Why Site Control Matters

Controlling a candidate site or building through a real estate option or similar binding agreement is an essential element of the site selection process. Without formal control—typically established through purchase, lease, development, or option agreements—progressing with a project can become fraught with complications and potential deal-killers.

Different Owners, Different Challenges

Sites or buildings can be owned by various entities, including private individuals, developers, and economic development agencies. Each type of owner presents unique challenges and risks:

• Economic Development Entities: These groups are often the least risky to deal with. They are tasked with assembling properties for projects that benefit the community economically. They are generally more predictable and aligned with project goals.
• Private Individuals: Acquiring property from private owners can be more unpredictable. Private individuals are often motivated by one-time financial returns tied to a real estate transaction and may not be aligned with economic development goals (jobs creation and investment).  It’s also not uncommon for a private landowner to initially agree to terms and then change their mind, potentially derailing the project.

Agreement Tools for Securing Control

To navigate these challenges, several strategies can be deployed, depending on the project’s stage:

• Letters of Intent (LOI): Ideal for the early stages when a site or building is on the shortlist. Though non-binding, LOIs pave the way for more formal agreements.
• Option Agreements: Give the right to purchase property within a specified period under pre-agreed terms. They usually involve a fee, which is non-refundable if the option is not exercised.
• Purchase Agreements: Set out the definitive terms and conditions for buying the property.
• Development Agreements: Outline the terms for the overall development of a site or industrial park involving multiple parties such as landowners, developers, and utility providers.

The Risks of Not Securing Control

For finalist locations, having a formal agreement in place is crucial. At this stage, significant time and financial resources have been invested in evaluating the site. Without control, the project is vulnerable to last-minute changes that can jeopardize the entire deal.

Securing site control through appropriate agreements is not just a procedural step—it’s a strategic necessity. Companies can mitigate risks and drive their projects toward successful completion by ensuring legal and formal control over the property.

Strategic Development Group

Our experienced team is focused on finding your project the best site for long-term success. We take a holistic approach and have the expertise to negotiate and navigate the intricacies of your unique company and needs.

Founded in 1999, SDG is a highly specialized site selection consulting firm. We focus on identifying optimum locations promptly, maximizing the value of incentives, and minimizing risk for corporations from across the globe. SDG has managed projects with capital investment from $15 million to over $1 billion for companies in a wide range of industries, including automotive, chemical, steel, and life science.

We would love to hear your thoughts on this article or discuss how we can help you achieve your company or community’s goals for long-term success. Contact us!