ESG - Land Development

Question 1

What are the four criteria of HBU?

Answer 1

Legally Permissible
Physically Possible
Financially Feasible
Maximally Productive

Question 2

Definition of Highest and Best Use

Answer 2

The reasonably probably and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and results in the highest value.

Question 3

Real Estate (Definition)

Answer 3

Real Estate today refers to land, as well as any improvements (infrastructure and buildings), and any rights running with the land that are above the land, as well as any rights (such as mineral or easements) below the land.

Question 4

The feasibility question for Land Development:

Answer 4

Is the COST OF THE LAND + LAND IMPROVEMENTS < LAND VALUE of the new hbu

Question 5

Air Rights and Underground Rights

Answer 5

Above - Zoning potential and “air rights”
Easements and restrictions - FAA, View Corridors
Transfers.
Below - Mineral rights and water rights
Recreation vs. monetization
Easements and restrictions - Subway, Waterway

Question 6

P3

Answer 6

Public-Private Partnership

Question 7

3 Methods of Real Estate Valuation (use all to increase accuracy)

Answer 7

Sales Comparison “Comps”
Cost Approach “Replacement Value”
Income Approach
- Direct Capitalization (BOE or “Static”
- Discounted Cash Flow

Question 8

Residual Land Value “RLV”

Answer 8

RLV begins with the value of a completed development.
Then strip out everything else, what is left is the value of the land.

Question 9

Land Residual

Answer 9

Is the maximum amount to someone who has run the analysis to the land.

Question 9

“Pricing the dire” RLV process

Answer 9

Gross Value Upon Completion (Calculated with applicable appraisal methods) (Less) Costs of Sale
(Equals) Net Value Upon Completion
-(Less) Hard Costs, Soft Costs, Financing Costs, Developer Profit
(Equals) Residual to land and land financing cost
-(Less) land financing cost (if applicable)
-(Equals) Land Residual

Question 10

Public/Private and Impact Development

Answer 10

EDC ferry adjacent land example.

Question 11

Horizontal Development (Land Development)

Answer 11

Single site rezoning
Public/Private Development
Subdivision and MPC development
Urban district and neighborhood development

Question 12

Types of Land Investors

Answer 12

Raw Land Buyer (10+ years typical hold)
Land Speculator (8-10 years)
Predeveloper (2-5 years)
Land Developer (1+ years)
Builder/End User (Indeterminate)

Question 13

Why create an entity?

Answer 13

Personal liability
tax treatment
fundraising
Compensation, Control, Credit

Question 14

Sole proprietorship

Answer 14

One person ownership
Unlimited personal liability
Self-employment tax; personal tax

Question 15

Partnerships

Answer 15

Two or more owners (people)
Unlimited personal liability unless structured as a limited partnership
Self-employment tax (except for limited partners); Personal tax

Question 16

Limited Liability Company (LLC)

Answer 16

One or more people
Owners are not personally liable
Self-employment tax
Personal tax or corporate tax

Question 17

Corporation - C corp

Answer 17

One or more people
Owners are not personally liable
Self-employment tax; Personal tax or corporate tax

Question 18

Corporation - S corp

Answer 18

100 people or fewer; certain trusts and estates; no partnerships, corporations, or non-resident aliens
Owners are not personally liable
Personal tax

Question 19

Corporation - benefit corporation

Answer 19

One or more people
Owners are not personally liable
Corporate tax

Question 20

Corporation - Nonprofit

Answer 20

One or more people
Owners are not personally liable
Tax-exempt, but corporate profits can’t be distributed

Question 21

Cooperative

Question 22

Why conduct due diligence?

Answer 22

“Kick the tires”
Know the problems at earliest possibility.
What are the three points at which you conduct due diligence?
Price in all the context.
Reps and Warranties

Question 23

Types of due diligence

Answer 23

Title Review
Survey
Environmental Assessment
Entitlement reviews