CASE STUDY - THE WEALTHY OUT-OF-STATE DEVELOPER

You are a developer from Orange County, California; the incredible growth of the housing market over the last ten years had made you wealthy, but now the market is saturated, and you are looking for opportunities elsewhere. One area that has caught your eye is the Wasatch Front (in particular, an undeveloped tract of land in the watershed of ex-farming community that is quickly becoming a bedroom community of Salt Lake City).

Normally, this tract of land would be public/government property, but is owned by an irrigation company set up one-hundred years ago to serve the water needs of the farmers and poultry producers. The area has also served as a recreation area for local hikers, equestrians, and picnickers. Since there is no longer the need for irrigation, the company is interested in selling the parcel. Because the land is so large and so choice, the small town government cannot at this time afford to buy it. You, however, have the required capital.

You hire a consultant to map out several development options. The consultant comes up with two main options:

1. Buy the land and develop it to the maximum legal density. There will be an outcry from environmentalists and locals at the loss of publicly-assessable land, but the houses will sell nonetheless, and since you live in California, you will not have to deal with the criticism. This option yields large short-term profits, although with the loss of the open space, the quality of life will diminish, thus lowering the overall community property values;

2. Buy the land, selling the critical riparian habitat to the town under a ten-year plan, which the town can afford. Develop the periphery with expensive houses. This option yields large long-term profits, due to the fact that the only way the town can afford to buy the riparian habitat is under a ten-year payment plan. Also, the overall quality of life will remain high due to the public accessibility of the land for community recreation use, and property values will remain high, especially your homes which border the park.

Which option should you choose?