November 2009

Great Developments All Begin with Great Dirt…

Don’t Forget About the Dirt.

Presented by Mark J. Mayfield, CCIM & Randy Graham

Managing Directors, Sperry Van Ness – Rock Hill, South Carolina

 

It’s been said that commercial real estate is a ground-up business. The simple truth of the matter is that at some point in time every real estate project started with a piece of land and a vision. If fact, the success of any development project will largely hinge on how astutely you can finance the land component of your transaction. The good news is that as sophisticated as the commercial capital markets have become, not a lot has changed with respect to how land is treated. In the text that follows, I’ll share some basic thoughts on how to use land to drive project returns.

As I alluded to in the opening paragraph, the one clear exception to the advancement of real estate capital markets has been in the arena of land financing. Land is the one asset class that is lagging the balance of the market as far as the number and sophistication of new financing options. Furthermore, even in today’s constrained market, land is the one asset class whose underwriting guidelines have remained fairly constant. Land is, by and large, financed today in the same fashion as it has been throughout recent history.

Given that in the majority of circumstances the largest impact on the profit margin in a real estate project is made based upon how well the land is acquired and financed, it seems somewhat odd that the options for financing land have not advanced at the same pace as that of the other asset classes. In order to understand why land seems to be the asset class exception when it comes to aggressive and favorable financing options, it is important to understand the two main underlying characteristics of land as an asset that taints its appeal to lenders:

  1. Timing: By its nature, land is financed at the beginning of a project lifecycle making it the most speculative stage of project capitalization. Early stage investments (debt or equity) in any industry are the most costly to fund due to the increased risk profile. Adding to the complexity of the risk profile, land is often unentitled at the point initial funding is sought, and thereby requires some form of municipal cooperation in order for the project to be successful. Complicating matters further, is that depending on the specifics of the project, it can take several years to secure the necessary entitlements which will be needed to insure that the project is viable, and during that time there is often no assurance that said entitlements can be procured.

  2. Lack of Income: Unlike stabilized operating properties, in most cases land is not an income producing asset, and therefore cannot carry itself by servicing underlying debt. Without income, land must be underwritten solely upon its current value and/or that of other collateral or guarantees that can be provided.

While the two characteristics of land identified above cause lenders and investors to treat land conservatively, the good news is that the often mentioned quote that “land is a great investment because they’re not making any more of it” is one of the great universal truisms in the development world.

 

>> Click Here to Read More

(Click on Image to view additional information.)

Available For Lease!

12,000 SF Retail Property

Potential Redevelopment or Ground Lease

(Click on Image to view additional information.)

Just Reduced!

Investment Property

Net Leased – 9.0% CAP

Sales Price: $715,000

In 1996, Mark Mayfield and Randy Graham started in business together and in 1999 started their own company Southern Commercial Real Estate, LLC (“SCRE”) in Rock Hill, South Carolina located 15 miles south of Charlotte, NC.  With a successful track record and established entity, SCRE expanded its services and national reach on January 1, 2007, by joining forces with a nationally recognized leader in commercial real estate brokerage, Sperry Van Ness, to form Sperry Van Ness/Southern Commercial Real Estate, LLC.

  • Sperry Van Ness was founded in 1987, when Rand Sperry and Mark Van Ness created  a commercial investment real estate firm with one key mission: To create unprecedented value for commercial real estate investors.  Today Sperry Van Ness is one of the largest, most respected and fastest growing commercial real estate brokerage firms in the industry.
  • Sperry Van Ness currently has more than 1004 advisors internationally.
  • Sperry Van Ness is located in more than 150 cities across the US, as well as in Costa Rica and Panama.
  • Sperry Van Ness completed over $11.6 billion in sales and leasing transactions in 2007. 

Experienced Commercial Real Estate Broker

Most brokers choose commercial real estate because it combines autonomy, flexibility, profitability and a passion for client service excellence. But what may be lacking is a clear point of differentiation that can give them a competitive edge.

In a study done by Pepperdine University, the top 5 things brokers want most are:

  1. National Brand Leverage
  2. Support Staff
  3. Marketing Materials
  4. Technology Support
  5. True Cooperation

Sperry Van Ness offers all these and much more.


If you're a broker who wants to make a difference in your career - one that can maximize profit, product offering, support systems and earning potential, it's time to talk to Sperry Van Ness.

Due to iContact's strict adherence to anti-spam laws, we cannot add you back to this email list once you remove yourself.  This newsletter is intended to be a valuable and high-quality source of information and resources, so please let us know if we are not meeting that standard.  You can also use the 'Forward To A Friend' button at the bottom of this email. 

 

 

Mark J. Mayfield, CCIM

Managing Director|BIC

Randy Graham

Managing Director

1926 India Hook Road | Rock Hill, SC 29732

803.325.1000 | 803.325.1214 | www.svn-scre.com | info@svn-scre.com