Current industry trends in high growth areas show that more municipalities are likely to allow developers to go vertical and create high-rise and high-density projects that generally wouldn't have been approved five or more years ago. While the municipalities' logic for these approvals varies, I'd like to focus on situations where developers are looking to acquire or have a great parcel of land but don't have: A) the tolerance for the risk implied, or B) the time to be in a position to develop a project of that size before the market changes and demand is no longer there for project presales. In my experience, neither is a bad situation. I'm going to outline why local governments won't be too disappointed with a request to rezone as long as you keep in mind their bottom line, and why many developers focus on mid-rise and mixed-use projects.

Creative Strategy

To examine local governments and the way in which they do business is to take a class in the study of two extremes. Typically, local governments are either open to any and all development or, on the other hand, so inhospitable that the process is miserable to anyone attempting to vary from their strict set of guidelines. Both are welcome challenges to the savvy developer; however, in terms of rezoning land that was clearly zoned for high-density, the municipality will most likely seek to have you find creative ways to develop the property.

Rezoning Land

At first glance, this might be a deal-killer for many out there, but there are a number of ways to rezone land to bring the municipality an even more profitable tax base and add another notch in your building portfolio that you might not have initially expected. Mixed-use developments are often a quick fix that can easily do the trick and provide an initial revenue stream to governments in terms of impact fees, property taxes and such, over expenses incurred in purchasing a home and developing a property; however, these are actually losing propositions in the longterm for governments.

Say Retail!

What you can propose are long-term solutions like retail and office complements to your project. Adding retail to the mix is a winner in a couple of areas: It adds the opportunity for revenue through a local sales tax and more opportunity for jobs. And isn't it about time your city got a decent sandwich shop? Seriously, retail is a great option to add, but it's usually one of the last that people look at. The simple reason retail is overlooked is because it's a tightly knit industry that is tough to penetrate on a couple of different levels, mostly in recruiting great tenants.

Joint Venture

Don't be afraid to seek people for joint venture. While retail might not be your strength, recruiting people who excel in that field might be easier than you'd imagine. Office properties can lend a nice balance to the mix in their ability to give cities a big hook to bring more jobs and build a broader base that shows more stability in the local economy. You might be asking, "Why would a municipality worry about looking stable?
The short answer is, local governments have to monitor their credit rating just like you would worry about your personal credit score. That credit rating allows bonds and various other forms of financing to be underwritten in their name. All of this, of course, allows for roads to be paved, parks to be manicured, and lights to be lit. If you start every proposal you give to a municipality with this in mind, you'll be much more successful than you'd ever imagine. Also, knowing the municipality's general plan would probably help as well. That's a topic for another month, however.

Hell-Bent on High-Rise

So, retail and office don't appeal to you. In fact, you're not even considering backing off your concept of building a 10-story highrise; it's just that Ö well, you've only got presales for five floors. Don't fret! There's a secret weapon local governments can't resist: hotel revenue.

Add a hotel to my condo? Hotels generate intangible revenues other than the standard bed tax: They give the government more ammunition to recruit visitors, tourists, business travelers, and, of course, the almighty convention. Hotels also have overlap with basic amenities that you probably are already set to offer in a high-rise.

Mid-rise Alternatives

I've seen hundreds of proposals on zoning that involve mid-rise developments for apartments and rarely do they take into account the possibility of one day being converted into condos, in terms of layout, construction, or even as an exit strategy. I know that after the last run-up of apartment complexes being converted into condos, there isn't a time that I view a proposal for apartments that I don't think, "Would these sell as condos? Are there slight changes I could build in during construction to give them more life and more value as a conversion?
You should be taking these exact same steps when developing a piece of land for high-density development.

Ask questions like

- What does the local government stand to make upon sale?

- What do they stand to lose if this goes undeveloped?

- What else could I do in the same vein as my zoning?

- What mixed-use alternatives could apply to this project?

- Which proposal has the least risk for my organization?

- And for the local government?

- Which proposal has the most upside for my organization?

- And for the local government?

It may all seem very redundant, but forcing yourself to get honest with the development environment in the local municipalities you develop in will save you hundreds of man hours and tens of thousands of dollars, simply by using some basic common sense. While just five years ago, the local governments might not have approved certain projects, that doesn't necessarily mean they're going to turn their backs on some fantastic opportunities that lie within developments that you have the ability to dream, develop, and create in the years to come.

Just make sure you remember the context in which they zoned the property initially, and be wary of the effect it has on their bottom line, just as if it were your own.