Today’s political and legal realities have made the use of eminent domain a non-starter in most communities in New Jersey. To help move projects forward in this climate, developers and municipalities alike should consider new, creative approaches toward risk allocation with regard to development and property acquisition that focus on the economic development potential of the site and ways to include the property owners more directly, including structured seller financing and joint ventures.

1. New Jersey Future Redevelopment Forum
Dealing with Reality: A New Approach to Property
Acquisition Without Eminent Domain:
Using Structured Seller Financing and Joint
Ventures with Public or Private Land Owners
George Vallone – President
The Hoboken Brownstone Company
1520 Willow Avenue
Hoboken, New Jersey 07030
GVallone@HBrownstone.com
201-792-3814
www.HBrownstone.com

2. 1. A full joint venture
 Single asset LLC
 Time adjust the selling price with an accrual rate on
the value of the land contribution
 Negotiate a profit share percentage for the land
contribution equity
 Seller gives developer time to mitigate risk before
the land is contributed

3. 2. A sale contract with Seller unsecured Junior
financing
 Seller earns a much higher interest rate.
 Purchase money note (PMN) is subordinated to the
construction lender’s (and any other secured debt)
on the property.
 The PMN takes the place of the Mezz layer in the
capital stack.
 Unsecured Mezz rates are 16% to 20%+.

4. 3. A sale contract with Seller secured Junior financing
 Purchase money note and mortgage (PMN & 2nd M)
is subordinated to the construction lender’s first lien
on the property.
 The PMM may take the place of the Mezz layer in
the capital stack.
 Secured Mezz rates are 12% to 16%.

5. 4. A sale contract with Seller senior secured mortgage
financing.
 A senior (first) secured Purchase money note and
mortgage (PMN & 1st M) not subordinated to the
construction lender’s or any other lien on the
property.
 Essentially a bridge loan because it will have to be
paid off before construction financing can be placed.
 The developer may still need to place a Mezz layer
in the capital stack.
 A senior secured mortgage rate today would be in
the 6% to 10% range.

6. 5. A sale contract with a phased take down
 Like an installment sale.
 Seller holds full title for the remaining, un-purchased,
parcels.
 Developer must obtain a sub-division approval –
could trigger need for more variances.
 Seller has property with increased value that’s fully
approved - therefore it can be sold in pieces.
 Partial take down pricing can be time adjustment for
each phase.

7. 6. Option to purchase the entirety
 Developer controls property and therefore can obtain
entitlements.
 Seller has to pay taxes, insurance, cut the weeds, the
fence, security issues.
 Developer can walk away only forfeiting option fee(s)
and entitlement costs.

8. 7. Option to purchase in phases (combines benefits
of #5 and #6).

9. 8. Sale contract with extended time to close with
contingencies at a fixed price.
 Contract of Sale usually requires an at risk deposit
larger than an option fee
 Contract of Sale can have an annualized increase in
price to cover inflation.
 Developer controls property and has time to obtain
entitlements
 Seller has to pay taxes, insurance, cut the weeds,
the fence
 Developer can sometimes walk away (Seller may
sue for specific performance) forfeiting the larger
deposit and entitlement costs

10. 9. Sale contract with extended time to close with
contingencies and a formula sale price
 A great tool to convince the seller to do long term
contract with the buyer
 The formula sale price pays a Fixed cost per unit
times the number of units approved so neither party
loses

11. 10. Sale Contract with a “Responsible Party” who
prefers to remediate itself prior to transfer of title.
 Contract of Sale needs to deal with extent to which RP will
have continuing liability, and limitation of liability of Buyer
for environmental contamination not caused by Buyer.
 Developer controls property for purposes of obtaining
entitlements, obtaining land use approvals.
 Buyer and Seller resolve who will pay ongoing costs of
property such as taxes, insurance, maintenance, pending
closing.
 Developer can walk away if remediation is not undertaken
as per Seller’s commitment (Buyer may sue for specific
performance).
 Price to be resolved based on how each of these issue is
to be resolved, and in light of passage of time before
closing.

12. 11. All cash, no contingencies, quick close contract.
 Used in instances where the value of the property is
great and Seller is inflexible.
 The best thing to do is to get Seller to accept a large
non-refundable deposit, sign the contract
immediately, and close as soon as title is clear.