Development Troubles

The assignment content consists of five real estate-related scenarios: (1) an equity investor facing difficulties with a commercial development project, (2) discussing why residential condominiums are more popular in Vancouver than Seattle, (3) proposing deal structures for a start-up technology company's leasing needs, (4) negotiating a purchase agreement for a parcel of land requiring a rezone, and (5) advising on an EB-5 investment program. Additionally, the content touches on zoning changes and alternative arrangements to preserve or replace moderate-to-low-income housing units.

1. Development/Financing:
You are an equity investor in a large commercial development project that is under
construction but is going sideways---and fast. You made a seven-figure (i.e., over $1
million) equity investment, and the development joint venture has obtained an eight-
figure construction loan. You have pre-leased only 20% of the projected space to office
and retail tenants, and the general contractor has just submitted a pay application for
several hundred thousand dollars of work and materials that your construction lender is
about to reject. Discuss the likely next steps each of the key players in this scenario is
likely to take, the possible ramifications of each step, and your options as a key
investor.
2. Residential Condominium Construction:
Residential condominiums are popular in many places in the US. They are also popular
and numerous in nearby Vancouver, B.C., but dramatically less so in Seattle. Discuss
why that might be, and what might be done to change that.
3. Start-Up Leasing:
A start-up technology company that is looking for space. The company has received an
initial round of funding and has sufficient funds for about three years of operations. The
business plan of the company calls for revenue to start after two years and the
company has sufficient revenue to fund operations for three years. The company needs
to acquire approximately 10,000 square feet of space for its initial operations, but, if
successful, will need at least twice that amount. The operations of the company require
a significant amount of special improvements to the space, which will be a little value to
any other tenant. The improvements to the space make it impractical to relocate at the
end of three years. The company has begun discussions with a building owner for
space. Identify the deal structures you would propose to satisfy their respective
concerns. You should assume the landlord has access to the financial statements of the
company and knows how to interpret them.
4. Purchase Agreement:
You have agreed to buy a parcel of property in Seattle on which you intend to develop
an apartment building. The property is currently zoned for single family residences only
and it will be necessary for you to obtain a rezone of the property to allow construction
of the project. The seller has agreed to allow you time to complete the rezone prior to
purchasing the property. However, the seller wants a specific time line tied to the steps
required to complete the rezone process. Provide a proposed time line with a
description of the milestones in the rezone process. Also, discuss alternative contract
arrangements to address the possibility the rezone will not be approved, presenting
alternatives from both the buyer’s and seller’s point of view as well as what you
consider a mutually acceptable solution.
5. EB-5 Investment:
A friend has asked you for advice concerning a possible real estate investment. Your
friend and three other non-US citizens want to participate in an EB-5 investment
program. The development has been approved for the EB-5 investment by the required

immigration authorities. The developer is proposing the four non-US citizens contribute
$500,000 each to a limited liability company. The developer will also be a member, but
will not be contributing any cash. The total project will cost $6,000,000, so there will
also be a $4,000,000 loan. Please discuss the issues you would raise with your friend
concerning (i) whether the property is suitable for the project; (ii) terms in the LLC
agreement you believe would be appropriate concerning the relationship between the
investors and the developer, their respective rights and their respective obligations; and
(iii) the risks associated with the financing arrangement in light of your friend’s
investment objective under the EB-5 program.
6. Zoning
The City has proposed to change its zoning code to allow for greater residential
densities. However, as a result, it is anticipated a significant number of moderate to
low-income housing units will be demolished to make way for new developments
encouraged by the increased permitted density. Please discuss the alternative
arrangements the City might consider as a means to (i) preserve the existing stock of
moderate to low-income housing or (ii) replace the demolished residential units with
units having comparable rents. As part of your discussion, include any legal issues that
might lead to a challenge to the legality of your proposals or render your proposals
impractical.