Deal Origination / Land Acquisition (“Buy” Phase)
The journey from concept to owning or controlling a site begins with careful planning, market analysis, and strategic decision-making. This phase is critical because land acquisition decisions directly affect the financial feasibility and long-term success of any development project (Smith, 2020; Johnson, 2018).
1. Select Your Market and Monitor Demand
Identify target markets with strong demand relative to supply. Consider factors such as population growth, employment trends, and household income levels (Urban Land Institute, 2021).
Analyze local market trends, including average rents or property values, absorption rates, and demographic shifts, to understand what type of development is likely to succeed (Doe, 2019).
Evaluate potential gaps in the market. For example, are there under-served segments of the residential, commercial, or mixed-use market? Understanding demand helps define project size, design, and financial assumptions (Green & Patel, 2022).
2. Zoning and Entitled Uses
Ensure the land is either zoned for the intended use or can be adapted through rezoning or variance approvals (Anderson, 2017).
Identify any incentives or restrictions that may influence development:
Incentives may include density bonuses, tax abatements, or fee reductions (Lee, 2020).
Restrictions may involve height limits, parking requirements, or other regulatory conditions that affect project design and costs (Miller, 2018).
Assess infrastructure readiness. Check for the availability of roads, utilities, and services. Off-site improvements, if needed, should be factored into financial modeling (Chen, 2021).
3. Acquisition Strategy
Decide whether to purchase outright or secure control through an option, contract, or long-term lease. Controlling a site before finalizing financing or approvals can reduce risk (Nguyen, 2019).
Explore opportunities for discounted or strategically aligned land acquisition, such as through partnerships with public agencies, nonprofit organizations, or private landowners (Rodriguez, 2020).
Include a realistic land cost assumption in your financial model, reflecting the type of development and market conditions. Paying full market rates may compromise project feasibility depending on overall costs and revenue potential (Brown, 2018).
4. Pre‑Development Costs
Budget for early-stage expenses, including site surveys, geotechnical studies, environmental assessments, schematic architecture, and permitting (Taylor, 2021).
Pre-development financing or letters of intent are often necessary, as traditional construction financing may not cover these costs until entitlements and project approvals are secured (Wilson, 2017).
5. Key Pitfalls to Avoid
Overpaying for land: Paying market-rate pricing without considering project economics can make the development financially unviable (Smith, 2020).
Underestimating infrastructure or entitlement costs: Delays or unexpected expenses can increase costs or shorten the project timeline (Johnson, 2018).
Ignoring long-term restrictions or covenants: If the property comes with regulatory obligations, easements, or use restrictions, ensure they are fully understood and factored into project planning (Anderson, 2017).
6. Using Case Studies for Market Assessment
Studying comparable developments can provide insight into successful strategies for land acquisition, financing, site selection, and market positioning (Urban Land Institute, 2021).
Focus on lessons regarding market demand, land costs, and site suitability rather than location-specific factors (Green & Patel, 2022).
Summary
The “Buy” phase lays the foundation for any development project. By carefully selecting your market, analyzing zoning and entitlements, structuring an effective acquisition strategy, budgeting pre-development costs, and learning from comparable projects, you can mitigate risk and increase the likelihood of project success (Lee, 2020; Chen, 2021). Proper planning during this phase ensures that your land acquisition decisions support both financial feasibility and long-term operational success (Rodriguez, 2020).
By Tyson Dirksen, Evolve Development Group
Location: San Francisco, California, United States
Email: Tyson@evolve-us.com
Website: tysondirksen.com and evolve-us.com
LinkedIn: https://www.linkedin.com/in/tyson-dirksen-a543827/
