Questions about retail development
I am in the beginning stages of planning the development of my 6 acre parcel of raw land. The property is located off a high-traffic street (70k CPD) in a dense commercial corridor. I have development experience, previously doing ground-up builds on several businesses I have owned. Over the course of around 8 years, I have slowly accumulated the lots adjacent to mine, starting at around 2 acres. My decision to develop, after all this time, is arriving on the heels of opening sale negotiations with the owner of the ~1.5 acre signalized hard corner-lot directly adjacent to my parcels. This acquisition would cohesively align my previously midblock property, allowing crucial ingress/egress I did not have from the road that intersects at the corner, which runs perpendicular to the aforementioned busy street. All these components, I have understood through experience, are paramount in attracting quality national tenants and I have pushed off development until this opportunity became available (which I knew, based on history, that it eventually would).


My question, for retail developers, pertains to a rough estimate of time I should be requesting for the due diligence period prior to the closing of escrow. How long will the pre-leasing, design development, project design, pre-construction plannings, and entitlement process take (roughly), and how do I accurately communicate this to the seller so as not to scare him off the deal? It could be a long, long wait for a seller that is expecting a 60 day escrow. As this is my first full scale development, I am considering leaving the DD period open ended and paying him a premium every passing 30 days that escrow is open. 

If any brokers feel they are qualified to help with this job, you’re welcome to send me a PM with some of your represented clients. I’m in Southern California. Thanks  
[{"id": "e34i2ys", "text": "From what I\u2019ve seen is that pre-leasing (what would take the longest) is usually not included in DD. Aside from that, you basically want a subject to entitlements deal, which is basically something you need to just bring up and negotiate with the seller. There\u2019s a thousand ways to skin this cat. Most people in my experience would close based on what is developable by right on the property and not have it based on entitlements. Does zoning allow a retail center of the size you want there by right or would you need to go through a rezoning or variance process?", "replies": [{"id": "e34zbq8", "text": "Aside from the usual CUP uses, the land is zoned for retail use and is actually part of a commercial overlay/master plan for the city. I guess, an associated question would be, in the absolute worst case scenario in which the seller wishes to close in 30-60 days, what is the most essentially work to be done? Pre-Leasing?", "replies": [{"id": "e351zxp", "text": "No, pre-leasing is usually done after the property is bought and construction has started or is about to start. Leasing the property and at the rates you want is something that is usually taken as a complete risk to the developer. The usual title, survey, environmental, and zoning work is whats most important assuming there\u2019s no structure on the property. Also if you don\u2019t know what is currently allowed per zoning get a massing study done and conceptual architectural drawings assuming you will go through with closing. ", "replies": [{"id": "e3522z9", "text": "To add to this, leasing the property is something that can take maybe even a year or more depending on the size of the project. ", "replies": [{"id": "e352vvs", "text": "Sorry I was not more clear, the property is not raw land. The seller is a realtor and constructed his practice on the corner decades ago and now leases it to a new broker. How would this, if anything, alter your DD procedures again given a small time frame? Also, the pre-leasing makes a lot of sense. My concern would be that financing usually requires some degree of lease commitment, yes? ", "replies": [{"id": "e4g96sn", "text": "Get a copy of the lease on the corner and get it to your attorney stat - call it 15 days for lease review and have your escrow not go hard till you understand what\u2019s in that lease.\n\nMany times a \u201cphased\u201d escrow is used - so the seller feels like they are getting money for the time their property is tied up.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e34n9lx", "text": "Impossible to answer this question with info given but just know, no matter how much time you get, it wont be enough. ", "replies": [{"id": "e3541iz", "text": "Wow very helpful thanks ", "replies": [], "depth": 2}], "depth": 1}, {"id": "e34rwcq", "text": "I would have a book of restaurants/ retail users and once I get it under contract send them a really nice marketing project of the whole site.  Ask for 90 days with the ability to buy multiple 30 day periods with Hard EM but applicable. ", "replies": [{"id": "e34z14v", "text": "What does EM stand for?", "replies": [{"id": "e34zcsc", "text": "Earnest Money\n", "replies": [{"id": "e352cw7", "text": "Thanks for that ", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e34wmd2", "text": "What kind of seller are you dealing with? Does he understand development? If so I would try to tie closing to certain milestones instead of number of days. You need to figure out at what point in the DD period would you (or whover you are borrowing money from)  be comfortable with you closing.  Do you need a signed lease? Approved site plan? Permits?  Really up to you and your risk tolerance. For my company (single Tennant retail development) we usually try to close after permits &amp; lease in a perfect world, but in this market many sellers will not give you that much time. At the very least you would need to have your use approved to build by right I would think. ", "replies": [{"id": "e352pd7", "text": "Hey, thanks for your response. The seller is a realtor, actually, so he indeed understands development, the corner lot is actually already constructed and leased (his old realtor practice that he sold). In your professional opinion, if you could give me an idea of what would be the most important milestones to reach first given a short escrow, It would be very helpful to me moving forward ", "replies": [{"id": "e35yne8", "text": "Purchase and have a leaseback for the corner with a right to terminate if/when you get preleasing going?", "replies": [{"id": "e36131o", "text": "Could you please elaborate on the logic behind this? We are already arranging to buy him out of his 2 year lease (5 year option) ", "replies": [{"id": "e36r0e4", "text": "Why not just arrange to have a right to terminate him with notice? That way you don't have to pay for the buyout before you need it (IE before pre-leasing) As mentioned above I may be missing some details, but conceptually I'd rather have a tenant paying me rent for ___ months while I'm working on my pre-leasing, then buy them out. Also helps mitigate some of the risk if you're not able to get preleasing going. Would imagine, like the option, there would have to be some incentive for him to do so, and that he'll need time to relocate etc.\n\nAny chance you relocate him to the back of your development (I know he's probably not high rent). Would be nifty to build the first phase, slide him into a lower rent portion, then demo his corner and do the corner outparcel after you've moved him into another place in your development", "replies": [{"id": "e3785le", "text": "Relocating him was definitely in the playbook. Thanks for everything ", "replies": [], "depth": 6}, {"id": "e4g98l9", "text": "Solid plan ", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e35fyf4", "text": "Is it common to have more than one potential site plan? My concern is properly marketing and conveying my openmindness in the buildout without alienating tenants with strict real estate preferences (end-cap only, freestanding only) based on their possible misconception of my desire to buildout a particular way. If anyone has any input as to the proper analysis required in deciding between entirely freestanding buildings, a strip center/in-line with end cap builds, or a combination of the two, please let me know. If I do provide multiple options and I have various tenants strongly skewed towards one site plan over another, it would be useful to know what the most powerful metric (cost, gross lease income, number of tenants, etc) in deciding between them would be", "replies": [], "depth": 1}, {"id": "e35ykg1", "text": "Why not try to option the property from him with a right of refusal to purchase, then go gangbusters on pre-leasing?", "replies": [{"id": "e364mo5", "text": "Could you elaborate, option the property? The building is not owner operated ", "replies": [{"id": "e36qt3g", "text": "Get an option to purchase instead of a full purchase agreement. You pay the owner $$$ (hopefully not too much) per month for the right to buy the property within ___ months. Once you get enough pre-leasing you exercise your option and then close on the property.\n\nOf course, this costs option $$$ along the way... but that's better than closing on the property all together only to find that pre-leasing is harder than you thought etc.\n\nCaveat is I may have read the situation quickly, or may be missing some details. The above approach allows you to control the property, time to pre-lease, without having to commit to close. ", "replies": [{"id": "e3782kj", "text": "Very helpful thanks a lot", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "e4n3beu", "text": "I would reach out to DOT to make sure you have the access you think you have. Sounds like a busy road. Also, talk to a civil engineer.", "replies": [], "depth": 1}]