In his last blog post, Davies Smith co-owner Ian Smith explained the 5 steps that the company takes when looking for a site to develop. In this post, Ian explains the next step in the land development process which is bidding for land.
Bidding for land is a public sale in which property is sold to the highest bidder. It’s a fairly quick and straightforward process which on average can take about 4-8 weeks.
The first step in the process involves signing a confidentiality agreement. Afterwards, the vendor sends us a confidential offering memorandum which we review and if we’re interested in the area, we do some preliminary work and research to assess the feasibility of the land. We usually look for a couple of areas of feasibility including location and desirability, political and financial feasibility, legal feasibility, physical feasibility and environmental feasibility. If we’re satisfied with the results, we then submit a letter of intent detailing the offer, the structure, conditions and terms, and closing dates.
Next, the vendor creates a short list of prospective candidates and if we’re fortunate enough to be on the shortlist, we then go through another submission round. Usually in the second round, the vendor requires adequate evidence of the purchaser’s financial ability to complete the transaction. The vendor will usually take a look at the company’s portfolio and method of financing for the land purchase and construction. They’ll also look at the company’s credibility in the industry, the history of their projects and the success rates of the projects.
After all this is done, the vendor selects and contacts their ideal candidate and negotiates a purchase sales agreement with them.
Our motto throughout the bidding process is “to bid assertively but not aggressively.” This means that we make sure that we do all of our research and then put forward a strong and realistic bid.