Due Diligence Analysis. Let’s walk through Due Diligence on a recent Deal.

Let’s walk through Due Diligence on a recent Deal.

The Deal.

The subject property covers 149.5 acres and is currently zoned Regional Commercial and Multi-family. It’s an enormous amount of land to develop, regardless of your experience. The initial plan was to sell the vacant land as it is, consisting of four large parcels (NE, NW, SE, SW).

Several purchase offers were submitted for the initial 12 acres (Phase 1A) immediately adjacent to the Interstate, but they fell through because the city was unclear on how to handle the steps needed to update the approvals. We had to revise the plan.

The New Plan.

The new plan focused on a portion of the 34.82 acres at the NW quadrant (Phase 1) immediately adjacent to Interstate 5. This portion is right next to the freeway with excellent visibility and access, and was chosen because the majority of interest was from developers and users, who were for this initial 12 acres (Phase 1A). A Use Permit was already approved for a tenant who developed at another site in Redding to the south.

The new plan is an amendment to the original use permit, which proposes a combination of freeway-oriented retail uses on 12 acres of Phase 1, such as Fuel and Fast Food, single-tenant retail, restaurants, hotels, and Quick Service Restaurants (QSRs) typically found along heavily traveled sites along interstates, as with this site. Only a Minor Use Permit Amendment is required because our proposal is within the parameters of the original Use Permit. This Amendment can be processed much quicker than if a Specific or General Plan Amendment were required, monetizing this portion much quicker. The other reason to pursue this approval is to kick-start the rest of the development by activating this portion of the site along the Interstate.

Due to the already approved Use Permit, this new plan must go through a new planning application.

Due Diligence Hit List

1. Understanding the City’s Planning Processes
2. Utility Information
3. Road Improvement and Realignments
4. Existing Creek
5. Improvement Costing

All In.

In addition to kicking this development off sooner, updating the approvals will increase the current owner’s land value. Also, by installing road improvements/ realignment, extending utilities, rough grading the parcels, and creating newly formed parcels, the total sale value of the land would increase further. The estimated cost to develop developable lots is approximately $5M. Implementing this plan will shorten the time frame and increase the net land value by $4M.

Why We Liked It.

1. The complexity is minimized for potential buyers. Potential buyers now have less risk, which opens up opportunities for end-user buyers.

2. The area. Phase 1A is located along a major highway that serves locals and tourists to the nearby lake, providing needed retail and hotel amenities.

3. It fits our market thesis. Adding new commercial services and access to Phase 1 also improves the value of the residential zoned parcels.

How It Ended.

We decided to move forward with the new plan and are getting the 12-acre site through planning approvals.