Land Transactions

Are Assemblages Difficult?

As a general rule, I think that most land developers would prefer to deal with only one land seller, which is particularly true when you might be talking about option contracts with the sellers.  Land development has enough risk with just one landowner and adding another layer can bring more risks.  That said, the assemblage of multiple parcels can add significant value to a development and provide for better overall communities.

One of the main complications with assemblages is getting all of the land sellers under contract.  Each seller may have different expectations, which can cause negotiation challenges.  Three sellers may have the same reasonable expectations as far as price and terms, but the fourth could be unreasonable.  And this fourth seller might make the development more valuable and maybe even infeasible without their land.  And if you offer more to this fourth seller, what will the first three sellers think?  It can get tricky trying to balance out all the offers.

With option contracts, you have longer escrow periods to allow for entitlements, final engineering, or site improvements to be completed.  If you run into a snag and need some additional escrow time, you need to go back to four sellers asking for extensions, not just one.  And I have found that some of the sellers will be accommodating while you have some that want to close as per the contract.  Again, an assemblage means you have multiple negotiations that may be necessary.

Another aspect of assemblages is how the site plan is designed over the multiple properties.  If you are under option contracts, there is the risk that one of the land sellers may not perform and you cannot close on that parcel.  If your site plan is highly integrated on the parcels, the lack of a parcel could be a linchpin to the whole project.  If possible, it is advantageous to design a site plan where the lack of a parcel does not destroy your development.

The easiest assemblages might be where you close escrow on all the parcels prior to designing the site plan and going through the entitlement process.  But that requires more upfront capital and brings more entitlement risk.

Please feel free to share with us below any of your comments and questions.

John Kaye has over 30 years experience within the land development and homebuilding industries, having held senior management positions with The Irvine Company, Koll Real Estate Group, and Brookfield Homes. As a developer, John has overseen the land acquisition, entitlements, and development of master planned communities, residential tracts, urban infill sites, and land assemblages. His experience and skill sets include land acquisition, land brokerage, project management, market analysis, finance, and strategic planning.

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