Amendment 4: An Editorial  
October 5, 2010

As I write this editorial the November 2nd election is just over 4 weeks away.  Amendment 4 aka "Hometown Democracy" is really not about development.  If the amendment passes development will still take place and construction of homes and businesses will continue seemingly undeterred.  What will grind to a halt are Comprehensive Land Use changes.  Some very vocal people claim the problem in Florida is there are too many changes in land use and inappropriate uses of land being approved.  It would be wonderful if everyone knew exactly how much land we would need for every conceivable use but the fact is we just cannot see that far into the future.

Amendment 4 is really about taking land use decision making from our elected officials and sharing it with the voters, Let's be honest here, campaign managers and public relation firms.  Yes I know there are a few people that feel the public is disenfranchised from deciding what is developed near their homes.  An election is not a very good way of controlling or deciding what happens in your neighborhood.  If you are unhappy with a land use decision by your elected official(s) you can vote them out of office.  If you are unhappy with an election result, well you are stuck with it and as far as I can tell there is no way to appeal the election result.

I am in favor of neighborhood meetings where the elected official must attend to hear the concerns of the affected residents and see the reaction to the project outside of a public hearing.  Many times I have witnessed a neighborhood cry foul when any land use change is proposed nearby.  I have seen firsthand how neighbors distort the reality of "unintended consequences" if the use is approved.  If the amendment is passed regular citizens will lose their voice and effectiveness in shaping a land use change.  Instead, a public war will erupt with ads, signs and commercials culminating in a municipal wide popularity contest.  Does that sound like democracy?  If you think it is bad having 5-9 elected officials vote on a change near you wait until 150,000 vote to have the landfill in your backyard.

–David Farmer, PE, AICP is the Managing Principal of Keystone Development Advisors, a Land Development Consulting Company.


  A Clash of Cliches - "The Rules Have Changed", but "This Time It's Different"
                                                                                                                April 2010
Have you heard the saying "The Rules Have Changed" when discussing real estate development and investment?  Have you heard what got us in to this mess of a recession is the thinking "This Time It's Different"?  While the words are different, from my point of view, they really are saying the same thing.  Both sayings are always true when taken out of context of the situation being referenced.  It is true, the rules have changed in terms of development if you are talking about financing and investment expectations.  It is also true that it is different "this" time in the context of the "last" we have done anything.  Every time I kiss my wife it is different.  Ahh, but the fundamentals really have not changed, just our perception of them. 
True, it is much harder to get a loan today, so that much has changed...since 2005.  The pendulum had swung so far to the easy side of getting a loan that it had to swing in the other direction for a while.  That does not mean there has been some cataclysmic change that will forever wipe out lending on commercial real estate and development loans.  What it does mean is once banking capital has normalized, in terms of the ratio of deposits to performing loans, lending will return.  More cash will be needed from borrowers.  Shorter terms will prevail for a while.  Rates will most certainly be higher.  These changes are merely going to be a return to the norm and not a significant departure from standard lending practices 10-15 years ago.
Also true is that there is little need for new commercial development for the next few years.  Vacancy rates in many parts of America are approaching or exceeding 20%.  The retail and office vacancy trend will continue until job growth returns.  There will always be special circumstances requiring new development (before vacancies are lower) and that is no reason to get excited when a new building or project goes up in your area.  This is still America and we like new things.

What has not changed, in a meaningful way, is people.  Specifically, investors have not changed as they still want to make money with their capital.  There is not much of an appetite for a real estate investment that will yield less than 8% these days.  If an investor can get a 10% return on the investment with some degree of continuity then they will generally take the risk of own a property.  Ten years ago, the rule of thumb for non-institutional investors was a target cap rate of 10%.  From a 2005 buyer's perspective the world must look like it is crashing all around them with rental rates down and vacancies increasing especially when you consider a 2005 buyer was willing to live with a 6% cap rate.  In real terms a cash buyer in 2005 has watched their investment decrease in value by at least half while at the same time had their cash flow also cut in half.  For these people, the rules have most definitely changed!  What is different this time is they are broke.
As baby boomers and insurance companies need to put money to "work" and create a predictable cash flow, real estate investment and subsequently development of real estate will come back to sustainable levels.  Land will be developed, buildings will be erected and investors will look for yield.  The rules really have not changed and it really is not different this time when looking back over the last 50 years.  I have a final cliche for you, the more things change the more they remain the same.  That my friends, you can bank on.
David H. Farmer, PE, AICP  -
Editor of Florida Land Development News