When repositioning is not enough, and the project you have inherited simply has no profitable (or sufficiently loss minimized) way forward then you may have to replan it. That means a completely new start. Replanning for a completely different use, throwing out the current consents and demolishing what has been built might be the most profitable strategy. Blue sky thinking.
There could be dozens of options and hundreds of permutations if you decide to replan the project. Two critical features will dictate the range of options available to you: 1) planning constraints, and 2) the current real estate market.
If you plan to rezone the property to make allowance for an alternative use, then all the luck of the Irish to you — I’m not about to embark on the limitless opportunities your project site may have. However, if you are going to plan within the current planning rules (perhaps with a few infringements) consider the following first three steps that often have the most impact on profitability:
- Can you increase density, or floor area and put more of the same or similar product on the site? This will reduce your land cost per unit. It can be especially effective if you are not significantly increasing per unit construction costs at the same time.
- On less expensive land where construction costs are increasing, can you do less density and lower height to take advantage of comparably cheaper rates? There is typically a reasonable difference in dollars per square foot construction costs for five-story condos (high) versus two-level terrace homes (lower).
- Does your planning and zoning allow what is in hot demand in the current real estate market? For example, residential may no longer be profitable but the office market is. You can then concentrate on this use.
That concludes our series on Restarting Failed Property Development Projects.
Restart #1: Intro
Restart #2: Continue As-Is
Restart #3: Clean Up and Dump
Restart #4 Renegotiate and Continue
Restart #5: Clean Slate and Continue
Restart #6: Consolidate and Segment
Restart #7: Restructure Existing
Restart #8: Reposition
Restart #9: Replan
Andrew Crosby
+64 21 982 444
andrew@xpectproperty.com
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