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Thread: Working with/and or finding private developers for housing redevelopment

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    Cyburbian Hawkeye66's avatar
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    Working with/and or finding private developers for housing redevelopment

    There are several old blocks with 80% degraded structures in our city, we are looking at re-development on a block scale. We have envisioned some mixed use development in a few of these. Has anyone used an RFP or other method to find a developer for these types of projects? I had this in mind: The City would consider doing the teardowns and lot acquisitions and sell it for a reasonable price working with the developer on more dense housing. The water, sewer and roads are already there. Some of the blocks adjacent blocks are commercial already, so it would sort of be a mixed use.

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    Cyburbian The District's avatar
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    our firm has done a lot of work helping communities select a viable developer for redevelopment work. an RFP is the typical manner of attracting interested parties.

    it's important to recognize that you want to attract the RIGHT kind of developers, namely, those than can actually deliver. one of the ways to do this is to play ball in a way that shows that you are serious. this should probably include acquiring all the lots beforehand, and at a minimum, getting a solid estimate of the teardown and remediation costs, so that even if the developer is required to clean up the site himself, he knows what he's getting into. a market research study would also be really useful in marketing the project. essentially, the more you can minimize his risk and uncertainty, the easier this is going to be for the developer, and the more likely that the project will actually come to fruition. VERY FEW developers will seriously submit on an RFP if ownership of the land is still held by a variety of parties or otherwise in question, or where the extent of the demolition and clean up work is unknown, etc. and those that will are most likely not qualified to take on the project in the first place.

    you need to package the project in a way that can be viably marketed in order to attract the right developer. email me for more info if you're interested.

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    Cyburbian wahday's avatar
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    I work for a housing developer, though we are a non-profit and develop affordable housing. So, our funding comes from a different place than a for-profit developer. But I think many aspects are the same (and we just recently completed a mixed-use development – rental apartments, 3 stories with retail on first floor). The District is absolutely correct that the City should go ahead and acquire these lots if you can make that move before developing an RFP. In my fair city, we have an official (but young) program to land bank properties like this for just this type of scenario. In our situation, it’s the developer who comes to the City and says “we want to develop these 7 lots, and here is our plan” They submit pro formas and other detailed information proving that they can move on development within a specified timeframe (I think construction must begin within 3 years, but it could be 5). The City will then purchase the land, hold it, and sell it to the developer once financing is in place. The City sells the properties AT COST. This is an important feature of a land bank and helps developers move forward with an assurance of the land costs while assembling additional financing. I should also add that this land bank program is specifically designed for affordable (or what we call “workforce”) housing. Land banking to assist for profit developments could have an additional layer of proving they aren’t just making developers rich unfairly. For affordable housing, for example, there is a limit to how much we can take in developer’s fees and one could institute a similar cap in dealing with for-profits.

    An RFP and a rough pro forma that shows the project you are proposing would be profitable are important to attracting developers as is the guarantee of securing the land. Those other elements like utilities you mentioned would be reflected in the pro forma as would cleanup costs and any other significant aspects to such a project. You might also look to your state mortgage finance authority for some sample documents that could help evaluate the track record of applicants. These are the folks that fund affordable housing in your state and dole things like LIHTC (Low Income Housing Tax Credits). Their applications have lots of info required to prove a developer has a good reputation in numerous areas (timely completion, responsible management, plays by labor laws, quality construction, etc.) that you could borrow from.

    I’ll direct you to this page which has links to a commercial RFP and related docs for redevelopment of an historic motor lodge in my city. It also has a market study. This has been a property the city has struggled to redevelop for quite a while now, but I think the documents are useful. The challenges in redeveloping the site mainly revolve around historic preservation restrictions. Because the site has some tribal murals that are protected by the National Park Service, developer’s have to deal with SHPO and the Feds on this one. So, a unique example, but hopefully the RFP is a useful guide.
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    Cyburbian Cardinal's avatar
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    This is done quite often. The city either acquires the lots or an option to purchase the lots, then issues an RFP. Often the RFP will include some guidelines on the types of development, design standards, incentives, etc., that are preferred. These may be backed up by a redevelopment plan or market analysis to provide greater insight to potential developers. I have managed RFP solicitations in the past, although not in the last few years. We have had good results before the market collapse. Recently I have heard of numerous instances when no proposals have been received, or the proposals were so poor that they have been rejected. Given the current development climate, I suppose that should be expected.
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    Cyburbian UrbaneSprawler's avatar
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    By the description, I wonder if an RFQ (request for qualifications) would be an option to look at instead of an RFP. We did an RFQ on land owned by the town and were then able to really explore the developer's financials, proposed consultant team, market analysis, etc. Perhaps it's just semantics on the acronym as I'm not too familiar with the nuances, but I got the impression an RFQ is another option that can be done first before an RFP.

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    Cyburbian Hawkeye66's avatar
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    I guess the main question(s) is how much interest would we draw in a small city of 27,000 and could a project really return a positive ROI for a developer.

    In some of these blocks the houses are worth very little, if not a liability already. A demo costs 7-12K with Asbestos Abatement.

    If the City takes care of the Demos, and the street, water and sewer are already there...is that interesting to a developer? Is a single block the right size or should it be larger?

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    Cyburbian ColoGI's avatar
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    Quote Originally posted by Hawkeye66 View post

    If the City takes care of the Demos, and the street, water and sewer are already there...is that interesting to a developer? Is a single block the right size or should it be larger?
    The city spending the money for abatement and assuming risk is always interesting to anyone who doesn't have to pay for it. As far as scale goes, that's up to the individual developer and what they can handle.
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    Cyburbian Cardinal's avatar
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    Quote Originally posted by Hawkeye66 View post
    I guess the main question(s) is how much interest would we draw in a small city of 27,000 and could a project really return a positive ROI for a developer.

    In some of these blocks the houses are worth very little, if not a liability already. A demo costs 7-12K with Asbestos Abatement.

    If the City takes care of the Demos, and the street, water and sewer are already there...is that interesting to a developer? Is a single block the right size or should it be larger?
    If there is a market, the city size is irrelevant. I have seen projects completed in cities as small as 1500 people. As far as the parcel size is concerned, it is again dependent upon the market (number of units and square feet of commercial) as well as the style of development, parking, etc.
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    Cyburbian Hawkeye66's avatar
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    Well the scale has always sort of been part of the question. Most of the houses we have that need demo are scattered about, but there are areas which higher concentrations of poor housing stock. One of the problems of doing it by the block is that most blocks still have at least 1-2 decent homes, so you would be buying out and demolishing some still decent houses. Finding money is a problem. We have some TIF set asides that can be used for LMI housing, but you are looking at 7-12K to demo a house and then the acquisition costs on top of that. If you have say 12 in a block, thats 120K in demos plus perhaps 300,000 or more in acquisition.

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    Cyburbian mike gurnee's avatar
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    Can you move the 'decent' houses?

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    Cyburbian DetroitPlanner's avatar
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    Quote Originally posted by mike gurnee View post
    Can you move the 'decent' houses?
    Chances are that those living in the 'decent' houses are keeping care of them and have a lot of sweat equity built not just the home, but to the garage, and the surrounding land as well. Not many would be happy to be moved. I am sure that they would be happy to see the 80 percent substandard stuff removed, and overjoyed if there was a way to redevelop those parcels. Locally we have examples of where both have happened. The infill of homes on empty lots does a lot to keep the neighborhood together. Once you start buying people out of thier homes or moving them around it breaks the social fabric up considerably.
    We hope for better things; it will arise from the ashes - Fr Gabriel Richard 1805

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    Cyburbian Cardinal's avatar
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    There are examples of redevelopment projects that have worked around remaining structures. This might best work if the replacement buildings are 2-4 unit buildings and small apartment blocks. I can share a couple examples from my photo collection. It sounds like you may need to provide some upfront market feasibility information and identify potential city participation, but you should also define what will and will not be accepted in redevelopment proposals. In an RFQ process you might prepare a redevelopment concept and then look for a developer to partner in executing it. The RFP process might give you more options to choose from and let the developer propose the uses they feel are best for the site. There are benefits to either approach.
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