Whether it’s a principal residence, family farm, business location, investment land or rental property, real estate has proven to be an excellent way to grow and store wealth. Its utility, intrinsic value, preferential treatment under the tax code and success as an inflation hedge make real estate an indispensable part of a well-balanced financial plan. Over the next 25 years, more than $60 trillion in wealth - 25% of which is real estate - will transfer from the 73 million Americans of the Baby Boom generation (born 1946-1964) to their heirs (“Millennials”).
Optimizing a real estate portfolio, which includes minimizing taxes, requires a competent analysis and clear understanding of each asset’s physical, financial and legal characteristics as well as the economic, market, political and regulatory factors that affect real property interests. Advisory services include strategic planning and management to enhance value while positioning each asset to fulfill its intended purpose under the owner’s financial, retirement or estate plan. Services may include:
* Structuring, negotiating and managing acquisitions, sales & exchange transactions;
* Drafting & negotiating purchase & sales, options and partnership agreements;
* Land-use planning, entitlements and subdivision development;
* Infrastructure, financing districts and cost-share agreements;
* Asset management, development, repositioning/renovating, leasing;
* Net lease, ground-lease, sale-leaseback and build-to-suit;
* Capital allocation, private equity, alternative structures, disposition strategies;
* Valuation, As-Is & pro-forma; marketing, brokerage & escrow management;
* Government & public relations; litigation, expert witness and conflict resolution;
* Estate Planning; succession, retirement income, transfers, trusts & tax strategies.
Highest and Best Use is the foundation of real estate value and investment success. Determining a property’s Highest and Best Use begins with a detailed examination of all potential uses that are physically possible, legally permissible and financially feasible, including the costs and net income characteristics associated with each use. Ultimately, the use or uses that will produce the highest net return, i.e. the maximally productive use, is the Highest & Best Use.
A detailed understanding of the economic, legal and physical characteristics of real estate, as well as the costs and process associated with achieving highest and best use, involves detailed market analysis, site studies, regulatory constraints assessment and a determination of the property’s market value - both “as-is” and pro-forma.
Property value can be substantially increased by securing regulatory approvals that support highest and best use. While generically referred to as “re-zoning”, the actual process of changing land use and developing property is a complex, capital-intensive and highly regulated endeavor requiring experienced management, specialized skills, consultants from a variety of professional disciplines; public review and hearings; permits from local, state and federal agencies; and a high degree of risk tolerance.
Securing regulatory approvals for a subdivision/land development project includes designing streets, utilities and other facilities that are required to support the development. This often includes improvements outside the boundary of the subject property, referred to as “off-sites”. Off-site conditions can include roads, traffic signals, drainage and water quality facilities, environmental mitigation and funding for parks, schools, fire-stations and affordable housing units. Satisfying these off-site conditions not only requires money, time and specialized management, but often necessitates property owner cooperation, extensive government agency negotiations and special financing arrangements, such as private cost-sharing agreements or bond-financed assessment districts.
The term “development” is used in reference to a wide array of land use planning, entitlement, subdivision, and construction activities. However, the multi-faceted process that precedes physical construction is more accurately defined as the entitlement and subdivision, or “pre-development” process. Once the requisite governmental approvals and permits have been secured and all development pre-conditions have been satisfied, the physical construction / development process (i.e. grading and lot finishing) can proceed. Preparing land for building improvements involves grading to create engineered building pads along with installation of underground utilities, roads, bridges and other improvements required to support the vertical improvements. The pre-development and development processes involve significantly different skills, expertise, capital structures and risk profiles.