It seems nearly every city in every state is aggressively trying to grow in size these days. This can often be a golden opportunity for your property development project.

City’s are looking to grow in size by annexing land for one simple reason – tax revenue. Every parcel that is acquired or annexed by a city increases its tax base and tax revenue. It is a simple way for cities to pay for thier constantly growing services and budgets.

As a property developer, when you conduct your due diligence, it is a good idea to be aware of what cities and towns may be in close proximity to your parcel. If another city is nearby your property, you should definitely evaluate what annexation could do to the value of the raw land and the final developed project.

Through annexation your property may be able to acquire;

• a higher density zoning or even a complete change in land use
• access to beneficial services like water, sewer, mass transit, fire and rescue, or snow removal
• possible change in school districts or added leverage to initiate a change in school districts
• tax incentives (normally for large parcels and developments)

Consider these scenarios.

1. You find a piece of vacant land that does not have water and sewer available nearby and is thus priced accordingly. You put the property under contract and then talk with the nearby city to arrange for annexation and the construction of a sewer line via a fair share agreement. Before you even close on the property you have increased its value significantly.

2. You are under contract to purchase 35 acres for the new property development of a high density commercial and retail center (complete with a big box anchor store and major hotel chain.) While running through your due diligence checklist it becomes clear that the city’s water line does not have the capacity to serve the entire site. However, the adjacent city has water service nearby that does have capacity. Rather than walk away from the project, you pursue annexation and obtain the water concurrency needed for your development.

3. You pursue rezoning of your property to allow for a higher density mix use development but are denied. However, the adjacent city’s planning and zoning board is much more in tune with your development vision and would be in favor of the project if the property was within their jurisdiction. You go through the annexation and rezoning process simultaneously (which is the norm) and get the zoning you need for your development.

It pays to explore all your options when developing property. This is often where the real profits are found. So add annexation to your due diligence checklist. It could bring your property development much bigger profits if you do.

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Tagged as: due diligence checklist, property development