Development land value

[Clive]

Promotional agreements make sense with smaller sites, as the competition among housebuilding firms will be larger when it comes to selling the site with planning permission, as there'll be plenty of potential purchasers. As the size of the project gets bigger however the number of firms capable of affording such a huge amount of money in one go shrinks rapidly. You are left with the potential bidders being one of the half dozen or so large Plc developers. If you think they are going to cut each others throats in a bidding frenzy to pay top dollar you're very much mistaken. They'll let one or two make bids way under the value and then parcel it out to each other afterwards. They all deal with each other all the time, constantly forming partnerships and consortia to enable big developments, they'll happily stitch up Joe Farmer in an instant.

they make sense on bigger sites as well which are rarely sold in one phase but usually sold by promoter in a phased way and often to multiple developers all competing. It’s fiercely competitive and the land values reflect that fact

small sites don’t need a promotion agreement or option, best approach there is invest and get permission yourself

options frankly never make sense for a landowner

 

[Clive]

The trouble is that as I mentioned above, for the landowner the development is a one off deal. He sells his land, gets his cash, end of story. So he has a massive incentive to get the very best price possible, he gets one bite at the cherry. Whereas all the professionals he may co-operate with, whether developers, land promoters or agents, they all are doing this all the time. There is less incentive for them to get absolute top dollar on any given deal, because there will always be another deal. In fact turnover is better for them. Get deal A done and dusted so deal B can be dealt with a bit quicker.

Its the difference between selling a tractor once and dealing in them. In the former you want the best price, in the latter you just want turnover as fast as possible, as long as each deal turns a profit. Indeed you might have an incentive to sell one for no profit, so you get your working capital back and can reinvest it in a better prospect.

This is why landowners face such a struggle getting full value for their land, everyone else in the process has different priorities to them, even when they are nominally on the same team.

it doesn’t have to be a single deal and on larger developments under promotion agreements often isn’t

a promoters priority aligns exactly with land owner as they get a % of the landowners return so need to maximise it. They don’t benefit at all from the development itself just the sale

 

[Goweresque]

it doesn’t have to be a single deal and on larger developments under promotion agreements often isn’t

a promoters priority aligns exactly with land owner as they get a % of the landowners return so need to maximise it. They don’t benefit at all from the development itself just the sale

Well I've got 30 years first hand experience of dealing with developers, agents, and Uncle Tom Cobbley and all in the development industry, and I've yet to meet a single person/company in that industry you could trust implicitly to work for your best interests. They all have their own agendas, their own interests, that often are 180 degrees out of whack with the landowner's interests. I wouldn't believe a word they said, let alone trust it.

The moment a landowner gets contacted by a developer is the moment he's swimming solo in shark infested waters, and if one of those sharks can see a way to legally deprive someone of the development value of their land, they will, regardless of what format the agreement with the landowner is.

 

[Still Farming]

Well I've got 30 years first hand experience of dealing with developers, agents, and Uncle Tom Cobbley and all in the development industry, and I've yet to meet a single person/company in that industry you could trust implicitly to work for your best interests. They all have their own agendas, their own interests, that often are 180 degrees out of whack with the landowner's interests. I wouldn't believe a word they said, let alone trust it.

The moment a landowner gets contacted by a developer is the moment he's swimming solo in shark infested waters, and if one of those sharks can see a way to legally deprive someone of the development value of their land, they will, regardless of what format the agreement with the landowner is.

Any luck or experience where farmers/Landowner start up a development company and do all themselves and therefore get "penny and the bun"?

 

[Clive]

Well I've got 30 years first hand experience of dealing with developers, agents, and Uncle Tom Cobbley and all in the development industry, and I've yet to meet a single person/company in that industry you could trust implicitly to work for your best interests. They all have their own agendas, their own interests, that often are 180 degrees out of whack with the landowner's interests. I wouldn't believe a word they said, let alone trust it.

The moment a landowner gets contacted by a developer is the moment he's swimming solo in shark infested waters, and if one of those sharks can see a way to legally deprive someone of the development value of their land, they will, regardless of what format the agreement with the landowner is.

I’ve only got 25 yrs experience but have also had some very good advice over that period

my view is options are not good for landowners and promotion agreements are much better - chances of a big development happening without option or promotion are very limited unless you have very deep pockets to invest in what is really just speculation

small developments best done without either as investment to gain pp and deliverability is more realistic for a landowner

a landowner should never deal directly with a developer - they will eat them for breakfast !

 

[S J H]

The trouble is that as I mentioned above, for the landowner the development is a one off deal. He sells his land, gets his cash, end of story. So he has a massive incentive to get the very best price possible, he gets one bite at the cherry. Whereas all the professionals he may co-operate with, whether developers, land promoters or agents, they all are doing this all the time. There is less incentive for them to get absolute top dollar on any given deal, because there will always be another deal. In fact turnover is better for them. Get deal A done and dusted so deal B can be dealt with a bit quicker.

Its the difference between selling a tractor once and dealing in them. In the former you want the best price, in the latter you just want turnover as fast as possible, as long as each deal turns a profit. Indeed you might have an incentive to sell one for no profit, so you get your working capital back and can reinvest it in a better prospect.

This is why landowners face such a struggle getting full value for their land, everyone else in the process has different priorities to them, even when they are nominally on the same team.

Yes I see what you mean, I just think the best deal will be got by someone who's paid on their performance rather than an agent clocking up hours, and not getting any further.

My main concern with a promoter would be that they could put land to the side which they know will be easier to move in trickier times, but I'm sure if things are able to move then they'd be pushing for it.

 

[Still Farming]

Their all interlocked ,associated, or work together ,be it land agents planners,consultants etc. etc etc

 

[Goweresque]

Any luck or experience where farmers/Landowner start up a development company and do all themselves and therefore get "penny and the bun"?

It would probably work about as well as farmers co-ops do...........everyone would moan about how much the CEO was paid, and they could do it better for minimum wage.

 

[jondear]

Any luck or experience where farmers/Landowner start up a development company and do all themselves and therefore get "penny and the bun"?

Rumour has it that's what happened on a development outside Pinhoe Exeter .Owner did it himself!

 

[Still Farming]

It would probably work about as well as farmers co-ops do...........everyone would moan about how much the CEO was paid, and they could do it better for minimum wage.

Or just become a developer themself ?

 

[David.]

Promoting sites, or indeed developing them, off your own bat is a lot easier if it is the second one you have done.
Less so if it is your first bite, and the farm overdraft is footing the bills. It costs a lot of money to get all the traffic, environmental, etc, surveys done and to go to appeal if necessary. And you still need extremely well paid professionals along to make the kind if talk that planners understand.

 

[Goweresque]

Promoting sites, or indeed developing them, off your own bat is a lot easier if it is the second one you have done.
Less so if it is your first bite, and the farm overdraft is footing the bills. It costs a lot of money to get all the traffic, environmental, etc, surveys done and to go to appeal if necessary. And you still need extremely well paid professionals along to make the kind if talk that planners understand.

Yes, you're talking 6 figures even for small sites, multiple 7 figures for large ones, all of which needs to be shelled out in cash before a penny comes in the other way. And no guarantee of success at the end.

 

[HarryB97]

No several people locally who have tried to do it all them selves on small sites of less than a dozen houses. Both said never again it cost them a fortune had to do several applications as they kept getting refused and generally a disaster!

 

[Doing it for the kids]

J

Yes I see what you mean, I just think the best deal will be got by someone who's paid on their performance rather than an agent clocking up hours, and not getting any further.

My main concern with a promoter would be that they could put land to the side which they know will be easier to move in trickier times, but I'm sure if things are able to move then they'd be pushing for it.

Modern promo’s place an obligation to get the job done quickly and not dilly dally. If they have stumped up a hefty sign up fee and shelled out for multiple surveys they won’t want to be messing about for too long either.

Also they can’t promote other land in the same area to keep them focused

 

[Hereward]

Quite happy to be taken advantage of by a developer, grant section 106s by the bucket load, nice two hundred acre block with road frontage available £50k acre its yours Mr Developer.

 

[Still Farming]

Yes, you're talking 6 figures even for small sites, multiple 7 figures for large ones, all of which needs to be shelled out in cash before a penny comes in the other way. And no guarantee of success at the end.

And I guess developers don't worry as they factor into the Purchases price and deduct so in essence the landowner still pays whatever?

 

[Clive]

And I guess developers don't worry as they factor into the Purchases price and deduct so in essence the landowner still pays whatever?

the costs are usually capped within agreements with developer (option). Or promoter and landowner is not responsible (so can’t loose out if unsuccessful)

It’s a minefield, you need a GOOD agent before entering into any such agreement not advice from the internet that’s for sure !

 

[Still Farming]

the costs are usually capped within agreements with developer (option). Or promoter and landowner is not responsible (so can’t loose out if unsuccessful)

It’s a minefield, you need a GOOD agent before entering into any such agreement not advice from the internet that’s for sure !

Your correct there,but looks like a cross section of people on here, that have "been through the mill", with it and a "general " chat always good ,that's what forum's are for, possibly, good or bad?
From the little I know, is that ,who ever your involved with is that "their all inter twined " with each other ,be it worked ,related , staff, been employed,on same committees, Associations, land agents, auctioneers etc etc so to get a Truly independent, 100% for you fight is near dam not possible?

 

[Clive]

Your correct there,but looks like a cross section of people on here, that have "been through the mill", with it and a "general " chat always good ,that's what forum's are for, possibly, good or bad?
From the little I know, is that ,who ever your involved with is that "their all inter twined " with each other ,be it worked ,related , staff, been employed,on same committees, Associations, land agents, auctioneers etc etc so to get a Truly independent, 100% for you fight is near dam not possible?

I think that's why promotion agreements are the only way to go with these things - The promoter and landowner are aligned in that the more the landowner gets the more the promoter does so they are 100% on the landowner's side.

Options are where many, many landowners have been done over, NEVER do one IMO

 

[Doing it for the kids]

I think that's why promotion agreements are the only way to go with these things - The promoter and landowner are aligned in that the more the landowner gets the more the promoter does so they are 100% on the landowner's side.

Options are where many, many landowners have been done over, NEVER do one IMO

Options are so last year, I don’t think many get signed up now but there still plenty knocking about from the 80’s that are still live. It’s those which I suspect attract and generate the bad stories.

A good agent will be on % basis so is always going to want the best deal for the client, a bad one, maybe not