Real Estate Guest Speaker 1/28/13

Mike Gentry – Real Estate Law

Dr. Harrison – medicine/investments, great great grandfather was in the 1^st graduating class of A&M

Developer Perspective of Land

·       The land that we discussed used to be Booneville, near briarcrest drive. The area used to be a cemetery where the freed slaves are buried near hwy 6 and Target in Bryan.

o   For developing this land in current day, they must dig for artifacts since it was a historical area, for example if they dug up some coffins or artifacts then he wouldn’t be able to pursue the project, and it would be shut down. Because then they would have to do a historical inventory which delays the project and could mess up any loans outstanding for the project.

o   There was a pipeline on the property that needed to be moved to the edge of the property. During the move oil was spilled and contaminated the soil, which then had to be removed and replaced before use.

o   There are phases for environmental spills, if an oil leak is found then you can do a voluntary cleanup yourself which is faster, or you can have Exxon do it for you but there is a wait list of 2-3 years.

o   Another topic that was covered is that you usually want to zone the land for commercial property to convince people to buy it, but you must go through a zoning process by applying to the city for zoning which will determine what type of buildings can be built on the land. Developers want to zone the property for uses that your buyers want.

o   TIRZ – tax incremental reinvestment zone, the first expensive part of developing land is bringing in the infrastructure, such as road with water and electricity, this makes the land attractive to buyers with access to the back and front of a lot and highway.

§  First determine the tax value as the base line for value, as property develops and the value goes up, then so does the taxes. The city gets revenue from the property taxes, so now they capture the increase in value in this zone, now they can issue bonds and pay the cost of building the road. Expecting an increase in tax revenue because of more development in that zone to pay for the bond.

§  You also want to keep the property as “Ag Use” because you pay almost nothing in taxes, want to keep it this way until the buyer is ready to develop, then they convert it to commercial and pay “Rollback taxes” which is the last 5 years, this is a large sum but it is way better than paying regular commercial taxes each year.

o   We also discussed that you must plat the land in order to do anything. To sell lots you must file a plat and subdivide the land. This simplifies the description of property but as a part of this process the city governments are planning what they want or being told what they need. Government's can tell you to develop certain portions for certain uses such as a curb cut allowing people on and off the highway. It is almost impossible to sell the land without the curb cut because buyers wont want it. You have to apply with Texdot to get this all approved, they make the land owner make all the changes such as curb cut, giving up land to cthe ity for roads etc. These things are necessary evils that are standard in the process.

o   Big box development - an example that was discussed is the corner of university and hwy 6. Big box is an old standard such as walmarts that are just big box designs, this doesn’t look very pretty. Nowadays cities wants to establish design guidelines as a covenant required for buyers on your plat, all buyers must design their buildings according to these standards. This makes projects more expensive because they must look pretty and unusual rather than a square box.

§  Also, you must make sure that the rainwater doesn’t leave your new developed land any faster than before it was developed, this sometimes requires you to do things such as at Lowes they had to put a big ditch in to hold the water. This is not liked by developers because it costs money and you lose a lot of land that could have been used for making money.

§  The city wants lots of bushes and trees and grass to look good along the street. Property owners must develop a land owners association for the property and must maintain all these aesthetics, paying for water, maintenance of street and greenery.

·         All of this has taken 18 months so far for this project and they are still developing the land to get ready to sell it.

·         I really enjoyed listening to the guest speakers because we got to see a relevant and currently ongoing real estate project that we can relate to and see what we have learned in a real world application.