How do I allocate land cost for a mixed use development?
I’m working through the UW for a ground up mixed-use deal. Considering the office, the MF, and the retail, it all works. My question is how would we go about selling the land to partners if we wanted to get out of the retail, multi, or office. How should the land cost be allocated?
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Are they distinct buildings within the development? If distinct you can break out into individual cash flows and allocate the land price by solving to a sensible IRR for each product type. Then sense check your allocation vs. recent land comps for each product type.
Thank you. That’s kind of what I was thinking. I guess there’s no quicker way to back into it?
You could solve land price for each to a sensible profit on cost or yield on cost? I like CFing stuff out to make sure the IRR is makes sense too.
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