Being a Developer
- Thread starter JoannaK
- Start date
That is a brilliant document. Really shows what type of senarios you can face.
Well done!
Well done!
hi JoannaK
I have read the doc and it is good for people to understand that its not all roses in the developing garden.
and some times things do go wrong and if they do it can cost a minor fortune to get it back on track your is oneof the lucky ones that have gone to the land and enviroment and have been built.
there are lots that the people run out of money getting out of court and end up selling the site for a loss all round.
welcombe to my world, that site went to the land and enviroment court the option holder did get it threw but he cost 1.3 mil to do that, 3 years and they ran out of money.
I have one on my desk that I have not even look at yet its 109 units the site has been in and out of the land and enviroment and they have run out of money and are taking a hit on the price, its a full da site.
I have read the doc and it is good for people to understand that its not all roses in the developing garden.
and some times things do go wrong and if they do it can cost a minor fortune to get it back on track your is oneof the lucky ones that have gone to the land and enviroment and have been built.
there are lots that the people run out of money getting out of court and end up selling the site for a loss all round.
welcombe to my world, that site went to the land and enviroment court the option holder did get it threw but he cost 1.3 mil to do that, 3 years and they ran out of money.
I have one on my desk that I have not even look at yet its 109 units the site has been in and out of the land and enviroment and they have run out of money and are taking a hit on the price, its a full da site.
Great diary !
JK,
Great post !!
I note you exchanged contracts Feb 03 and settled May 05....2 years later.
Does this mean the purchase was "conditional" on you getting all the approvals etc ?? Did the contracts contain a 'dead-line no sale' clause?
i.e. what if the procedure had taken 5 years ? instead of 2 ?
Hope that makes sense...
LL
JK,
Great post !!
I note you exchanged contracts Feb 03 and settled May 05....2 years later.
Does this mean the purchase was "conditional" on you getting all the approvals etc ?? Did the contracts contain a 'dead-line no sale' clause?
i.e. what if the procedure had taken 5 years ? instead of 2 ?
Hope that makes sense...
LL
landlubber said:
Hi Landlubber,
yes, the purchase of 3 out of the 4 were subject to council approval. There was a "sunset clause" in the contract whereby we had to have everything approved within 12 months, but with an option to extend for a further 12 months should the need arise. We purchased one of the properties straight out. We also had "interdependent" clauses within each of the contracts (the ones purchased subject to) that said that if we couldn't complete the sale on one then the other contracts become null and void.
If it had taken 5 years we would have been up the creek!
But it would never have come to that as we had already lodged and received a hearing date with the Land and Environment Court on the basis of a deemed refusal.We were very lucky that we were dealing with local business people who were entrepreneurs in their own rights, and who were well aware of the procedures involved and the machinations of the community.
JoannaK said:
Joanna
How do sellers feel about having such a clause in their sale agreement? Wouldn't they prefer to wait for someone who doesn't want this?
I know you are dealing with larger/more expensive pieces of land, so they are harder to sell but I would still be interested in your thoughts. Couldn't you just put an offer in subject to DA, get the DA, settle on the property and sell off at a profit?
Would you mind sending me a pm with the details of the solicitor you use?
Hi Frank,
The sellers understood that their properties weren't as valuable individually as they were consolidated, thus, they wouldn't be able to achieve the same sale price.
They had always wanted to develop the site themselves, and they had previously tried to consolidate but for some reason it always fell over as there was always one party that couldn't do it for one reason or another. Eventually they decided that it was all too hard and they'd sell it to someone who shared a similar vision to themselves.
We all felt that the interdependant clause was quite fair and reasonable given the amount of money we would be outlaying throughout the DA process. And if for whatever reason we did not complete the sale, the vendors got to keep all that work that we had done. We felt it was a win/win for all, which is always on our minds during the negotiating process.
We could have done as you suggest and sell off the land at a profit, and it did cross my mind several times when the going got tough. We were approached once to do this at a nice profit, but not anything near the profit we'd realise if we developed the property ourselves. But, in our minds, at the end of the day, this is not what developing is about. To us, developing is about realising a vision, and it is a tool that allows us to create an income stream to last us our lifetime and our children's lifetimes. We don't believe in LOE, we believe that cashflow is king. That's not to say we would never ever consider doing as you had suggested, we just couldn't bring ourselves to do it with this particular site, and i doubt it would be as satisfying as actually completing the development.
The part of the city that we purchased in is in the early stages of a rejuvination, which in part is being led by our development. Growing up in the area, I immeditately knew the value and potential of this particular location. Why on earth would I sell it and let someone else capitalise on all that value that is inevitably going to increase in the next few years?
The opportunity for us, as developers, was that we had a completely different mindset to those people who already had property and businesses in the immediate area. They took the area for granted and could not see the value in it. People were operating run down businesses and property, and would balk at the idea of paying a suitable rent for that privelege. We knew that we could build something fantastic, get some fantastic businesses with the appropriate mind-set into the completed product and charge a premium rent for it, which is exactly what we're doing.
Anyway, they were/are our thoughts on that whole topic. My apologies for rambling.
About the solicitor, we used a firm in East Sydney called Crighton Browne Crossley. A Mr Garry Crossley had been our representative and friend for many years, and Roy's long before I had even met him. Unfortunately, Garry passed away in 2005 (may he rest in peace), but Harry, who worked with Garry, is just as good.
The sellers understood that their properties weren't as valuable individually as they were consolidated, thus, they wouldn't be able to achieve the same sale price.
They had always wanted to develop the site themselves, and they had previously tried to consolidate but for some reason it always fell over as there was always one party that couldn't do it for one reason or another. Eventually they decided that it was all too hard and they'd sell it to someone who shared a similar vision to themselves.
We all felt that the interdependant clause was quite fair and reasonable given the amount of money we would be outlaying throughout the DA process. And if for whatever reason we did not complete the sale, the vendors got to keep all that work that we had done. We felt it was a win/win for all, which is always on our minds during the negotiating process.
We could have done as you suggest and sell off the land at a profit, and it did cross my mind several times when the going got tough. We were approached once to do this at a nice profit, but not anything near the profit we'd realise if we developed the property ourselves. But, in our minds, at the end of the day, this is not what developing is about. To us, developing is about realising a vision, and it is a tool that allows us to create an income stream to last us our lifetime and our children's lifetimes. We don't believe in LOE, we believe that cashflow is king. That's not to say we would never ever consider doing as you had suggested, we just couldn't bring ourselves to do it with this particular site, and i doubt it would be as satisfying as actually completing the development.
The part of the city that we purchased in is in the early stages of a rejuvination, which in part is being led by our development. Growing up in the area, I immeditately knew the value and potential of this particular location. Why on earth would I sell it and let someone else capitalise on all that value that is inevitably going to increase in the next few years?
The opportunity for us, as developers, was that we had a completely different mindset to those people who already had property and businesses in the immediate area. They took the area for granted and could not see the value in it. People were operating run down businesses and property, and would balk at the idea of paying a suitable rent for that privelege. We knew that we could build something fantastic, get some fantastic businesses with the appropriate mind-set into the completed product and charge a premium rent for it, which is exactly what we're doing.
Anyway, they were/are our thoughts on that whole topic. My apologies for rambling.
About the solicitor, we used a firm in East Sydney called Crighton Browne Crossley. A Mr Garry Crossley had been our representative and friend for many years, and Roy's long before I had even met him. Unfortunately, Garry passed away in 2005 (may he rest in peace), but Harry, who worked with Garry, is just as good.
Hi Joanna
Many thanks for the great and in depth response. The main reason for my question is as follows.
My parents place is on a corner block right near the beach and opposite a park never to be built out. It is a great spot, recently the block next door came up for sale for 850k (Their house is worth around the 1 Million mark) and they have been interested in purchasing, however it is a large outlay if we cannot get a DA to build say 3-4 townhouses. They would ideally like to get the DA, and sell the plans and two blocks to a builder.
That is why the clause is of such interest to us.
Many thanks for the great and in depth response. The main reason for my question is as follows.
My parents place is on a corner block right near the beach and opposite a park never to be built out. It is a great spot, recently the block next door came up for sale for 850k (Their house is worth around the 1 Million mark) and they have been interested in purchasing, however it is a large outlay if we cannot get a DA to build say 3-4 townhouses. They would ideally like to get the DA, and sell the plans and two blocks to a builder.
That is why the clause is of such interest to us.
I just found this on another site and thought Id share it. Shows the interaction of various stakeholders within a project. Quite interesting actually.
http://www.dsarchitecture.com.au/images/diagram_relationships.jpg
RJ
http://www.dsarchitecture.com.au/images/diagram_relationships.jpg
RJ
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Budget ...how long is a piece of string ??
Hi Joanna,
Thanks again for a great post and subsequent responses.
It seems to me this darned approval "process" that you have to go through is very much open ended with barristers and possible legal action etc etc ...how much money do you budget for this two (?) year ( or even longer God forbid) marathon ?
I salute your perserverance big-time !!
....Respect !
LL
Hi Joanna,
Thanks again for a great post
and subsequent responses. It seems to me this darned approval "process" that you have to go through is very much open ended with barristers and possible legal action etc etc ...how much money do you budget for this two (?) year ( or even longer God forbid) marathon ?
I salute your perserverance big-time !!
....Respect !
LL
Hi LL,
We actually didn't budget for land and environment court proceedings as we didn't think it would go that far, and we only budgeted for 12 months of holding costs on the property we purchased outright.
Basically, we had an informal meeting with Council's Planning and Strategic Planning departments before we submitted the DA, and they loved what we were doing. They had informed us that out plans complied with current guidelines etc etc, and they advised us to go full steam ahead, and it would have the full support of the Council planners.
What no one counted on was an incredibly organised anti-development brigade, and that is what slowed things down.
The Councillors (not all, but a powerful green minority), ever thoughtful of their re-election prospects, didn't have the guts to inform the brigade that our development complied, and effectively sponsored their actions. Because of this, the Council staff had to tow the line.
In the end it added approximately $150k to the expenses with barristers, solicitors, re-designs etc etc.
We actually didn't budget for land and environment court proceedings as we didn't think it would go that far, and we only budgeted for 12 months of holding costs on the property we purchased outright.
Basically, we had an informal meeting with Council's Planning and Strategic Planning departments before we submitted the DA, and they loved what we were doing. They had informed us that out plans complied with current guidelines etc etc, and they advised us to go full steam ahead, and it would have the full support of the Council planners.
What no one counted on was an incredibly organised anti-development brigade, and that is what slowed things down.
The Councillors (not all, but a powerful green minority), ever thoughtful of their re-election prospects, didn't have the guts to inform the brigade that our development complied, and effectively sponsored their actions. Because of this, the Council staff had to tow the line.
In the end it added approximately $150k to the expenses with barristers, solicitors, re-designs etc etc.
Joanna,
Thanks for the response ....$150K "up in smoke" ...and everybody wonders why property is so expensive. I read recently the local council "add-ons" for Melbourne are now $33K for each block of land.
You must recite the famous quote on "perserverance" every night to keep yourself sane !
I need alcohol just reading yuur post ! Thank goodness it's beer o'clock!
LL
Thanks for the response ....$150K "up in smoke" ...and everybody wonders why property is so expensive. I read recently the local council "add-ons" for Melbourne are now $33K for each block of land.
You must recite the famous quote on "perserverance" every night to keep yourself sane !
I need alcohol just reading yuur post ! Thank goodness it's beer o'clock!
LL
