Mixed Use Development

#1

Ritzwatch

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#1
@LouderVol @marcusluvsvols , and any others who want to chime in.

Partner and I are exploring an opportunity for some mixed use development. We live in rural America, with all that goes with that.
We are thinking about using a currently owned property near enough to parks, groceries, downtown and gyms to develop a mixed use residential/office space.
Lets the locals who now want to downsize to something nice do so, lets others spend time at their vacation homes without needing to care for lawns, and still gives them a place to come home to them to be near their grands. Or, gives young couples who want to live in a small town environment without the hassle of keeping up a house a chance to have something nice.
Zoning is not an issue. We would have support of community leaders/town planning board/local businesses.
Small investors that we are, we are thinking about building in phases as needed to meet demand.

Curious if any of you designer/developer types have any thoughts to share.
 
#2
#2
I can't say I've seen that first-hand in rural America. I have seen things like restaurants, convenience stores, etc. on the ground floor and then apartments on the upper floor(s).

I've heard that New York City has some of that -- the studio is in the front of the unit and the living space is at the back. The residential tenant and the commercial tenants are the same people.

Do you have any potential tenants yet?
 
#6
#6
I can't say I've seen that first-hand in rural America. I have seen things like restaurants, convenience stores, etc. on the ground floor and then apartments on the upper floor(s).

I've heard that New York City has some of that -- the studio is in the front of the unit and the living space is at the back. The residential tenant and the commercial tenants are the same people.

Do you have any potential tenants yet?
Have had interest expressed by some soon-to-retire. Other interest from single professionals.
 
#9
#9
I have developed several residential communities in the Chattanooga/Ooltewah/Cleveland areas.
Currently have Commercial in Collegedale(suburb of Chattanooga).

Yes, Phases is the only way to go. You will learn the business as you develop. Where are the needed utilities. If you are going to be building roads, sewer, utilities development will be expensive. In TN some utilities can be free. Electric, cable tv.

What is the population of the small town? Has it grown the last few years.
What kind of businesses do you think will locate there to your dev?
Are new residents moving there.
Income of the area?
Elementary school nearby?
In the end, supply/demand.

Talk to the city planner. Talk with a local Civil engineer who designs what you want. Look for problems like a 100/500 year flood zone. These folks should be helpful.

Brother in law was a planner in NC. Seems like NC had very few development laws. Good and bad.

I think you are in a desirable part of the country.
 
#11
#11
I have developed several residential communities in the Chattanooga/Ooltewah/Cleveland areas.
Currently have Commercial in Collegedale(suburb of Chattanooga).

Yes, Phases is the only way to go. You will learn the business as you develop. Where are the needed utilities. If you are going to be building roads, sewer, utilities development will be expensive. In TN some utilities can be free. Electric, cable tv.

What is the population of the small town? Has it grown the last few years.
What kind of businesses do you think will locate there to your dev?
Are new residents moving there.
Income of the area?
Elementary school nearby?
In the end, supply/demand.

Talk to the city planner. Talk with a local Civil engineer who designs what you want. Look for problems like a 100/500 year flood zone. These folks should be helpful.

Brother in law was a planner in NC. Seems like NC had very few development laws. Good and bad.

I think you are in a desirable part of the country.
Do I know you?


Edit: I’m positive I know you.
Now I have to figure out who you are lol
 
#13
#13
I have developed several residential communities in the Chattanooga/Ooltewah/Cleveland areas.
Currently have Commercial in Collegedale(suburb of Chattanooga).

Yes, Phases is the only way to go. You will learn the business as you develop. Where are the needed utilities. If you are going to be building roads, sewer, utilities development will be expensive. In TN some utilities can be free. Electric, cable tv.

What is the population of the small town? Has it grown the last few years.
What kind of businesses do you think will locate there to your dev?
Are new residents moving there.
Income of the area?
Elementary school nearby?
In the end, supply/demand.

Talk to the city planner. Talk with a local Civil engineer who designs what you want. Look for problems like a 100/500 year flood zone. These folks should be helpful.

Brother in law was a planner in NC. Seems like NC had very few development laws. Good and bad.

I think you are in a desirable part of the country.
I live in the Ooltewah area and have had a career in the utility industry. Wonder if our paths have crossed. What are the names of some of your developments in Ooltewah and Cleveland?
 
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#14
#14
Its a bit tricky to get started from what I have seen. I don't see the numbers too much, but what I have gleaned is to start smaller, like you said with phasing. still risky, and definitely like most new businesses you need to be able to survive without earning much if anything the first couple years.

and it can be a chicken and egg thing, meaning you need people to draw in businesses, but you also need businesses to draw in people. so it helps if there is already something nearby, walking distance. having a few "anchor" tenants will be key too. a grocery store being key to the area.

unless you have a state/national park nearby and can rely on short term leases people are going to want a grocery nearby. you don't need a full size publix, one of these small sized guys would be perfect if there isn't something in the area 5-10 minute drive. Top 50 Small Chains and Independents
small convenience type retail/bodega type places would be good starters too.

access will be key. Not just to amenities or healthcare as pointed out. but can you get to the interstate quickly. is there another population center nearby, or are you near a major highway. going the full blown small town, isolated feel requires luck and dang good connections, because you will only have word of mouth.

restaurants you want a mix, you want a sit down type place that has a liquor license, or at least can sell beer and wine. and then you will want something for people to pop in and out of for lunch type meals or coffees.

having places to hang out, a lawn with seating, covered patios, or just outdoor seating will be key to activate the place. parking key too, even though you want the walkability, nearby parking is going to be key for business. you never want the place to feel empty, even if you are doing phases. find ways to activate the empty lots. pop up stores, farmers markets, food trucks, temporary beer halls. to be frank you are probably going to need to appeal to ladies to make it some place they will drag their +1.

pure guessing but you probably need about 10,000 of retail/restaurant space to start. I would say about 5k is restaurant, split to something like 3500 for the main sit down place, and 1500 for the pop in place. then divide the retail into small retailers, sans grocery. 1k to 1.5k per. mini-malls do great, lots of small stores, again you want to drive interest and activity. these are bigger, because they are in atlanta but things like Krog Street Market, Avalon, the Works here in Atlanta do crazy business.

Office keep small. maybe just over the bigger restaurant, as that is going to be lower rent for residential anyway. and generally there isn't a huge market for office right now anyway. the We-Work type set up, or some type of combo use place is going to be key, again you want to drive activity and interest, and not just rely on one big tenant unless you already have a whale.

residential a couple things will be key. Townhome living, over retail, isn't for the old empty nesters usually. they will want ground floor access, elevators, and will get tired of the activity. so private residential areas away from the active front will be key. something that gives the community its own space while having access. think of something like rear alley access to the retail, with controlled access. small tables, lights, more comfortable than the active front. maybe bar access to the big restaurant from the private area, so people can grab drinks without dealing with the tourists. don't do anything more than 3 stories without an elevator, access to the units will be key to determining the vibe. is it really residential over retail? Do you want them to feel more separated? Are they just some townhomes or tiny homes behind some retail with some type of cutesy space to tie them together. is it more the neighborhood feel, with clear separate residential, and just a small defined separate retail area.

Serenbe is a smaller town vibe place that has had great success. but this was built over decades, and really only survived because it was the rich hippies getting out of the city.
 
#15
#15
I live in the Ooltewah area and have had a career in the utility industry. Wonder if our paths have crossed. What are the names of some of your developments in Ooltewah and Cleveland?
Frost Creek Farms(Ooltewah-Ringold and E. Brainerd Rds)
Homewood (Collegedale)
Fairlawn (Cleveland)
Developed between 93-07.
Currently have land near I-75, exit 11. Would like to be out, but my partner wants a 2nd opinion.
 
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#16
#16
Frost Creek Farms(Ooltewah-Ringold and E. Brainerd Rds)
Homewood (Collegedale)
Fairlawn (Cleveland)
Developed between 93-07.
Currently have land near I-75, exit 11. Would like to be out, but my partner wants a 2nd opinion.
I did the telecom design on Fairlawn but don’t recall interacting with the developer. The way exit 11 has exploded, if you’ve had that property for any length of time your likely sitting on a huge capital gain!
 
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#17
#17
I did the telecom design on Fairlawn but don’t recall interacting with the developer. The way exit 11 has exploded, if you’ve had that property for any length of time your likely sitting on a huge capital gain!
Yeah, I just did what the utility folks wanted. Never had one make an unreasonable request. Maybe Eastside water, but they were getting hit with a lot of development then.
If you are in the development business it's not a capital gain. It's ordinary income. I sold 300 acres below Kingston 2 years ago. My two partners were surprised that they would have to pay FICA. One was a surveyor/developer and the other had built rental property and was renting it.
I'm a CPA, but both verified with their CPAs.
I'm always going to subdivide unless something happens, and I abandon a project.
You should be able to flip the property and only pay cap gains.
 
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#18
#18
I did the telecom design on Fairlawn but don’t recall interacting with the developer. The way exit 11 has exploded, if you’ve had that property for any length of time your likely sitting on a huge capital gain!
I forgot about Timber Creek in Cleveland. I started that development with 2 other guys. We completed phase 1. Then one of them died, and we sold it.
I had moved to Knoxville to develop, and it was too far to commute to complete the project. Things had started slowing down, and I never developed in Knoxville.
 
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#20
#20
Its a bit tricky to get started from what I have seen. I don't see the numbers too much, but what I have gleaned is to start smaller, like you said with phasing. still risky, and definitely like most new businesses you need to be able to survive without earning much if anything the first couple years.

and it can be a chicken and egg thing, meaning you need people to draw in businesses, but you also need businesses to draw in people. so it helps if there is already something nearby, walking distance. having a few "anchor" tenants will be key too. a grocery store being key to the area.

unless you have a state/national park nearby and can rely on short term leases people are going to want a grocery nearby. you don't need a full size publix, one of these small sized guys would be perfect if there isn't something in the area 5-10 minute drive. Top 50 Small Chains and Independents
small convenience type retail/bodega type places would be good starters too.

access will be key. Not just to amenities or healthcare as pointed out. but can you get to the interstate quickly. is there another population center nearby, or are you near a major highway. going the full blown small town, isolated feel requires luck and dang good connections, because you will only have word of mouth.

restaurants you want a mix, you want a sit down type place that has a liquor license, or at least can sell beer and wine. and then you will want something for people to pop in and out of for lunch type meals or coffees.

having places to hang out, a lawn with seating, covered patios, or just outdoor seating will be key to activate the place. parking key too, even though you want the walkability, nearby parking is going to be key for business. you never want the place to feel empty, even if you are doing phases. find ways to activate the empty lots. pop up stores, farmers markets, food trucks, temporary beer halls. to be frank you are probably going to need to appeal to ladies to make it some place they will drag their +1.

pure guessing but you probably need about 10,000 of retail/restaurant space to start. I would say about 5k is restaurant, split to something like 3500 for the main sit down place, and 1500 for the pop in place. then divide the retail into small retailers, sans grocery. 1k to 1.5k per. mini-malls do great, lots of small stores, again you want to drive interest and activity. these are bigger, because they are in atlanta but things like Krog Street Market, Avalon, the Works here in Atlanta do crazy business.

Office keep small. maybe just over the bigger restaurant, as that is going to be lower rent for residential anyway. and generally there isn't a huge market for office right now anyway. the We-Work type set up, or some type of combo use place is going to be key, again you want to drive activity and interest, and not just rely on one big tenant unless you already have a whale.

residential a couple things will be key. Townhome living, over retail, isn't for the old empty nesters usually. they will want ground floor access, elevators, and will get tired of the activity. so private residential areas away from the active front will be key. something that gives the community its own space while having access. think of something like rear alley access to the retail, with controlled access. small tables, lights, more comfortable than the active front. maybe bar access to the big restaurant from the private area, so people can grab drinks without dealing with the tourists. don't do anything more than 3 stories without an elevator, access to the units will be key to determining the vibe. is it really residential over retail? Do you want them to feel more separated? Are they just some townhomes or tiny homes behind some retail with some type of cutesy space to tie them together. is it more the neighborhood feel, with clear separate residential, and just a small defined separate retail area.

Serenbe is a smaller town vibe place that has had great success. but this was built over decades, and really only survived because it was the rich hippies getting out of the city.

Thank you for the thoughtful response. Confirmed much or our thinking; also gave us some education on some things to consider that we had not considered yet.

I appreciate your reply.
 
#22
#22
Lots of good advice so far. I would encourage you to spend a lot of time understanding the demographics of the area and how it has changed, and will/may change in the future, especially considering that it is a rural area as you mentioned. I have seen many developments in rural areas that either never fully took off, or did well for a few years and then gradually faded out, simply because the demographics were not self-sustaining.

I think your concept is spot on, as many boomers are looking more for convenience and less maintenance/upkeep with their aging lifestyle. And this is true for much of the younger generation as well... they don't want the responsibility of mowing a lawn and/or taking care of a house (some don't even know how)!

Things you need to know about the area.

What are the age demographics (older or younger)? Has it shifted over the years?
Average income? Average family size?
Are youth graduating and remaining in the area, or are they moving away after graduating?
Are older people moving to the area? Possible retirement area?
Are families moving to the area?
Has there been positive growth in population, or is it mostly stagnant?

Lastly, while it's always exciting to think about the potential for such an investment... I would encourage you to also honestly think about the risks (e.g. what would happen in the area if recession hits, Ukraine/Russia war escalates, things turn south with China, another terrorist attack happens, another Covid event, etc.). Do you and your partners have the financial assets to sustain a 3-5 year cycle of a down economy if something were to happen?

Just my $.02.
 
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#23
#23
I forgot about Timber Creek in Cleveland. I started that development with 2 other guys. We completed phase 1. Then one of them died, and we sold it.
I had moved to Knoxville to develop, and it was too far to commute to complete the project. Things had started slowing down, and I never developed in Knoxville.
Small world as I was involved there also.
 
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