I’ll help if you promise not to yell (smile) - Posted by ray@lcorn
Posted by ray@lcorn on December 07, 1999 at 23:55:35:
Before I respond to your question, could I ask you to please turn of your caps lock? It is considered yelling on the Internet to type in all caps. Thank you.
Now, to your deal:
I have developed a project very similar to what you are proposing, which included a hotel, restaurant and two medical office buildings. It took over a year of planning and up front work, at a cost of over $100T, to get to the point we broke ground on the hotel in the first phase of construction. I always knew it would get built, but sometimes I wondered who would own it when it did! But we were acting as an owner-developer-operator, and you say you have a developer lined up. I would have to know how you propose to work with the developer in the deal before I can advise you about how to move forward.
In most development deals, the property is optioned from the seller, or otherwise controlled until the developer obtains all the approvals and committments from his tenants or users, i.e the restaurant, hotel and senior care facility. It sounds as though you and the seller plan to stay in the deal, as landlords maybe?, I can’t tell. Or is your intent to obtain the property, develop the improvements, and sell them to the end user? Let me know your game plan and perhaps I can be of more help.
It sounds to me that so far you have had a good conversation with a willing-to-make-a-deal seller. That’s a great start, and it sounds as though you may have a grand concept. One thing to know about this business from the get-go though, is that the devil is in the details.
Number one on the list should be the details of the partnership agreement; such as who contributes what and pays for the upfront cost to get the development to the finance stage: the equity split should be well established before you start, or you will never finish arguing about it. I highly recommend that you use the “lawyers on the scene” to draft and execute the appropriate organizational documents. I would also advise that you take another look before entering creating a general partnership. As an ownership entity, it sucks. An LLC is the most favored entity of recent years.
Depending on the nature of the relationship of you and your partner with the developer and the lender involved, appropriate contracts and agreements must be drawn and executed with them as well. Any guarantees of performance, bonds, penalties, events of default, etc., need to be negotiated now rather than argued about later. Everybody must have a clear understanding about what is expected of all parties. A multi-use development is a complex orchestra to direct from any capacity, and it only takes one missed cue to start a domino effect of consequences. Again, not knowing your objective here I’m just hitting the high spots that are true of any deal.
I am curious as to how you are going to fit the hotel, restaurant and senior living facility on 3.5 acres? Is this a high-rise project?
Let us know some details, and I can be more specific.