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Thread: Value of development rights vs. value of actual land with rights

  1. #1
    moderator in moderation Suburb Repairman's avatar
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    Value of development rights vs. value of actual land with rights

    Somewhat of a follow-up on another thread, but not close enough related to go with it:

    How do you go about establishing the value of development rights, such as for a transfer of development rights (TDR) or purchase of development rights (PDR)? We have absolutely no precedence in the area for valuing development rights.

    For example, a multifamily property of 29 acres capable of supporting 533 units with current zoning would be worth $3,225,000. How much would the rights be worth as a percentage of that number? My boss tends to think the development rights are worth substantially less, while I feel it should be similar. I base my arguement on the granting property being rendered worthless for development and the receiving property gains more efficiencies because more units can be developed on a smaller parcel with less infrastructure outlay (economies of scale).

    What do you think?

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

  2. #2
    Unfrozen Caveman Planner mendelman's avatar
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    Yeah, SR, I would go with your opinion. I would think the value of development rights for the receiving property should equal the value from the giving property. Especially, if the value on the market is the same or comparable between the two properties.

    Where's Cardinal? I'm sure he could give you a more definitive answer....probably along the lines of "It depends".
    I'm sorry. Is my bias showing?

    Let's not be didactic in this profession, because that is a path to disillusion and irrelevancy.

    Six seasons and a movie!

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    Cyburbian Dashboard's avatar
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    Most of the PDR programs I have looked at rely on two appraisals. The first one is an appraisal of what the property would be worth at its highest use (generally, how many homes, etc.). The second one is an appraisal of the agricultural value of the land. The difference between those two values is essentially the value of the development rights. For example, if you have property that is valued at $10,000 an acre for residential and $3,000 an acre for agriculture, the value of the development rights would be $7,000 an acre.

    Others may have alternative methods...

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    Cyburbian hilldweller's avatar
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    Quote Originally posted by Suburb Repairman View post
    My boss tends to think the development rights are worth substantially less
    I don't follow his reasoning. Can you elaborate?

  5. #5
    NIMBY asshatterer Plus Richmond Jake's avatar
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    Our TDR ordinance does not address the value of the rights. We leave that to the private marketplace. The density allowed on the sending site can be transferred to the receiving site (the intent is to remove development rights from a barrier island). The allowed intensity transfer was pulled out of thin air by the County attorney.

  6. #6
    Cyburbian Flying Monkeys's avatar
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    Is it a transfer or buyout? A transfer is a transfer; they get the same on the receiving property. What I think you are doing is buying the developers development rights.... so the difference in value (as stated, based on average of high and low surveys) is what you are buying.
    What’s in a name? – Your reputation….:)

  7. #7
    moderator in moderation Suburb Repairman's avatar
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    Quote Originally posted by hilldweller View post
    I don't follow his reasoning. Can you elaborate?
    I'll do my best... Basically, TDRs are an unknown quantity for the most part in Texas. Agents & developers here have very little experience with them. As you probably know, lenders view anything different from the norm as inherently risky. I think she views the transferred rights as less valuable because it adds complexity to a project. I think its a difference between how her & I view this project: she is looking more at initial capital & start-up costs, while I'm looking at longer term gains.

    Another friend of mine suggested I contact some conservancies, such as The Nature Conservancy, to see if they have any useful information.

    EDIT: To explain the particular situation...

    A collaboration of non-profits, with CDBG assistance, purchased a property to develop a social service village and park. They are trying to find ways to speed development of the infrastructure & buildings. The director & I thought this might be an opportunity to use our TDR provisions, which have yet to be used since 2003 when the code was adopted. We have a couple of other catches with our TDR, namely that it was written to preserve open space & environmental features, not provide community services. Since we are still looking at less intense use and a public good, we can work with that. Before we go through the headache of a text amendment, we'd like to see if this is really worth it.

    Basically, a developer would purchase the development rights from the non-profit collaboration. The city would be involved only because the initial investment included the city's CDBG funds and we don't want to run astray of HUD.
    Last edited by Suburb Repairman; 31 May 2007 at 10:46 AM.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

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    Cyburbian hilldweller's avatar
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    Quote Originally posted by Suburb Repairman View post

    EDIT: To explain the particular situation...

    A collaboration of non-profits, with CDBG assistance, purchased a property to develop a social service village and park. They are trying to find ways to speed development of the infrastructure & buildings. The director & I thought this might be an opportunity to use our TDR provisions, which have yet to be used since 2003 when the code was adopted. We have a couple of other catches with our TDR, namely that it was written to preserve open space & environmental features, not provide community services. Since we are still looking at less intense use and a public good, we can work with that. Before we go through the headache of a text amendment, we'd like to see if this is really worth it.
    Are the perceived delays associated with zoning/permitting issues? Are TDR's entitled to a speedier process of some sort?

  9. #9
    moderator in moderation Suburb Repairman's avatar
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    Quote Originally posted by hilldweller View post
    Are the perceived delays associated with zoning/permitting issues? Are TDR's entitled to a speedier process of some sort?
    Their delays stem from lack of financial capital, not bureaucracy. It's tough for non-profits to get financing from lenders, so they have to get together a pretty large amount in order to construct buildings, a bus station, new road, etc. Plus, the TDR allows them to extract value in the property from development rights they have no intention of using.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

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