A while ago, I had the privilege to work with DBM Realty Limited comprising of Brian Mortell and his son Colin through a very interesting and creative land assembly. That journey is as follows.
A substantial student and apartment gap had emerged in a particular sub-market required to house doctors, nurses, support workers and students through the location of a large and growing Regional Hospital plus well known established and growing College.
Across from the hospital, and just down the street from the college, were 7 independently owned residential homes. Knowing the Official Plan called for intensification development, initial concept plans were drawn to determine various potential Asset Types including Gross Floor Area (“GFA”) potentials etc. For further support, a local active planner was also was engaged to offer further suggestions etc. regarding “Highest & Best Use”, GFA alternatives etc.
From that, collective valuation alternatives for all 7 properties were undertaken assuming municipal support for new vertical development. The Assembly was than valued as a collective. Which begged the question of how each homeowner could be confident they received an equitable portion of the collective?
Next, we carried out individual meetings with each home owner. All properties were owner occupied. It was reasoned with each that the value of their properties collectively far outweighed pricing if they simply sold individually. All that was needed was everyone to buy in and let the qualified developer proceed toward municipal approvals.
In the interview process discussion with each owner revolved around the net usable land area each owned as it related to the total collective need.
To make sure everyone felt the process was fair and equitable, an appraisal for each home was undertaken on the same day by the same qualified independent appraiser.
We then again met with each homeowner, discussed all 7 appraisal results “As Is”, and how it compared with the major financial gain each party could assume as part of the larger development. Everything was totally transparent. To provide each homeowner with a fair value we calculated the aggregate value of the appraisals and then we took the Assembly Value and divided by the aggregate appraised values. This gave us a premium factor that we could multiply each Home Owners appraised value to give each the same premium on their ‘As Is’ Value. i.e. if Assembly Value/Aggregate Appraised Value = 1.25 each Home Owner would receive a 25% ‘premium’.
A qualified developer, well known to the Mortells was then approached to gauge potential interest in a future development at this location, which was quickly established. Also, it was determined what the Developer would pay collectively, subject to acquiring all 7 properties and receiving the required Municipal approvals.
The developer, who needed to spend multiple thousands of dollars to achieve required municipal approvals, was then able to carry out his requirements with the confidence all the original process was complete.
This assembly was completed with all parties acknowledging satisfaction with the outcome.
The home owners each received substantially more than they would have received individually, and in a well-planned timely manner. Also, the Agreement structure allowed them sufficient time after transactions firmed up to seek out their future alternative housing accommodation etc.
The Developer was able to work through the approval process confidently knowing the Municipality was very keen to see the development concept bear fruit in this sub-market.
Today, there is a very attractive active 360 bed student housing project completed and operating, plus extra land in the process of being developed for either apartments and/or residential condos.
We were able to witness first hand the clear advantage that straight forward honest negotiations, in most cases, brings out the best in people. There was little “shadow boxing” and few hidden agendas with this successful transaction. It was a great opportunity to work with quality people throughout.