Playing the Land Game to Your Advantage

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There's more than one way to improve your position

Land development for building homes
July 30, 2015

We’re putting the July issue of Professional Builder to bed at the same time that we’re packing our bags for San Diego and PCBC, formerly known as the Pacific Coast Builders Conference. It’s an event that we look forward to all year long. A bellwether of trends and a wellspring of new ideas, PCBC is the place to be to hear experts and luminaries share innovative concepts, talk about what they’re working on, and weigh in on home building’s most heated topics.  

A look at the lineup of panel discussions reveals that land is nothing if not a hot topic this year. A session on how builders and developers each can win in the development of MPCs; a panel discussion that asks if urban infill is, as the program states, “The Last Refuge of the Private Builder?”; and a seminar on how to get land deals done all speak to one of the most pressing issues many of you face: how to play the land game to your best advantage. 

No need for travel, though. Land is an issue we’re addressing right here, right now. “Lots, Land, and Opportunity” by senior editor Mike Beirne explores the approaches that smart builders are taking to acquire land. While Mike was talking to sources about the strategies that are working best, it became clear that there’s more than one way to play the game. Reinvention can be a part of the deal; some builders are getting into development. Honing new skills is a part of the plan, and some are getting more artful at approaching banks. For others, making the most of what you’ve already got is a wise strategy—playing up your advantageous position as a local, for example. 

Other stories this month examine the topic of land in yet more ways. Our article about Traditional Neighborhood Development (TND), written by contributing editor Sue Bady, invokes one of the most iconic town planning projects in America: Duany, Plater-Zyberk & Co.'s Seaside, in Fort Walton Beach, Fla. The story takes a look at several inspired new examples, highlighting the valuable lessons we’ve learned from successful TNDs. “What Makes a Good Neighbor” by architect Michael Medick underscores the essential role that good home design and sensible lot use play in creating Master Planned Communities that draw a range of buyers. One of the keys is product variety and offering options that suit all manner of life stages. When you’re a community where it’s easy for buyers of many stripes to imagine living, your homes have the potential to command higher resale prices than the competition. And banks like that.

The land question won’t be going away anytime soon, and we’d like to hear about your own approaches. If you have a moment, tell us about it in our comments section on ProBuilder.com or drop us a line.

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Amy Albert is the editor-in-chief of Professional Buideraalbert@sgcmail.com@amyalbertLA

Comments

Amy, we are a Developer / Builder based in Toronto.(www.bgigroup.ca). We always do as you describe, not so much to produce more profit (although that helps solve challenges on following projects if required), but to build in additional contingencies to allow us to bring a higher quality / less (possibly subsidised) cost product to Market, and allow us a flexible 'firewall' if the Market softens.
Our main revenue sources are therefore:
1) Added Land Value through smart entitlements
2) Development Management Fees
3) Development profit
A few brief examples of Item 1 above increasing land value through entitlements and prior to construction :
1. Increased Land Value on a 200 unit townhouse project - $2,000,000
2. Increased Land Value on a 700 unit condo project - $7,000,000
3. Increased Land Value on a 450 room hotel - $6,000,000
4.Increased Land Value for an Intergenerational Community - $14,000,000
The added land value can then be borrowed against to provide 100% of pre-construction soft costs including Permit fees, which once attained, allows our Builder hat to take over and construct to completion.
To remain streamlined and nimble however, we now sub the construction to Construction Management companies with us overviewing them instead of supervising 30 Trade Contractors per project. That approach allows us to produce more projects in the same amount of time.

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