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Richard, Lawyer
Category: Real Estate Law
Satisfied Customers: 55289
Experience:  32 years of experience as lawyer in Texas. I'm also a Real Estate developer.
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I am workng on launching a very large international farmers

Customer Question

Hi Richard, I am workng on launching a very large international farmers market. The project will only need 9 acres including parking. I recently submitted an offer with earnest money on a larger property that is 19 acres. I was approached by a developer that wanted to get involved with project and put a Highrise and a luxury hotel on the remaining space as well as some mixed use retail. The City is behind the project and will soon make an additional 12 adjoining acres available to us. How should I craft a deal with these inestors (developers) that will give me the fastest track to my project while returning a healthy profit. The property is selling for $400K per are but real estate comps put the Rezoned (from I2 to MRC3) value over $700K per acre. I have a couple months to figure it out, but I am just looking for some general direction as to what my options may be.
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Richard replied 1 year ago.

Good afternoon. This will obviously be a very complex transaction for you. The thing you want to be careful about with the developers is the fees and cost reimbursements they take out. In these type deals, if you're not very careful, you end up having the equivalent of a net profits interest in a movie...where the movie is hugely successful, but due to the developer fees, overhead allocation, reimbursements, etc., you end up getting basically nothing. So, you either want to sell them the land at the much higher value or you want to make sure that: i) you limit their fees and reimbursements until and unless you get a return of your investment plus a yield and then you get a carried percentage after that.

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