The Family’s Golden Egg
Late last year our firm was approached by a gentleman, who happens to be a member of one of the organizations which we are actively a part of, in order to set up a meeting to discuss a partnership to develop his family’s land. Our meeting involved touring his properties and him providing us with the backstory behind this idea. It turns out that the land was passed down by the parents to the children who are now seniors and wanted to take advantage of the housing market. What truly sparked their development idea was that earlier in the year while performing routine maintenance on the site, one of the family members fell ill and was diagnosed with late-stage leukemia. After the gentleman passed away, the family understood that if they ever wanted to realize the full potential of their land that they would have to actively begin looking at potential development opportunities.
It turned out that the family’s properties were being utilized for agricultural purposes but had the zoning rights to build single-family homes. After our meeting and us getting a better understanding of what exactly the gentleman wanted to do with this land, our team spent the next couple of weeks over the holidays touring the property and the developments in the area, analyzing market conditions and forecasts, producing several proforma analysis, and evaluating construction phasing to create a thorough development breakdown. As we finalized our research and due diligence, analyzing the project from multiple angles, we came to the conclusion that the risk for that particular area was too high at this current time to develop regardless of the approach. At the beginning of this year, we decided that rather than sending an email or talking over the phone, that we would discuss our findings in person. We drove down to one of the properties in order to discuss the main points that we had discovered. During the meeting, we thoroughly explained why we felt that we could not partner up on this project and why the development was potentially too risky. The family had held onto these properties for over 30 years and we understood that they were hoping it would be their golden egg. Unfortunately based on our research, we did not believe this was the case and felt explaining the details in person was the best approach.
As we outlined the specifics of our initial analysis, the gentleman was shocked, somewhat dismayed, and asked a lot of questions as we did not provide him with the answers he was hoping for. Nonetheless, he reluctantly understood and appreciated the fact that our team took the time to entertain his proposal. Several weeks after our meeting, we received a phone call from the gentleman stating that his family was interested in contracting Vercetti Enterprises in order to solely develop the property rather than creating an equity share partnership. Unfortunately, our stance on the development project had not changed but we once more decided to explain how and why we came to our original decision. As a young and aspiring development company, it was tough for us to walk away from a potentially lucrative contract but we could not take on a project that we knew had little chance of succeeding.
Regardless, we still offered the gentleman our pre-development services for a small fee in order to perform further due diligence and help him understand how we reached our conclusion. However, we did not walk away from this opportunity with anything; this experience is a testament that the members of our firm stand true to our companies values by creating a foundation that you can truly rely on.