Developing a Parking Lot

Or, in this case - almost developing one…

A very short, but instructive story:

One thing I learned in land development is that you can get analysis paralysis when looking at a prospective property to buy. I have been guilty of this a few times, where I spent too much time analyzing a property for assurances that were just not there. Then failing to act in time.

It’s important to remember that land development is an inherently risky proposition and there is only so much butt covering you can do. At some point you have to pull the trigger and act, or lose out. This post is about a time I failed to act on the obvious, but I sure wish I had!

City lot opportunity:

There was a vacant city lot in downtown Tacoma, Washington and I would drive by it from time to time. It kind of stuck out because it was the only cleared lot among the surrounding low rise buildings. Downtown Tacoma is on a hill that slopes down to the waterfront, but this lot was carved out flat way back when, so it was 100% useable. A very attractive prospect.

Looking into it:

Downtown Tacoma has had it’s starts and stops over the decades and there have been many unsuccessful attempts to revitalize it. This time around the city had invested big money in a new convention center in order to attract private investment money to the downtown area.

It was working too, since there was a new hotel a couple of blocks down from the convention center. The vacant lot was across the street from the convention center, two blocks down and abutting a four point intersection. Perfect location!

One day while driving by I noticed a for sale sign on the lot. I looked it up and the Seller wanted $89,000, which I figured was a very decent price, maybe a steal. My first thought was that I should buy it and make a parking lot out of it.

As it turns out, that was a great thought..

Checking further;

Over the next couple of evenings I started looking up the lot and what was planned for downtown Tacoma overall. The lot was zoned some sort of commercial, I forget what, but parking lots were an allowable use. I had a guy pull a title report on it and there was nothing unusual there either.

Then, I started looking up current downtown development applications and it looked really promising. There was an offshore billionaire that had already put real money into the downtown revitalization on a long term basis. He was buying up old downtown buildings like Grant going through Richmond and there were other big money investors that were doing the same thing.

I checked the convention center schedule and they had booked events planned 18 months out, which was encouraging to say the least. There were also professional offices nearby that needed transient parking.

I didn’t know anything about parking lots, but I figured it wasn’t exactly atomic physics. After some research I found that the lot would accommodate about 15-18 parking stalls, depending on what the City would require in the final approved plans.

Then I checked into downtown parking rates, which was very promising. The going rate for all day parking was $25 and convention goers are usually all day folks. That would be $375 a day for 15 full spaces, or $450 a day for 18. For short term parking I could charge $5 for the first hour and probably make even more per stall over the course of a day.

All I had to really do was contract to buy, thoroughly inspect, close the deal, get permitted, asphalt it, paint the lines and put a pay box in. Figure six months to completion, maybe a bit more.

Unfortunately, that’s about how far I took it. I had three other active projects about 60 miles up the road and I was driving to them almost daily. I figured that I was just too busy to do anything about it. In the back of my mind I was also thinking that I had never worked with the City of Tacoma before and that unknown could be a hassle.

That approach is called being lazy and it turned out that this tiny little opportunity was probably the biggest dollar for dollar failure in my land development career.

The guy that won:

Of course, you know what comes next. Some guy bought it and did what? Oh yeah, he put in a parking lot that looked just like the one I had pictured in my head. Very disappointing to say the least.

A key miss was my suspicion about why this lot was so cheap in an area that had become so active. What I didn’t think through was that the lot was too small for the big guys to be interested in. Of course the guy that bought it did not miss that important factor.

For a while afterward, whenever I was close to downtown I would drive by “my parking lot” just so I could kick myself in the rear end. Every time I did, “my parking lot” was always full or near full with parked cars.

Which brings us to the point:

I am thorough by nature when it comes to acquisition of land and anyone who has read my other posts knows it. I consider that to be a strength since I have never had an acquisition disaster.

On the other hand, I have come to learn that sometimes my strengths are also weaknesses in disguise. Like here, where the project was incredibly simple and my indecision caused me to stall out before I even started.

Besides telling myself I was too busy, I had other things on my mind. Things like not really knowing anything about parking lots (like it’s brain surgery or something), not being up-to-speed on downtown Tacoma, never having done one before, what the City of Tacoma’s permitting process was like… and on and on. I was really just anticipating problems that weren’t really there.

Strike while the iron is hot:

I am against shooting from the hip in land acquisition. That’s a fool armed with money in one holster and false hope in the other. However, this example shows that failure to act can have extreme consequences. This little project would have captured very reasonable income for my entire lifetime, with marginal development cost and risk.

My reasons for failing to act were pretty lame for a land developer. Risk goes hand-in-hand with reward in this game and I could have easily figured out how to do it. I have never forgotten the little gold mine that I let slip by and it causes me to remember that when opportunity jumps out at me I need to pay attention, even if it isn’t in my wheelhouse at the time. Also, to be prepared to act quickly and deliberately.

One thing I’ll say for sure - it never happened again, but I will never forget the time I let a fantastic income producing land deal slip through my hands - right into the grasp of the other guy.