A River Land Sale
Sidney Gable, CRE
The LARGEST land sale in recent years within the city of Philadelphia was accomplished by Sidney E. Gable Associates. It was the sale of a 100-acre tract of industrial zoned ground to a residential developer. Thanks to 50 years in the Real Estate business I learned to think outside of the box in order to find successful solutions to the many situations in the sale of this large tract of ground owned by two separate parties.
To begin you need patience when dealing with the city officials, politicians, and statutes. You hope that the overall economic conditions will support the project at the end of the transaction as well as at the beginning. You have to address the different interests in the transaction and deal with their lawyers, engineers, title company, and their loan commitment.
Recently I concluded a six year journey from the time I listed the property until we sold the ground in January 2007. The dollar value of the land sale was $14,000,000.00.
In 2001 I became the exclusive real estate agent for 70 acres of lease-restricted zoned industrial ground in Philadelphia, Pa. It was a great location for heavy industry use as it was along the river and surrounded by other industrial users. Formerly it was an overseas shipping terminal on one hundred and ten acres. GMAC foreclosed on forty acres and a 180,000 square foot transfer shed, leaving a seventy acre odd shaped parcel. GMAC sold this parcel to Waste Management Corporation. I also approached Waste Management for a sales listing as they were not utilizing the property. I explained to them that the 110 acres would be unique and easier to sell. However their agency agreement was not acceptable to me and therefore I did not list the additional acreage (40 acres).
Series of Events
In 2002 I sold 8.5 acres to a neighbor for expansion. My owners received $1,100,000.00 which relieved financial pressure to maintain their facility. I also was able to obtain a Keystone Economic Zone (KOZ) designation. This meant no city or state taxes were required for the property. Hopefully this would encourage a corporation to purchase the site. Years later I was told by one of the owners that "KOZ" saved us from losing the property because we did not have the tax payments of approximately $185,000.00 a year.
Showing the property to prospects had little positive interest for the following reasons:
a. Odd shape of 70 acre because it surrounded the 40 acres (see brochure)
b. Limited access, caused by road construction by which the state blocked most of the entrance from the street (State Road adjacent to I-95 Expressway was being altered); this lasted for over 3 years
c. Cost of fixing bulk head: $1,000,000.00 plus
d. Location: Prison north of property, trash disposal plant to the south
e. City planning wanted to change the zoning designation to limited Industrial, thereby limiting the future uses, and later changing the zoning to "Waterfront Development" for housing and recreational purposes.*
Therefore, in 2003 I changed course and introduced the site to the major home builders in the area. Most of them declined the site for the reasons mentioned above.
The next challenge was to find a developer that was interested if he could purchase the forty acre site from Waste Management as well. Waste Management was not interested in encouraging residential housing use of the 60 acre site next door to their waste disposal facility to the south but the 40 acre site was not being used. I convinced KBHI Developers to put the 60 acres under contract, and I would then talk to Waste Management again about their 40 acres.
The City's Vision
"One hugely underutilized asset for Philadelphia is the North Delaware Riverfront. The land looks out across a broad tidal river with spectacular views to a mostly wooded and green New Jersey side. With many gentle banks, beaches and tidal-flats, the river is a great place for fishing, boating and walking. Moreover as destination frontage, it offers prime sites for revenue generating facilities such as restaurants, marketplaces, museums and other cultural amenities, with the inland sites developed as new residential and mixed-use riverfront communities."*
"There is currently a great opportunity for the City of Philadelphia to transform its relationship to the Delaware River. This opportunity exists because of the shift from industrial economies once centered on Riverfront to new service and information technologies, and the subsequent shift of the river from a corridor of industry and shipping to one of recreation, leisure and vista. The scale of available land (over 1,000 acres), the proximity of I-95 and regional rail lines, and the magnificence of the Delaware River point to a huge potential for transformation." *
* City Planning Study of 2003.
With the 60 acres under contract I explained to Waste Management that if they didn't sell the 40 acres, the city would use the new eminent domain legislation to condemn the 40 acres, exposing their operation south of the 60 acres to possible condemnation. My plan was to sell the 40 acres to the developer and have Waste Management give back 28 acres of the 60 acre parcel to separate the housing development from Waste Management's operation. I completed these arrangements with Waste Management in December of 2004. I also had to remove cross easements regarding the railroad lines on the property as they were a hindrance to the housing development.
In 2005 we continued to move the development process along. We were aware that it was taking the city and state long periods of time to give approvals for zoning, site approvals, building approvals and riparian rights. I took an active part by obtaining an attorney who had a great track record for getting approvals. I suggested using past engineers who knew the site. We structured the sales agreement to accommodate the buyer and seller. After the due diligence period the deposit went to the seller. Also, the seller would receive $125,000.00 every six months up to thirty months to allow the purchaser to obtain approvals. This process required the entire five periods or the full thirty months.
In September final approvals were obtained and settlement was scheduled to take place in October. Then KBHI Developers sold its interest in the project to Churchill Residential Developers. Settlement was rescheduled for December but did not take place. Title issues with Waste Management and finalizing the purchasers mortgage held up settlement. I was involved with locating legal documents, environmental documents and the old mortgage satisfactions to move the transactions along.
At the beginning of this year we did not know until the last moment if settlement was actually going to take place. The housing market had been strong for three years but now it was softening. The financing of the purchase was finally completed and settlement took place on January 25, 2007. The sixty acres was sold for $8,000,000.00. The 40 acres with a value of $6,000,000.00 was conveyed. Twenty-eight of the 60 acres were transferred to Waste Management to add on to their Bleigh Street plant. Waste Management received $1,700,000.00 for 11 acres difference in acreage that was lost in the trade. The purchaser of Independence Point was Churchill Residential Development. Churchill Residential plans to build 1700 residential units on the site.
Nothing like a successful conclusion.
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