Plottage Value

[John Heines]

I need your opinion of, and any supporting data for, a percentage price premium to pay for the final, hold-out parcel in the assemblage of a group of contiguous parcels necessary to build a commercial center.

 

[hastalavista]

I would think that the percentage/amount would be entirely assignment-specific, no?
:new_smile-l:

 

[David Mescon]

It's been years since I have encountered a similar scenario, and would be difficult for me to produce any reliable supporting data. My experiences have indicated premiums ranging from about 50% to 200%, with an average of around 100%, (in addition to the MV).

I'm not sure you can reliably quantify this, as it is worth whatever this particular developer is willing to pay. I have seen a number of scenarios wherein the holdout seller's demands were so ludicrous that the developer literally just built around them. I have also seen one where the holdout seller had a key parcel, essential for the project's ingress/egress, without which development would become economically unfeasible, if not physically impossible - they were able to absolutely rape the developer on that one, because they knew exactly what they had, and were just as greedy as they could be. Good luck!

 

[timd354]

I have also seen one where the holdout seller had a key parcel, essential for the project's ingress/egress, without which development would become economically unfeasible, if not physically impossible - they were able to absolutely rape the developer on that one, because they knew exactly what they had, and were just as greedy as they could be. Good luck!

Why would you consider the owner of a key parcel who held out for the highest price that the developer was willing to pay to be "greedy" or to have somehow "raped" the developer? Why should'nt the property owner receive the full value for his property?

 

[David Mescon]

Why would you consider the owner of a key parcel who held out for the highest price that the developer was willing to pay to be "greedy" or to have somehow "raped" the developer? Why should'nt the property owner receive the full value for his property?

Define "full value." If by that you mean every last possible red cent you can milk out of someone solely because you have them over a barrel, then, in most cases, yes, I would consider that greedy, and unethical. I take great umbrage at those who would eagerly step on others who are caught between a rock and a hard place because they are in a dominant position. When I can make great money and a tremendous profit, in a short period of time, why should I obsess on making an absolutely obscene profit, at the expense of another?

Do you own an AMC? It sounds as if you do. They operate on the principles you appear to espouse.

 

[Meandering]

Dave,

If the hold out is operating on that principal, it is not a matter of finding value, it is a matter of negotiations. Because no matter what value you put on it, the hold out will seek more.

The hold out is looking at the value-in-use to the developer, not the MV of his property on a stand alone basis. What will be the value of the assemblage after expenses and demolition that is incremental to the hold out's portion of land?

What is the highest and best for the hold out's land?

 

[David Mescon]

When the hold out is offered three or four times as much per unit as the next highest acquisition, (which may have sold for say one and a half times MV), and they respond with "no - we will not accept less than ten times that," then that, IMO, is highway robbery.

 

[CANative]

Is that the point where the local jurisdiction might consider abusing eminent domain?

 

[Laughing Heir]

Is that the point where the local jurisdiction might consider abusing eminent domain?

Happens all the time in my part of PA.

 

[Meandering]

Abusing eminent domain Yup, but the courts will award market value +, that's what they did here.

Here they built a couple of big mall projects. Went around buying up the parcels as they came up for sale in the MLS. As soon as the Realtors realized who was buying up the parcels prices skyrocketed in that area.

But, the developer bought most of what was needed, except for a hold out. No problem, developer bought a couple more across the street, offered to move the street. The township got a new street with better line of sight, a new intersection, Penn Dot made him put in traffic lights and ta da!

Here is a big brand new commercial retail complex and smack in the middle of the road frontage is a 1940 2.5 story farmhouse that is now surrounded by parking lot lights all night, traffic, noise and tons of people looking over the retaining wall into their windows and back yard.

Can your developer see a way to buy other parcels, or at least threaten the hold out not to buy his?

It's negotiation and creative thinking time.