You don't know complicated
The winner of the 2003 commercial transaction of the year award showed patience, flexibility, and creativity to overcome numerous challenges to his deal.

You might need a flowchart the size of Texas to keep track of all the parties and conditions involved in the Texas Association of REALTORS® 2003 commercial transaction of the year. But John Maddux of John H. Maddux Inc. in Fort Worth managed to focus on delivering a top-quality, compatible development, despite the challenged land he had to work with.

Maddux, representing the sellers, orchestrated a transaction to develop 100 acres of vacant land that the buyer wanted to turn into a mixed-use project, including commercial, retail, office, and medium- and high-density residential. Now, most deals face obstacles, but Maddux truly overcame a litany of complications to bring this project to fruition.

The property spanned two municipalities; about 60 of the 100 acres were in a city, while the remaining 40 sat in a smaller, adjoining village. The 100 acres were owned by seven parties—four bank trusts and three individuals.

Two oil pipelines bisected property, and there was a large sewer easement and main on the parcel as well as a power-line right-of-way. A major creek bisected the property, 20 of the 100 acres were subject to hazardous-material cleanup, and the property included a non-dedicated cemetery. And the noise from a nearby airport impacted the parcel.

Since the transaction is still being completed, the location of the property and the parties to the transaction will not be revealed here.

If at first you don’t succeed …
“I’ve been familiar with this piece of property for many years,” says Maddux, a CCIM and member of the Texas Association of REALTORS® since 1959. “I’ve had four deals on this property over the past 20 years that have failed.”

Those past agreements, for part or all of the 100 acres involved in this project, fell apart because the challenges presented by the land are too much to handle at once. “The only reason we were able to make it work this time,” claims Maddux, “was because we broke the land up into smaller pieces.”

The deal began in October 2001 when the buyers and sellers executed a contract for sale that required the buyer to secure platting and entitlements from both municipalities for the first phase of the development. The buyer plunked down substantial earnest money, which would increase fourfold over the course of the contract’s six amendments. The buyer had nine months to complete his due diligence and create a conditions, covenants, and restrictions (CCR) agreement that provided for a mutually acceptable landscaped greenbelt and protections for the existing adjacent subdivision.

“It’s an unusual transaction for anybody.”
Maddux used his familiarity with development to guide the project past its many obstacles. “My background is as a developer,” he says. “Had I not had a background as a developer, I never could have made the deal work. I knew what the developer needed. I was able to explain that to the city, village, and sellers. … It’s an unusual transaction for anybody.”

He assisted both parties and their attorneys with title-commitment issues and presented change-of-zoning requests to the city’s zoning commission to accommodate the developer’s urban-village plans. He assisted the buyer with presentations before the city’s development-review committee and planning commission and the village’s planning commission—more than 25 meetings in all.

Maddux negotiated an initial contract and extended closing periods using extension fees to allow the buyer time to secure additional financing and substitute equity partners for a portion of the project. He also assisted with the creation of the conceptual development plan and presentation of preliminary plats to two municipalities as well as a traffic study. He assisted with rezoning in both the city and village—eventually rewriting a village zoning ordinance.

Maddux met with the buyers and sellers to negotiate CCR issues such as the characteristics of the development’s greenbelt and landscaping and the exterior building materials to be used on the project. He also helped resolve environmental issues associated with various parts of the project as well as providing information on 24 monitoring wells and assisting the buyers and sellers with the Texas Commission on Environmental Quality investigation and mitigation process.

Wait … there’s more
Municipal approval delays, changing lender requirements, and concept plan revisions necessitated the contract being renegotiated and amended by Maddux six times between May 2002 and October 2003. The first instance required extending inspection periods and approval dates for zoning changes and the final plat. The second extended due diligence dates and required additional, nonrefundable earnest money. The third created two rolling options, triggered by the purchase of a 2.3-acre tract and provided for the exercise of two sequential options on 11 tracts of land. Option 1 applied to four tracts in the city. Option 2 applied to seven tracts in the village with the option price increasing incrementally for extended option time periods.

The fourth extended the closing date for the four tracts in the city specified in Option 1 and detailed the buyer’s infrastructure construction obligations.

The fifth permitted early closing of the triggered transaction and the creation of an escrow agreement for the extension of a water line to service the tract. And the sixth modified Option 2 to include an additional 15 acres of village land with an increased price as well as specific water, sewer, and street-construction obligations.

“The deal is still unfolding as we speak.”
The aforementioned trigger tract in the village closed in August 2003, and $215,000 was escrowed for the construction of a water main. Maddux assisted in securing approval from the city and village for the main’s route, necessary easements, pipe size, and the engineering plans. And his work isn’t done yet.

“This deal is still unfolding as we speak,” he says. Options for the buyers to acquire two tracts in the city and three tracts in the village continue through November 2004. “About 56 acres have closed. We are in the process of rezoning another small piece and getting another preliminary and final plat.”

After so many years spent trying to create something with this parcel of land, Maddux is quick to give credit elsewhere for his project’s success. “The key was to find a developer with a vision for the land use that my seller needed,” he says. “With all of the challenges to the land—next to oil pipelines, next to electric lines, working around the cemetery—finding a developer to fit such a high-quality product in the footprint available given all the obstacles was the biggest challenge.”

Photo: Ward Lowe.

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