Results
The Baker Group first built 3 lakes on the property to give it the added “something” it needed to make it stand out from other tracts of land. One of the partners in the partnership purchased 100 acres from the partnership and the Baker Group created a development plan for the remaining 211 acres – Alcovy Lakes.
First, the Baker Group had to have a portion of the property rezoned, and negotiated with neighbors for concessions that were acceptable to the neighbors and acceptable to the development plan. Second, the Baker Group had to manage the process to minimize the tax burden. They structured the deal to have the partnership sell the property to itself (a separate development company) to give the partnership the ability to take advantage of the lower capital gains tax rate (15%) on the sale.
Second, the development company developed the land, sold the lots, and paid the higher ordinary income tax (up to 39%) on the sale of the lots. Without careful attention to this detail, the entire project could have been taxed on the higher ordinary income tax rate.
Third, the Baker Group developed the property in the 1-5 acre estate size tracts with the average size being 3 acres. The Baker Group managed the development of the roads, the soil erosion control, creation of the Homeowners Association and Protective Covenants, installation of the utilities, the entrance monuments, and the construction of the Community Lot, featuring a park and lake access for all residents.
Fourth, the Baker Group brokered the sale of the lots to those building their own custom homes and found a builder that built numerous spec and custom homes in the project. Because this project is an upscale development, our proforma showed the project would take several years to sell out. The development was started in 2004, the development loan was paid off in 2006, and by 2010 we have sold over half of the lots.
