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Sometimes, the timing is not quite right

With any commercial real estate deal, there are always a number of components. There is the land acquisition. It may be simple and easily available, or it may be difficult and complex, with numerous parcels that need to be aggregated and multiple transactions with numerous private owners.

There is the financing, which likewise can run the gamut from fully self-financed to the need to assemble investors and loans from financial institutions. There is often elements of regulatory and governmental approval. Perhaps clearance is needed from an environmental impact statement, a zoning variance may be necessary to change or modify the property's zoning classification, or maybe the city or county will have to sign-off on traffic changes to nearby streets or even the reconstruction of some roads.

There is also an element of timing. As many developers who experienced the crash of 2008, no matter how good a deal looked prior to that year, once the tipping point was passed, virtually no deal moved forward after the collapse set in.

Emotions also play a role. A recent proposal to build a new hotel in Eagan has been withdrawn by a local hospitality company, after issues with financing and the death of the founder of the business.

The owner had been a big proponent of the town where he lived and building a new hotel next to the new outlet center seemed a great opportunity, but with his death, the company had to reassess how the project would fit within its business at this time.

The company has asked Eagan to exercise its option and repurchase the parcel. Which serves as a good reminder that your land contracts should always contemplate the potential for such unplanned for outcomes, such as the death of a principal of the developer.

Source: twincities.com, "Plans for $14M hotel near Eagan outlet mall scrapped," Nick Ferraro, June 29, 2016

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