Case Study: The Architecture of an Off-Market Deal

Case Study: The Architecture of an Off-Market Deal

Deconstructing a Strong Land Basis Opportunity in Lauderdale-by-the-Sea.

The Executive Thesis: Institutional capital and brokers (Blackstone, JLL) rarely touches deals under $20M. It doesn't move their needle. Conversely, the typical residential agent lacks the technical literacy to underwrite zoning density or construction costs.

This creates a "Middle Market Efficiency Void"—and for the High-Net-Worth Investor or Family Office, this is where the highest returns often hide. We recently successfully identified and underwrote a development opportunity that perfectly illustrates this "Middle Market Sweet Spot." Here is the anatomy of the deal:

1. The Mandate

The Client Profile: A High-Net-Worth Investor looking for a "Value-Add" project. The Goal: Locate a site suitable for luxury townhome development in Greater Fort Lauderdale. The Constraint: It had to be "Off-Market." The best dirt rarely hits the MLS.

2. The Discovery: Zoning Arbitrage

We didn't start by looking for "For Sale" signs. We started with the Zoning Map. We identified a parcel in Lauderdale-by-the-Sea (LBTS) that allowed for density but was currently underutilized. Through direct relationship building with the owner, we negotiated a potential disposition that met his number while preserving our client's margin and timing goals.

3. The Math: The "16.7% Signal"

In development, you make most of your money on the buy. The underwriting for this site revealed a compelling "Margin of Safety":

• Acquisition Price: $1.0M (Off-Market)

• The Product: Two Luxury Townhomes (3,300 SF each + Rooftop Terraces)

• Cost Per Door: $500,000

• Land Basis Per Buildable SF: ~$151/SF

The Exit Analysis: Based on current comps for new construction in LBTS (water views, new code), we forecast a conservative exit at $900 / SF in ~2 years' time.

• The Metric: This equates to a Land-to-Sellout ratio of 16.7%.

• The Analysis: Generally, if land cost is under 20% of the final sales price, the project has strong insulation against cost overruns. At 16.7%, this deal offers significant "Alpha."

4. The "Full Stack" Advisory

Finding the land is only 10% of the job. "Advisory" means managing the entire pre-construction ecosystem. Before the contract was even signed, we:

• Prepared the Exit CMA: Validating the $900 / SF target (with sensitivity analysis up and down from here).

• Vetted the Team: Sourced the specific architect and consultants familiar with LBTS code.

• Priced the Build: Presented two General Contractor (GC) estimate to verify hard costs and create a target for the architect to stay within.

5. The Optionality (Exit Strategy)

We structured the deal to give the client three distinct exits:

1. Pure Spec: Sell both units for maximum capital gain.

2. Basis Reduction: Keep one unit as a primary or secondary residence, sell the second unit to pay down the basis (ie, this is living well for significantly under market value).

3. The Cash Flow Play: Keep one, rent the other to cover carry costs.

The Takeaway: This is the Tropical Phoenix Homes difference. We are not just gatekeepers to inventory; we are architects of the business plan. If you are looking to deploy capital in the $2M–$20M development space, let’s look at the map together.

Connect with Jennie and the TPH team about our Commercial Advisory and Development practice.