Real Estate Development

As a development manager for a local real estate firm, you have been selected as a development partner
by a local family who owns a parcel of land. The parcel is detailed on the attached site plan. It is currently
unencumbered by debt and is occupied by an auto dealership and a variety of other uses whose tenancies
are all scheduled to end on January 1st, 2021. The family is willing to “contribute the land” to a development
joint venture but has no capability to incur additional out-of-pocket expenses to pursue the entitlement, financing, development, and stabilization of the potential project. In fact they will require priority payments of
$20,000 per month commencing in January 2021 as part of any venture deal.
Your firm has undertaken the feasibility work, but it is not financially capable of proceeding with the project
without a financial partner. Your assignment is to:
1) Prepare a development program summary, development budget and proforma for the project,
based on facts provided herein.
2) Propose a structure (and rationale) for a joint venture indicating how project ownership will be
shared, capital compensated, and cash flow and residual proceeds split between the land owner,
financial partner, and the developer (you).
3) An estimate of the required equity capital should be included.
4) Prepare a summary which indicates the returns that each partner could anticipate based upon
your proforma and proposed venture structure. You should assume a sale of the project on
January 1, 2031 at the cap rates provided.