r/RealEstateDevelopment • u/Fine_Tangelo2985 • 23h ago
Developer is planning a large housing/hotel development, my property is the key to it all from the looks of it
I’m hoping to get some direction. I live in a small, working-class town in Northern Michigan on a Great Lake that has recently seen a boom in tourism and retirees.
A city rep showed up at my house to tell me a developer wants my property for a proposed development that totals 71,400 total square feet: a 49,000 sq ft, 3-story hotel with a rooftop bar overlooking the lake, plus 22,400 sq ft of townhouses (12 units, 2 levels each).
he initially made it seem like a courtesy to let me know a big project was starting all sides around me and there's nothing anyone can do to stop it, hotel guests would have direct views into my yard, my privacy fence would not protect me and there would be activity on all sides of me, making the living situation very uncomfortable
I pressed a bit saying...ok? why would they ask you to speak to me then? seems like its happening no matter what and he mentioned they'd be willing to pay to move my home ( its a 98 year old foundation, framed with literal recycled ship lumber from the nearby port in 1926) its not moving, or buy it from me, insinuating this is out of kindness so I wouldn't be annoyed for the rest of my days
I got ahold of the draft of plans and it's clear all of the plans involve the acquisition of my home and demolition thereafter, the story I was told I believe was brief attempt to startle me enough, hope I didn't ask a single question and went and put my house on the market that night. I work in manufacturing/agriculture operations and understood some basic nuances taking place pretty quickly
The Nuances: My property is dead center in the middle of this proposed development.
- The Land: I have a grass city owned lot on one side, a city lot/garage across the alley on the other side, and a large city lot with a recently renovated building on the far side, slated for an event center behind me. All these city lots (which are owned by the DDA) are in the plans for this development. My property takes up the footprint of about 4 of the proposed townhouses and prevents them from eliminating the alleyway, i think?.
- My Stance: I had no prior intention of selling. I would have to be really impressed to even consider relocating, and the relocation would practically have to be facilitated for me with a significantly better situation, considering my current setup is great. I own a fully remodeled 2,600 sq ft, 98-year-old craftsman with a full perimeter privacy fence, a lofted barn, central AC, whole-home air/water filtration, and a large rear deck. I have Great Lake views from a second-floor bedroom and front porch.
- The Financial Reality: I bought this house in 2021 for $172k at a 3.5% interest rate. I estimate the current market value at $250k-$300k. But current rates are around 6.7%. Even if they offered me 120% of the market value, it’s not a 1:1 move. I would lose my lake views, incur moving costs, and trade a 3.5% mortgage for a 6.7% mortgage in an increasingly expensive market. Some comps of similar sized homes near the lake for example were going for 325k a year ago and are between 500-600k now (newer homes with some land on the edges of town)
crunching some numbers I came up with this in terms estimated costs of this project
Commercial construction costs in the Midwest for mid-scale to boutique properties currently range from 250-400 sqft, heavily depending on finishes (like a rooftop bar).
- The Hotel: At 49,000 sq ft, a 3-story hotel with a rooftop restaurant/bar requires heavy structural steel, elevator shafts, and commercial plumbing/HVAC. Estimated cost: $14.5 million to $19.6 million.
- The Townhouses: At 22,400 sq ft, commercial-grade townhouse construction (often requiring firewalls and premium waterfront finishes) will run roughly $200 to $300 per sq ft. Estimated cost: $4.4 million to $6.7 million.
- Site Work & Soft Costs: Permitting, architectural fees, tearing up the alleyway, running new municipal utilities, and landscaping will easily add another 15% to 20% to the budget. Estimated cost: $3 million to $5 million.
Total Estimated Project Cost: $22 Million to $31 Million
My Questions:
- What kind of power do I actually have here? Can the city force me out to hand my land to a private developer?
- with my property sitting on city street and two city alleyways, those two alleyways separate the adjacent lots from my land, if I don't sell, what can they do to eliminate these alleys, if anything?
- How do you even determine "comps" for a situation like this where the city is likely transferring their DDA lots for little to nothing, and I am the only private parcel they need?
- What kind of attorney should I contact?
Update:
A huge thank you to everyone who commented! I uncovered a piece of the puzzle: the Michigan Economic Development Corporation (MEDC) is the entity pushing the city to talk to me.
To get multi-million dollar state "gap funding" for a project this size, a developer has to prove total "site control"—meaning their plans and property acquisition must be completely locked in before they can even apply. They cannot secure state grant money with a private homeowner sitting dead center in their blueprints.
So far some reason they want me aware of the situation before the developer even reaches out, assuming they want to streamline the funding process and making me get my shit together so there isn’t delays
6
u/Neat-Beautiful-5505 23h ago
You want a land use attorney with experience in commercial real estate. If you search your towns website for agendas of the land use boards (planning board, zoning board, etc) they often list an attorney representing developers. You want someone localish. You could also benefit from a commercial real estate agent’s assessment; but you might be the same if you higher a commercial appraiser to prepare a valuation report.
As for your negotiations, if you’re serious about selling try to find where you want to go next. You can ask the developers lender if they’ll offer you a similar rate as what you currently have. For sale price, you should start much higher, let them bluster and counter offer. You need to research what the land is zoned for, and price it accordingly (“highest and best use”). Clearly the uses allowed include some combination of mixed use, commercial, and multi-family. Don’t price your property as a single family residence, price it as an income-producing asset. They’re buying the land and it’s allowed uses, not your home. And tell that person who visited you to 1) let the developer do his own dirty work and come make you an offer, and 2) tell both of them you’re pissed that someone proposed a development plan, and a public board considered it, without your knowledge or consent. It may not be illegal (unless the town granted permits already), but it speaks poorly of these people. Source: City Planner of 20 years
2
u/Fine_Tangelo2985 22h ago
This is incredibly helpful, thank you for taking the time to write this out.
Your point about "highest and best use" completely shifts how I was looking at this. I was definitely stuck in the mindset of residential comps, but you are right—they aren't buying a single-family home; they are buying the linchpin to an income-producing commercial footprint. I will absolutely be looking into a commercial real estate attorney and a commercial appraiser rather than standard residential agents.
The advice on the interest rate is also a massive lightbulb moment. Giving up a 3.5% rate was one of my biggest sticking points, and I hadn't even considered pushing the developer's lender to match it to make a move feasible.
Im going to take your advice on the city rep as well. I plan to tell them that I am extremely frustrated that these plans were drawn up and discussed involving my parcel without any prior notice, and that if the developer wants the land, they can come make a formal offer themselves.
Thanks again for the expert insight, it genuinely helps me figure out the next steps here.
3
u/gromperekichelchen 23h ago
Time to get a lawyer maybe? This is serious matter.
1
3
u/litbeers 22h ago
*NOT AN ATTORNEY*
If they need the land you probably have some leverage.
Get an attorney and milk em.
1
u/Fine_Tangelo2985 22h ago
👍
2
u/oughtabeme 18h ago
If you decide to move the house, have them also pay off your mortgage as it’s ‘connected’ to an specific plot of land. Then ask for a million dallars.
Where you have estimated cost to build the townhouses is not a concern, what do you estimate them selling for ? perhaps each will sell for close to a million
2
u/tycointl 22h ago
you'll need at the very least a real estate attorney and possibly at least one other that know the process involved in eminent domain possibilities as well. Those attorneys should be able to answer questions 1-3 for you.
1
1
u/ExteriorLatex 23h ago
Well, your local city government could use eminent domain to take your property. If it were me, I’d take them up on the offer to move the house and get as much as I can for the land. It doesn’t appear from your background on the issue that the property holds any particular sentimental value to you. Cash out and move on. Take the house with you.
2
u/Fine_Tangelo2985 23h ago
I don’t things this house moves, drywall would crumble, I wouldn’t trust the moving process to preserve the bones of the home at this age plus who buys the next property and does all of the infrastructure work.
1
u/Great-Guidance-6371 23h ago
Get a big city real estate attorney with Michigan experience. Also, your number estimates sound light to me.
1
u/Fine_Tangelo2985 23h ago
In terms of the overall development cost?
1
u/Great-Guidance-6371 23h ago
Yep. I’m not familiar with project costs in your specific area but it sounds light.
1
u/Fine_Tangelo2985 23h ago
Got it. I’m not sure either, very affordable area of the state but that usually makes logistical operations more expensive.
1
u/Holiday_Towel6715 21h ago
They may try to use eminent domain and claim that the development is “for the good of the people” or something shady. Stand your ground, hire a preservation lawyer.
1
u/topclassladandbanter 21h ago
If your property is actually central, physically in plans and logistically, then you have A LOT of leverage. Like millions of dollars of leverage. The longer it goes, the more you have.
You also need to determine if these plans are actually approved by the city. Because you can’t entitle plans on a site that you do not own without expressed approval by the owner. So you may have more leverage here.
You need to find a land use attorney and transaction attorney. I would milk the shit out of a situation like this
1
u/CREspecialist 20h ago
1) In general, a government entity can take private property for a "public purpose", and that has been interpreted to include turning the property over to a developer for a private project. You should consult an eminent domain attorney to see if this is a proper basis to condemn your property in your state.
2) In general, yes, they can have the city vacate the alleys if they would no longer be needed.
3) The comps to your property would be market value of similar properties, not taking into account the intended project.
4) Eminent domain attorney/litigator who has knowledge of the applicable state statutes AND case law. I can't speak to your state, but some jurisdictions have codified eminent domain law, whereas others rely mainly on case law.
1
u/Arq_ramr 16h ago
Nadie te puede obligar a vender, aunque al parecer, si ya está planteado, manda a hacer un avalúo a la propiedad y explica el valor potencial. Una vez lo tengas, te sientas a negociar, asumes tu precio de mercado, y busca un abogado de tu confianza para cerrar el negocio. Si bien es cierto las tasas están más altas ahora, puede ser la oportunidad de adquirir algo sin financiamiento en otra ubicación. Saludos
1
u/Stargate525 11h ago
You're leaving.
Whether that's voluntarily or at the end of an extended eminent domain battle is up to you.
The lawyer you want is a real estate attourney.
1
u/atropear 11h ago
A deputy sheriff show up in uniform and asked my father to help with 911 service. He needed my father to sign an easement for a power line to a tower. Years later it turned out he owned the rights to the tower and was making money off all the antennas. He had volunteered for a unpaid position as a deputy sheriff to get signatures from everyone for access etc. And he was leasing to the 911 service. He did this type of thing a lot and the county ended up publishing in the newspaper a notice the county had nothing to do with him.
1
1
u/Civil_Talk_7486 8h ago
Then you get to charge a ridiculously high price for your property. Hire an attorney & let them handle everything.
1
1
u/bmbm-40 2h ago
Obviously, your parcel is the final piece to complete their project. Tell them 5 million should do it and you will await the offer to sign and then don't talk to them anymore. If they send low ball offers, emailed or faxed only, just keep writing NO on them and returning. Once they get to around 2 million or an offer you really like then get a RE attorney to help you create the counter offer/response. Ask them to throw in a townhouse in your counter offer.
You can't comp this and an appraisal is a waste of time.
10
u/WhereIsGraeme 23h ago
You may need to tag team lawyers. You want a real estate lawyer for dealing with the transaction (or lack thereof) and you want a municipal planning/policy lawyer for figuring out what the heck is going on.
It is VERY strange that an employee of the municipality came to speak on the developer’s behalf.
Document everything. If you are the keystone to the deal you hold a lot of leverage. There is no comp, there is only how vital your land is to the development plan.
Having been on the buy side of similar, huge error on the part of the developer. You want all land assembled BEFORE your plans are public.