7 Acre Development - Options ?
Discussion
A friend of mine has been left 7 acres of development land (in a very nice area of Leeds) by a relative who recently passed away.
Preliminary discussions with an architect led to an opinion that around 50 houses could be build, however to take things any further it would cost circa 80k. The development worth on completion would be circa £12.5 million.
He has also been approached by 2 large builders who both offered around circa 250k for the land (without planning).
I spoke with him earlier today & obviously, in my opinion, the offers are a complete joke. I do however understand that without planning the land is worth considerably less than with, due to the risks involved.
The long & short of it is that he doesn't have the 80k to plough into it up front, but doesn't want to sell for 250k either.
I told him he has a couple of options:
1) Sell land without planning, but with a clawback clause stating that should the land ever get planning within the next x years that he is entitled to x% of the increased worth
2) Find an investor who is willing to put in 80k for a % of the land (which I may be - but didn't want to come across as I was trying to shaft him).
Are there any other options available ?
My dealings with Leeds City Council (on a development I am currently doing) are basically that you still need to submit all the same information as you would with a proper planning submission before they will assign a person to the case, ie you still do need to pay an architect a load of money to come up with a scheme before they will give you 'outline' planning approval. Obviously on smaller projects this is not always the case, however, on large projects it is.
Even once outline has been given I suspect the land would be worth well into 7 figures, however, at that stage it would have to be sold to a major builder as it is too big for a first time developer (financially, logistically, etc).
Preliminary discussions with an architect led to an opinion that around 50 houses could be build, however to take things any further it would cost circa 80k. The development worth on completion would be circa £12.5 million.
He has also been approached by 2 large builders who both offered around circa 250k for the land (without planning).
I spoke with him earlier today & obviously, in my opinion, the offers are a complete joke. I do however understand that without planning the land is worth considerably less than with, due to the risks involved.
The long & short of it is that he doesn't have the 80k to plough into it up front, but doesn't want to sell for 250k either.
I told him he has a couple of options:
1) Sell land without planning, but with a clawback clause stating that should the land ever get planning within the next x years that he is entitled to x% of the increased worth
2) Find an investor who is willing to put in 80k for a % of the land (which I may be - but didn't want to come across as I was trying to shaft him).
Are there any other options available ?
My dealings with Leeds City Council (on a development I am currently doing) are basically that you still need to submit all the same information as you would with a proper planning submission before they will assign a person to the case, ie you still do need to pay an architect a load of money to come up with a scheme before they will give you 'outline' planning approval. Obviously on smaller projects this is not always the case, however, on large projects it is.
Even once outline has been given I suspect the land would be worth well into 7 figures, however, at that stage it would have to be sold to a major builder as it is too big for a first time developer (financially, logistically, etc).
He has spoken to people & the concensus is that planning would be granted for 50+ properties.
Its just that to take it any further, ie to a formal planning reciept stage (outline or full), is going to cost a huge amount of money which he does not have available to put in up front.
All I'm trying to figure out is the best way forward as selling at 250k seems ridiculous when you consider what it could be worth after a little investment.
Its just that to take it any further, ie to a formal planning reciept stage (outline or full), is going to cost a huge amount of money which he does not have available to put in up front.
All I'm trying to figure out is the best way forward as selling at 250k seems ridiculous when you consider what it could be worth after a little investment.
Hobo,
I agree that £250K sounds derisory for 7 acres of land in a nice part of Leeds.
Without having seen the land, so does the Architect's estimate of 50 houses. Notwithstanding the fact that 'developable area' may be considerably less, for a variety of reasons (public open space requirements, gradients etc., etc. ), I'd be expecting, superficially, to get at least 85 units on a site that size, though it does rather depend on site constraints, location and market mix.
Also, how are you arriving at £80K to 'take things further'?! If your friend has found a 'proper Architect' through the RIBA or whoever, there is a better than average chance that they don't know their arse from their elbow in this specialised end of the market, are quoting full RIBA 'recommended' fee scale and, furthermore, have no commercial awareness when it comes to housebuilding for profit. You need an Architect or Architectural Designer who specialises in 'Speculative Residential Development', and I'd suggest that they ought to be able to get you a lot further down the line for a lot less than £80K!
For reference, I've just commissioned a very well respected Architect to prepare a Planning Application for us for a 70 plot site in Oxfordshire (so comparable size to your friends) and we are expecting all design fees for the detailed application (including Architects, Engineers, Archaeology, Ecological, Ground Investigation and Traffic Impact Assessment) to total slightly more than £40K... and you wouldn't need that level of detail for an Outline Application!
There are a variety of deals that you could enter into with large developers; for example, you could sign up to a 'lockout agreement', where a developer promises you a certain (full market) value for the site, subject to Planning Approval and other technical investigations, in return for which you agree not to market the site to anyone else for a certain period while he makes his enquiries... if everything goes through smoothly, he buys the site at the end of the lockout period, having obtained planning permission etc. on it. If things don't go according to plan, he can walk away from the deal at the end of the lockout at minimal cost to himself, allowing you to re-market the site. This sort of agreement allows you to realise full potential for a site that would otherwise have it's value significantly reduced by a lot of 'what ifs?'.
I was from Leeds originally, and though I currently head up the design team for the Cotswold & Malverns Region of a major UK housebuilder, I could put you in contact with our Land Manager for the Yorkshire Region if your friend would like us to see what we can offer? E-mail me via my profile if you are interested!
I agree that £250K sounds derisory for 7 acres of land in a nice part of Leeds.
Without having seen the land, so does the Architect's estimate of 50 houses. Notwithstanding the fact that 'developable area' may be considerably less, for a variety of reasons (public open space requirements, gradients etc., etc. ), I'd be expecting, superficially, to get at least 85 units on a site that size, though it does rather depend on site constraints, location and market mix.
Also, how are you arriving at £80K to 'take things further'?! If your friend has found a 'proper Architect' through the RIBA or whoever, there is a better than average chance that they don't know their arse from their elbow in this specialised end of the market, are quoting full RIBA 'recommended' fee scale and, furthermore, have no commercial awareness when it comes to housebuilding for profit. You need an Architect or Architectural Designer who specialises in 'Speculative Residential Development', and I'd suggest that they ought to be able to get you a lot further down the line for a lot less than £80K!
For reference, I've just commissioned a very well respected Architect to prepare a Planning Application for us for a 70 plot site in Oxfordshire (so comparable size to your friends) and we are expecting all design fees for the detailed application (including Architects, Engineers, Archaeology, Ecological, Ground Investigation and Traffic Impact Assessment) to total slightly more than £40K... and you wouldn't need that level of detail for an Outline Application!
There are a variety of deals that you could enter into with large developers; for example, you could sign up to a 'lockout agreement', where a developer promises you a certain (full market) value for the site, subject to Planning Approval and other technical investigations, in return for which you agree not to market the site to anyone else for a certain period while he makes his enquiries... if everything goes through smoothly, he buys the site at the end of the lockout period, having obtained planning permission etc. on it. If things don't go according to plan, he can walk away from the deal at the end of the lockout at minimal cost to himself, allowing you to re-market the site. This sort of agreement allows you to realise full potential for a site that would otherwise have it's value significantly reduced by a lot of 'what ifs?'.
I was from Leeds originally, and though I currently head up the design team for the Cotswold & Malverns Region of a major UK housebuilder, I could put you in contact with our Land Manager for the Yorkshire Region if your friend would like us to see what we can offer? E-mail me via my profile if you are interested!
Sam_68 said:
There are a variety of deals that you could enter into with large developers; for example, you could sign up to a 'lockout agreement', where a developer promises you a certain (full market) value for the site, subject to Planning Approval and other technical investigations, in return for which you agree not to market the site to anyone else for a certain period while he makes his enquiries... if everything goes through smoothly, he buys the site at the end of the lockout period, having obtained planning permission etc. on it. If things don't go according to plan, he can walk away from the deal at the end of the lockout at minimal cost to himself, allowing you to re-market the site. This sort of agreement allows you to realise full potential for a site that would otherwise have it's value significantly reduced by a lot of 'what ifs?'.
We have an agreement with a developer on some land, it runs out later this year after the company has done nothing with it - I think i'll just give it a go myself!Thanks for the reply Sam-68. Very informative 
Now. I know this is a hard question to answer, but, what kind of value would the land have on it after the reciept of planning (either outline or full) ?
As stated, the worth of the development upon completion would be circa £12.5 million.
Also, would it be worthworth going for full, or is it the case that a builder would want to do his own scheme & therefore just wants to know that the site will be allowed to be developed, ie just get outline.
Now. I know this is a hard question to answer, but, what kind of value would the land have on it after the reciept of planning (either outline or full) ?
As stated, the worth of the development upon completion would be circa £12.5 million.
Also, would it be worthworth going for full, or is it the case that a builder would want to do his own scheme & therefore just wants to know that the site will be allowed to be developed, ie just get outline.
Yes.
Thats what I'm saying. It hasn't got permission, although indications show that it would be granted.
However, to get to this stage is going to take a fair chunk of money needed to be invested upfront, and this is what my friend doesn't have.
As you can imagine, 50+ houses in LS16 = lots of money
Thats what I'm saying. It hasn't got permission, although indications show that it would be granted.
However, to get to this stage is going to take a fair chunk of money needed to be invested upfront, and this is what my friend doesn't have.
As you can imagine, 50+ houses in LS16 = lots of money
Hobo said:
Yes.
Thats what I'm saying. It hasn't got permission, although indications show that it would be granted.
However, to get to this stage is going to take a fair chunk of money needed to be invested upfront, and this is what my friend doesn't have.
As you can imagine, 50+ houses in LS16 = lots of money
Morning,Thats what I'm saying. It hasn't got permission, although indications show that it would be granted.
However, to get to this stage is going to take a fair chunk of money needed to be invested upfront, and this is what my friend doesn't have.
As you can imagine, 50+ houses in LS16 = lots of money
My first impression is that if the offers are in the 250k region then there is a big problem somewhere. Either, he is being ripped off or the likelyhood of getting permission is extremely low.
I have client who's business is to work with land owners such as yourselves to option up and package parcels of land, achieve planning and then sell to the highest bidder. In essence he acts as their specialist and consultant.
If you want to go straight to builders then another very close friend runs a residential building company up in Huddesfield (very well respected) and I also know the owners of Ben Bailey plc.
If your friend would like to talk to these chaps then feel free to PM.
An alternative is to test the market by putting the property up for auction. He can always put a reserve on it.
However if the land is developable then the development companies will be fighting to get it.
Incidentially if the land was recently left to him are there any taxation issues with selling it? Preumably there is going to be a significant capital tax gain, and will there be any issues with inheritance tax? In fact when he was left it surely the land was valued for inheritance tax purposes? That would give an indication (although possibly conservative) as to its value.
However if the land is developable then the development companies will be fighting to get it.
Incidentially if the land was recently left to him are there any taxation issues with selling it? Preumably there is going to be a significant capital tax gain, and will there be any issues with inheritance tax? In fact when he was left it surely the land was valued for inheritance tax purposes? That would give an indication (although possibly conservative) as to its value.
I don't know about the tax issues, etc. As for it being valued at the time is was inherited, well, its just land. Its not got planning & therefore can't be valued as if it had (surely?).
The auction idea is an interesting one Might suggest this & as you say, just put a ridiculous reserve on it.
I've spoken to a friend at a major builder & they have given me the details of a planning consultant they use. I suspect a meeting on site with them would be the way to progress. They should be able to give him a more informed view of whether planning approval is likely or not.
Cheers for the advice 'off-line' too (to all the people that have sent private mails). I will pass these details on the my mate & he may be intouch in the not too distant future.
The auction idea is an interesting one
Might suggest this & as you say, just put a ridiculous reserve on it.I've spoken to a friend at a major builder & they have given me the details of a planning consultant they use. I suspect a meeting on site with them would be the way to progress. They should be able to give him a more informed view of whether planning approval is likely or not.
Cheers for the advice 'off-line' too (to all the people that have sent private mails). I will pass these details on the my mate & he may be intouch in the not too distant future.
Is it a brownfield site or greenbelt? Does it have good roadside access or is it landlocked?
You might try writing to the land buyers at the various developers such as Redrow etc, McAlpines etc.
They will undoubtable know the site's potential and may make offers on the basis of them getting planning permission for you, for an option fee, and they then buy it at a mutually agreed value. That's what we did and they have the expertise to come up with suitable schemes.
You could also make contact with a company like 'Old Road Securities' who may come and look at the site, apply on your behalf for planning permission (for a percentage of any eventual sale) and then help you sell the site with planning permission, which greatly enhances the value.
Good luck!
You might try writing to the land buyers at the various developers such as Redrow etc, McAlpines etc.
They will undoubtable know the site's potential and may make offers on the basis of them getting planning permission for you, for an option fee, and they then buy it at a mutually agreed value. That's what we did and they have the expertise to come up with suitable schemes.
You could also make contact with a company like 'Old Road Securities' who may come and look at the site, apply on your behalf for planning permission (for a percentage of any eventual sale) and then help you sell the site with planning permission, which greatly enhances the value.
Good luck!
Mattt said:
We have an agreement with a developer on some land, it runs out later this year after the company has done nothing with it - I think i'll just give it a go myself!
This does happen, I must admit, but it's certainly not the game that we play!The really big PLC developers will often take out 'options' as nothing more than insurance, or to prevent land being developed by competitors, but we think this is grossly unfair on vendors and bad for our reputation.
When we take out an option, it's because we genuinely want to develop the land... we don't just sit back and let it moulder!
hobo said:
I know this is a hard question to answer, but, what kind of value would the land have on it after the reciept of planning (either outline or full)?
.YHM!
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