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A
Practitioner’s Guide to Conservation and
Limited Development Projects Page 5 of 7: Minimizing financial risk |
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One
of the best ways for a land trust to limit the financial risk associated with
a CLDP is to partner with developers, investors, or the current landowner to reduce
the land trust’s costs (see CLDP
Structures). Pursuing non-development funding sources, such as public
open space funds and private donations, can also reduce the revenue gap that
will need to be closed through development.
Some
groups that use the financially riskier Buy,
Restrict, and Sell project structure try to obtain an option to purchase
the prospective CLDP site for a period of up to a year. During this time,
they conduct initial site planning, prepare pro-formas,
and line up funding sources including commitments from future buyers. If this
initial legwork points toward a financially successful project, the group
exercises its option and moves forward with the CLDP. Finally, as with any
real estate transaction, CLDPs should build in cost contingencies for factors
such as engineering or legal fee overruns, market decline, and other
unforeseen events. |
A Practitioner’s Guide to
CLDPs Page 1:
Deciding when to do a CLDP Page 2:
Selecting the right CLDP structure Page 3:
Forming a project team Page 4:
Designing the development program and site layout „ Page 5: Minimizing financial risk |
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One
common approach for increasing net revenue per unit of development is to
reduce development related expenses. For example, many CLDPs make use of
pre-existing roads rather than build new roads; negotiate for the right to
build narrower roads than would ordinarily be allowed or to build unpaved
roads; and avoid the need to install costly centralized water and wastewater
facilities. By reducing infrastructure costs, CLDPs can increase the net
revenue generated per unit of development, enabling the project to protect
more of the site. Another
postulated cost-saving aspect of CLDPs is their greater acceptance by
permit-granting agencies compared to conventional development, allowing them
to undergo streamlined permitting review. While in theory most developers and
project reviewers would espouse a “no hassles” permitting approach for
projects with bona fide conservation merits, in reality only a minority of
the CLDPs I studied were able to reap significant savings of time or money
from expedited permitting review. For many CLDPs, project reviewers responded
favorably to project proposals but were nonetheless obliged to administer
standard review procedures. For a minority of projects, detail-oriented
reviewers, lacking major substantive critiques of the CLDP proposal, focused
instead on small details—in the end tying up the CLDP in a permitting process
nearly as lengthy as that faced by full-density developments. Organizations
contemplating CLDPs would be well advised to inquire into the official—and
actual—project review process in the local jurisdiction before assuming that
a CLDP will yield savings from expedited project review. |
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Where to now? |
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Copyright © 2005, All Rights Reserved. |
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