All Forum Posts by: William Jenkins

@Matt Clark did you ever do a deal with the carrier?  Interested to hear what happened. 

I develop towers for all of the major carriers.  I could offer you significantly more.  Feel free to contact me if you would like.  

@Robert T. you are 100% right about there not being a simple step by step way to develop properties.  Good luck always helps too :) 

Pre-leasing/selling is always key although it is very difficult to get something 100% committed to before you put a shovel in the ground.  You absolutely never want to follow the "if you build it they will come," mentality but sometimes you have to roll the dice a little bit when you have some solid commitments behind you.        

On this type of project things don't always move in a 1,2,3..... type manor.  Sometimes you start working 2, skip to 8, go back to 3 etc. 

If you are serious about the property here is a rough guide..

1.  Get your head around property, the use, the users, etc. and do a much research as you can.  Before you can even approach something like this you need to know your target market and the facts behind it stone cold.  You also need to research development incentives and tax credits. 

2.  Approach the property owner to discuss an option/purchase.  What you could option it for is a big question mark because there are so many variables.  If it is that distressed you may be able to get a $1 option to buy at a fair negotiated purchase price.   

3.  Bring on an architectural firm to create renderings and marketing material for the project.  Pomp and circumstance is key.... Renderings always look bigger, better, and more bold than the final product. 

4a.  Network with your target market to try to get interest from a user.  Use your marketing material to wow them.  

4b.  Create financial projections for the property and begin to talk to banks, investors, and tax credit partners. 

4c.  Work with the City on approving the tax credits and other incentives.  You may also need to seek zoning approval (CUP, Variances, Etc.).   

5.  Engage engineering firm to develop construction drawings and get multiple construction estimates from GCs. 

6.  Execute agreements with tenants/users, finalize financing, finalize credits and development incentives.

7.  Secure building permit, start construction, and cross your fingers....

Most projects make it to step 3 and don't get past 4. 

This is a big boy game for sure.  An alternative route you could take is to try to tie up the building, get a handle on the ins and outs of the project, and then try to flip it to a seasoned developer.  As part of the deal you can offer them access to your contacts and local expertise.        

Lot of questions and variables on this, but here it goes....

Your City of Toledo and mine of St. Louis, MO are very similar in demographics, development trends, etc.  Commercial development in these cities is very different than what you may see in some of the hot areas of California, New York, etc.

Buildings and building sites in our cities are a dime a dozen.  Like you, we have some beautiful and very ornate buildings that have gone into disrepair.  You can buy these buildings for nothing (literally $0 in many cases), but then comes the question, what do you do with it.  Despite the low price, it is not cheap to own these things.  Taxes, insurance, city nuisance violations, minimal maintenance (roof patches, door boarding, etc.) can eat you alive.    

In our markets in order to make commercial development work on the scale that you are talking about, you have to (a) tie up the property via an option agreement (b) work on your development plans and find the tenant or use for the property and then (c) work the Fed, State and City to provide historic tax credits, tax abatements, enterprise development zone credits, etc.  There are probably a dozen different credits and incentives out there for the property you are looking that would help fund the project. 

Now you are probably thinking.... that's great... not only can I get a property cheap, but I can also get free money to develop it too....  Win Win. 

Not so fast.  Biggest problem here is who is your tenant, or what is your use?  Got a tenant (that is not easy to do by the way).... That great, what lease rate will they pay?  Their rate probably won't back into your development cost either and that's where your tax credits and development incentives come into play.

There was a large (just under $100M) project in my City that I represented the ownership group on a few years back.  Almost 1/2 of it was financed with federal and state historic tax credits and other development incentives.  It didn't survive.  The numbers just didn't work.    

It's a tough game and you need deep pockets.  It would be nothing to spend $500k trying to make a play on that building with no positive end result.     

Aside from the tax deduction implications that you need to work out and structure with your CPA, I can see only 1 potential pitfall. 

I am not sure how the loan will be structured (margin account or collateralized loan), but you should know that if the value of your portfolio (their collateral) drops below the value of the loan, then they will call it.  At that point you have the option of funding the difference in cash, or they will simply liquidate your portfolio.

If you have a stable portfolio (not sure what that really means now days), and you are not overleveraging (i.e. 100% on margin), then I don't see any downfalls.  I would suggest that once you acquire the asset and stabilize it though, that you finance it with a traditional loan.   

A HELOC is an equity secured line of credit for a certain time period (5yr, 10yr, etc.). Your line is approved for a certain fixed dollar amount, I.e. $50k and you typically have a checkbook on which you can draw against the line. As you draw agains the line, your balance goes up and you must make monthly payments to maintain the account. These payments are typically interest only, but you can always pay more to reduce your balance. Your rate will likely be floating based on prime. At the end of your term you must either renew the line of credit for another term or pay the balance in full. A HELOC is basically a credit card that is secured by your property. If you plan on taking the money out of the property for the long term they you would be much better off refinancing into a fixed rate amortized loan.

Whole life is a terrible investment in general. It would be even worse for your situation with out any financially dependent heirs. You do not need life insurance period. There are some very rare circumstances where it could be a good idea for very specific tax strategies but I can almost guarantee that those don't apply to you. There is a reason why insurance agents receive huge commissions on these policies.

Call the state department of natural resources. Give them the property address and they will likely be able to give you information on if the tank is in compliance or not. They should also be able to tell you if there are any current remediation issues at the property as well. If they report no problems then you should feel good, but it is by no means a guarantee that the site is clean. The seller doesn't want an inspection because they want to absolve themselves of knowing if there is an issue. As an FYI... If this is commercial then no bank will finance it without a clean phase 1 or phase 2. So that may kill the deal right there if you are financing. If you pay cash and there is an issue, then everything you have in the property could be at stake if something is discovered in the future. Under no circumstances should you close on the property in your own name or in an entity with other property. You will want to make sure the property is in a separate entity all by itself.

What area of St. Louis are you looking at and what is your investment criteria?