Potential New Development - Sydney's Northern Beaches - Start to Finish

Discussion in 'Development' started by lynchy, 27th Oct, 2020.

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  1. lynchy

    lynchy Well-Known Member

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    Hi all,

    I thought I'd start a new thread for a potential development I'm about to jump in with a JV partner. It's very early days having just submitted an offer but I thought it would be interesting to track a live "deal" and potential development that has some uniqueness

    A bit of background. I work for a national developer and have, with my boss who I've been working with for over 5 years, been looking for a potential development site for us to do on the side for a while now. We've decided to pursue a potential development site on Sydney's Northern Beaches. I cant go in to details about the exact location yet

    The site could potentially be developed in to 7 high Torrens title townhouses with street front retail in a highly sought after area

    We have submitted 2 offers
    1. Relatively standard contract with 12 month settlement
    - conditional upon solving some heritage issues
    - conditional on VP being achievable within 24 months
    1. Same conditions to the above but under a Project Delivery Agreement (PDA). The PDA is for an approx. 20% higher purchase price. From what we believe the Vendor is in no need of the funds up front so this may be of interest. Assists with our financing also.
    I shall keep the thread updated as to how we go. It could be rather short lived if the Vendor is seeking too much...
     
  2. lynchy

    lynchy Well-Known Member

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    Response has been received, at least we have engagement I guess. We haven't got much room to move so we've asked for a counter offer

    Hi xxxxx,

    Thank you for your interest in acquiring X.

    While I appreciate your offers to purchase, both offers fall short of the market valuation as is the property currently is

    Thank you for your expressed interest

    Kind regards,

    X
     
  3. thatbum

    thatbum Well-Known Member

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    Uh, are they talking crap or is it possible you're way off the mark? Otherwise they're saying both your offers, one of which was 20% more than the other, was not even close.
     
  4. lynchy

    lynchy Well-Known Member

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    We've gone in about 10% under our max so if we're way off the mark it might be too hard to get a deal done. He hasnt said we're "way" off simply, we're short of the valuation.

    The Vendors not stupid though and we've approached him. Sites not on market, I found it using ArchiStar and found his contact details after some investigation so he's not exactly a willing Vendor which makes it hard
     
  5. GOU

    GOU Member

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    I don't think the 20% is enough for the trouble being locked in.
     
  6. wylie

    wylie Moderator Staff Member

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    I'm confused or perhaps missing something.

    Are you offering 20% more than market value? How did you come to that figure?

    They think your offer is considerably below market value?

    Someone has got something wrong?

    People we know are marketing their property with an agent who told them $2.5 - $2.8m. I overheard the same agent telling people at the second open home "we think low to mid $2m".

    Sounds like you are not on the same page. Yet.
     
  7. lynchy

    lynchy Well-Known Member

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    Not 20% above market value

    Offer 1 - Straight 10% deposit, 12 month settlement say $10m
    Offer 2 - PDA eg settlement on project completion, say $12m

    Not 20% above market perse, just 20% above our traditional offer. Under a PDA, the Vendor will be responsible for all land holding costs to completion and there will be no stamp duty payable which essentially equates to the additional 20%
     
  8. thatbum

    thatbum Well-Known Member

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    What's the point of this from your point of view? Why not just make a clean offer that isn't confusing and extra work for the seller to understand?
     
  9. lynchy

    lynchy Well-Known Member

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    Current property is income producing so the Vendor continues receiving what is property a decent yield for 3 years and gets a higher price at the end

    He's said, it's not for sale, he doesn't need the money and its up to us to come up with an acceptable offer. Trying to offer different options
     
    lixas4 likes this.
  10. lixas4

    lixas4 Well-Known Member

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    I like the PDA structure and currently looking at a couple of sites under development agreements.

    A couple of queries:

    - how are you financing the construction and soft costs?
    - are you paying a deposit?
    - do you have capital? Or investors/money partners you are working with?
    - or are you supplying a service to the landowner, and not putting in own funds or equity