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Land Use, Zoning & Entitlement in Real Estate Development



This document provides an overview on land use, zoning, entitlement, and planning in real estate development

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Land Use, Zoning & Entitlement in Real Estate Development

  1. 1. An overview on real estate planning and development LAND USE, ZONING & ENTITLEMENT
  3. 3. DEVELOPMENT PROCESS Ploutus Advisors, LLC 2 Project Concept Site Selection Research Properties Land Purchase Offer Site Due Diligence Close Land Preliminary ProForma Project Defn. Architect Conceptual Design & Est. Schematic Design / Initial GMP Value Eng. & Agency Review Design Dev. / Final GMP Constn. Docs Bid & Subcontract Building Constn. Open for Use Agency EIR Planning & Zoning Approval Eng. Consultants & Studies Market Research Financing Options Bond Equity Debt IdeaPlanning Execution
  4. 4. PROJECT INFORMATION Ploutus Advisors, LLC 3 ¡  Current Use ¡  Planning and Land Use ¡ Legal description of property, including boundaries, height, and density ¡ Applicable zoning codes and specific plans, and other applicable laws affecting development ¡ If located in “coastal zone”, affordable housing requirement under 1982 California state law called Mello Act ¡  Ownership ¡ Previous and new owner ¡  Encumbrances ¡ Liens and/or covenants ¡  Property Taxes ¡  Building and Safety ¡ Inspections, complaints, permits, code enforcement ¡  Redevelopment ¡ Redevelopment plans and use of eminent domain
  5. 5. ¡  Land Use future of neighborhood, kind of new construction permitted (eg., multifamily, commercial, industrial, etc.) ¡  Housing type of housing, affordability, ownership vs. rental, proximity to transportation, parks, community services ¡  Redevelopment responsiveness to community needs, use of eminent domain, relocation, replacement housing, affordability ¡  Transportation connectivity with neighborhood and beyond, street improvements, freeways, bus, rail, bicycle, pedestrian Ploutus Advisors, LLC 4 KEY DECISION DRIVERS ¡  Community neighborhood revitalization ¡  Parks / Recreation safety, cleanliness ¡  Environment quality of neighborhood, permits, toxic cleanup, air and water quality ¡  Jobs local job creation, wages, benefits ¡  Financial Impact public subsidies, tax revenue
  6. 6. ¡  Almost all development projects in Los Angeles are required to obtain approval from either city or county ¡  Development permits, zoning code compliance, city planning compliance, and environmental review each creates a public process Ploutus Advisors, LLC 5 DECISION-MAKING BODIES ¡  Advisory Bodies §  Neighborhood Council (NC) §  Project Area Committee (PAC), or Community Advisory Committee (CAC) ¡  Decision-Making Bodies §  Planning Department (PD) §  Planning Commission (PC) §  City Council §  County Board of Supervisors §  Zoning Board §  Redevelopment Agency (RA)
  7. 7. Ploutus Advisors, LLC 6 PUBLIC PROCESS Discuss project with Neighborhood Council Approach Building and Safety Department to determine approvals needed Submit project application to City Planning Department Planning Department, Hearing Officer or Zoning Administrator, to hold hearing and make recommendations; typically placing conditions on project Regional or City Planning Commission to make decision on any administrative/ adjudicatory matters or appeals from Hearing Officer City Council to make determination on legislative matters and appeals from Planning Commission
  8. 8. ¡  Local Agencies – City Council, Zoning / Planning Departments §  All new construction must receive approval from local city or county Planning Department §  City Council approval may also be required §  Planning Department establishes zoning laws and long-term plans to guide future developments, and is also responsible for completing an environmental review of any major new development §  All major city planning decisions or recommendations are made by local city Planning Commission who are appointed by City Council, Board of Supervisors or Mayor (in Los Angeles) §  Legislative land use decisions (e.g., General Plan Amendments, creation of new Specific Plan) require City Council approval after Planning Commission recommendation §  Planning Commission decisions can be appealed to City Council or Board of Supervisors Ploutus Advisors, LLC 7 GOVERNMENT AGENCIES
  9. 9. ¡  Regional and County Agencies §  County planning agencies are responsible for decisions and plans affecting unincorporated areas of the county §  Regional agencies are becoming more influential in local decisions, e.g., the Southern California Association of Governments (SCAG) is responsible for creating a Regional Transportation Plan (RTP) to allocate federal transportation funding and establish a vision for regional growth §  County transportation authorities, such as the Metropolitan Transportation Authority (MTA) in Los Angeles County, have significant influence over development of local transit systems Ploutus Advisors, LLC 8 GOVERNMENT AGENCIES
  10. 10. ¡  Regional Planning §  In California there are 36 regional governance structures called Council of Governments (COGs) which address issues that transcend local boundaries, such as transportation, growth management and environmental protection §  Southern California Association of Governments (SCAG) represents six counties and 191 cities ¡  Local Planning (Comprehensive) §  Actual land use authority, for the most part, resides with local governments §  Each community’s legislative body, upon recommendation and guidance from a Planning Commission, implements the General Plan through zoning ordinances Ploutus Advisors, LLC 9 REGIONAL & LOCAL GOVERNANCE
  11. 11. ¡  Entitlement is approval from a regulatory body to use or develop land ¡  A project typically requires several approvals pertaining to land use, architecture review, general and specific plan, subdivision, development agreement, etc. ¡  Entitlement process includes: §  General Plan §  Zoning §  Subdivision Approval §  Site Specific Permits §  Conditional Use (CUP) §  Variance §  Design Review §  California Environmental Quality Act (CEQA) / Environmental Impact Report (EIR) Ploutus Advisors, LLC 10 ENTITLEMENT
  12. 12. ¡  Provides broad generalized vision for future development ¡  Describes goals and policies that serve as the basis for other land use ordinances and local land use decisions ¡  Contains at least seven (7) mandatory elements: (i) land use; (ii) circulation; (iii) housing – with the passage of SB 375, the housing element must, in most cases, now be updated every eight (8) years; (iv) conservation; (v) open-space; (vi) noise; and, (vii) safety ¡  In Los Angeles, adopting or amending a city’s General Plan requires public participation §  First, Planning Commission must hold at least one (1) public hearing before making a recommendation for approval §  Second, City Council’s Planning and Land Use Management committee (PLUM) must hold a public hearing §  Finally, full City Council must hold a public hearing before taking action on the plan or amendment Ploutus Advisors, LLC 11 GENERAL PLAN
  13. 13. Community Plan ¡  Land use element of General Plan actually consists of 35 separate Community Plans in Los Angeles ¡  Each Community Plan sets general land use principles and policies for a specific area of the city Specific Plan ¡  Detailed plan for development of a specific area of the city ¡  Contains specific limitations on development, such as maximum height or set backs ¡  Details approvals and appeals process for developments within the Specific Plan area Ploutus Advisors, LLC 12 COMMUNITY PLAN & SPECIFIC PLAN
  14. 14. ¡  Zoning is a police power exercised by local municipalities through adoption of ordinances to control and direct use and development of private real property ¡  Generally divides allowable uses of land (e.g., residential, commercial, etc.) into different zones ¡  Imposes a set of restrictions on land use and development within a particular area ¡  Creates “zones” for specific land uses such a residential, industrial, or commercial ¡  Each zone is divided into subcategories such as residential “single family” or “light” industrial ¡  Each zone has specific legal limitations on use, height, yard size, lot size, and parking ¡  Overlay zones protect uses and regulate development to protect specific features in an area (e.g., historic preservation overlay zones, flood hazard zones, ocean-submerged land zones, and coastal zones) Ploutus Advisors, LLC 13 ZONING
  15. 15. ¡  Subdivision is division of land into two or more parcels or legal entities – process is referred to as Platting ¡  All divisions of land, including creation of air parcels for condominiums, are regulated by State Subdivision Map Act (SMA) ¡  In Los Angeles, subdivision approval is a two step process: §  First, Tentative Map, which if approved, then Final Map §  Final Map must be recorded within two (2) years from date of approval of Tentative Map; however, extension of up to six (6) additional years (one year at a time) may be requested ¡  Subdivision may be achieved by one of the following methods: §  Parcel Map – required when division of property would create four (4) or fewer parcels or four (4) or fewer condominium units (i.e., Minor Land Division) §  Tract Map – required when division of property would create five (5) or more parcels or condominium units §  Vesting Map – grants vested rights to proceed with project in accordance with ordinances, polices and standards in effect at time application for approval of Vesting Tentative Map §  Hearing Officer has authority to make decisions on Parcel and Tract maps, and Vesting Maps; decisions of Hearing Officer are appealable to Board of Zoning Appeals Ploutus Advisors, LLC 14 SUBDIVISION
  16. 16. ¡  Most decisions involve the Planning Department or Planning Commission when evaluating a project proposal ¡  In case of rezoning, a site-specific application can be considered a legislative approval that requires City Council review ¡  Rezoning / Zone Change – If proposed development does not comply with existing zoning code, then rezoning (or zone change) is required for approval §  In California, rezoning is a legislative act that requires City Council approval §  In Los Angeles, zone change requires public participation §  First, Planning Commission must hold at least one (1) public hearing before making a recommendation for approval §  Second, City Council’s Planning and Land Use Management committee (PLUM) must hold a public hearing §  Finally, full City Council must hold a public hearing before taking action on the zone change Ploutus Advisors, LLC 15 SITE SPECIFIC PLANNING
  17. 17. ¡  Variance – Used to avoid restrictions imposed by zoning code §  Essentially a limited waiver of zoning requirements §  Granted only in special cases where a strict application of zoning code would deprive property owner of uses enjoyed by other land in same zone §  Variance cannot allow a use prohibited by zoning ordinance, but can relax standards for certain criteria e.g., lot size, set backs, or floor-area-ratio §  Zoning Administrator must hold a public hearing before issuing a variance §  Section 12.27 D of Los Angeles Municipal Code sets standards for granting a variance Ploutus Advisors, LLC 16 SITE SPECIFIC PLANNING
  18. 18. ¡  Conditional Use Permit (CUP) – Certain uses of land may only be allowed upon approval of a CUP §  Uses that often require a CUP include schools, hospitals, factories that produce hazardous materials, and group homes §  CUP may impose special conditions that ensure the use will not harm surrounding properties §  CUP does not rezone land; the use in question must comply with zoning requirements and obtain a CUP §  Granting of CUP requires a public hearing §  In Los Angeles, granting of CUP requires a public hearing §  Either Zoning Administrator, Area Planning Commission, or City Planning Commission decides whether to issue a CUP §  Initial decision-maker has 75 days from receipt of application to make a decision §  Zoning Administrator decisions can be appealed to Area Planning Commission, and Area Planning Commission or City Planning Commission decisions can be appealed to City Council Ploutus Advisors, LLC 17 SITE SPECIFIC PLANNING
  19. 19. ¡  Site Plan Review – In Los Angeles, Site Plan Review is required before issuing building permits for development projects that will result in: §  An increase in 50,000 square feet of non-residential floor space; §  An increase of 50 or more dwelling units; §  Changes to fast food restaurants; or §  New residential buildings in the Greater Downtown Housing Incentive Area ¡  Generally, the Planning Director will determine whether a proposed project is consistent with the General Plan and any other applicable plans (e.g., Specific Plans, Redevelopment Plans) ¡  Public hearing is not required for Site Plan Review Ploutus Advisors, LLC 18 SITE SPECIFIC PLANNING
  20. 20. ¡  A plan or project’s approval process is mostly determined by whether the decision is (i) Legislative, (ii) Quasi-Judicial, or (iii) Ministerial ¡  Legislative – City Council action required to create or amend a rule or policy applicable to the development project §  Generally changes law or standards as they are applied to all residents, e.g., changing a plan affects multiple property owners and residents that live within plan’s coverage such as General Plan or Specific Plan Amendment, or Zoning Change where City may require developer to pay impact fees or contribute to community improvements §  Requires extensive public hearing Ploutus Advisors, LLC 19 PERMITS & APPROVALS
  21. 21. ¡  Quasi-Judicial – Some developments require quasi-judicial (also called “Adjudicatory”) approvals meaning Planning Commission (or other agency) must determine if development complies with an existing rule or policy ¡  Ministerial – Requires little or no judgment, or exercise of discretion, by decision-making body Ploutus Advisors, LLC 20 PERMITS & APPROVALS
  22. 22. ¡  Following approvals could be either Adjudicatory or Ministerial (in most cases these will be Quasi-Judicial) §  Building Permit – Allows developer to construct on lot; city will issue building permit only after compliance with applicable zoning and planning regulations and design review §  Conditional Use Permit (CUP) – Zoning ordinance lists permitted uses within each zone, as well as a second list of uses that may be allowed if developer obtains a CUP §  “Conditional” uses are kind city only wants in limited numbers or special circumstances, like tall buildings, and, in Los Angeles, are listed in Sections 12.24 U,V,W and X of Municipal Code §  Tentative Subdivision Map – When property owner subdivides a property into five (5) or more separate parcels (e.g., when creating condominiums), developer must generally prepare a Detailed Tentative Tract Map that must be approved by Planning Commission after a public hearing §  Variance – Allows a developer to construct in ways otherwise prohibited by zoning ordinance because of special physical characteristics of a lot; Zoning Administrator must hold a public hearing before issuing a variance Ploutus Advisors, LLC 21 PERMITS & APPROVALS
  23. 23. ¡  Local land use controls (e.g., Zoning and Specific Plans) limit size of buildings that can be built, and size of residential units inside thus limiting “density,” i.e., number of residential units a developer can build on a site ¡  In order to allow developers to build more residential units, state law and city ordinances give developers a way around these regulations in exchange for including affordable units or senior housing, or for building near mass transit; extra units are called a “Density Bonus” §  Housing developments with at least 10% percent of units for households earning 80% of AMI, or 5% of units for households earning 50% of AMI, allows for an increase in size of total development of 20% above legal limit §  Developers may also request up to three (3) additional concessions from local zoning regulations e.g., developer may elect to raise maximum height of a building to allow more units to be built on top of building §  Condition of granting a Density Bonus is that affordable housing developed as a result must retain its affordability for a minimum of 30 years Ploutus Advisors, LLC 22 DENSITY BONUS
  24. 24. ¡  California Environmental Quality Act (CEQA) is a state law that requires government agencies to consider the environmental effects of certain development projects before approving them ¡  Allows public participation and influence on future development ¡  Six (6) steps that a public agency must follow in order to comply with CEQA: §  Determine if proposed project is a “Discretionary Project” §  Determine if project is Exempt or Non-Exempt from CEQA compliance §  If project is Non-Exempt from CEQA, conduct an initial study to determine if project may have significant environmental impact §  If project has significant environmental impact, prepare an Environmental Impact Report (EIR), else, prepare Negative Declaration (ND) or Mitigated Negative Declaration (MND) §  Certify, or approve as complete, EIR, ND, or MND §  Approve or disapprove project – within five days of approving the project, agency must file Notice of Determination, which declares that agency has approved project application ¡  Note: After project has been approved, public may file lawsuit challenging public agency’s decision in approving project Ploutus Advisors, LLC 23 CEQA
  25. 25. IN CONCLUSION - THE ROADMAP Ploutus Advisors, LLC 24 Plan Gather Relevant Research Involve All Parties Having A Stake Analyze Make A Qualified Decision
  26. 26. CONTACT US Ploutus Advisors, LLC 25 Disclaimer: The information contained herein may be subject to errors, omissions, changes and, other factors that may adversely impact any decision made by a recipient/user, if relied upon, without appropriate verification by a recipient/user. Ploutus Advisors, LLC, its partners and/or employees DO NOT provide any guarantees, express or implied, and/or make any representations as to the accuracy of information contained herein. All information contained herein is only for general informational purposes, and should be independently verified by a recipient/user. The recipient/user is hereby advised NOT to solely rely on information contained herein, and to conduct its own due diligence and consult with its advisors prior to making any decision. Source: Legal Aid Foundation of Los Angeles, Department of City Planning – Los Angeles, Planning & Zoning – City of Los Angeles Real Estate Consulting & Advisory Mr. Adnan Tapia Email: Tel: +1.424.274.3561 Ploutus Advisors, LLC 1875 Century Park East, Suite 700 Century City CA 90067 Real Estate Investment, Acquisitions & Development Analysis, Due Diligence, Underwriting & Financial Modeling, Business Development & Transaction Origination, Structuring & Negotiation, Joint Ventures, Financing Adnan is a Principal at Ploutus Advisors, LLC; a boutique real estate investment and advisory firm based in Los Angeles, California. Over a period of 18 years, Adnan has worked on 16+ million square feet or US$2.5 billion worth of US and India focused real estate transactions across several product types (office, industrial, retail, residential, hospitality, mixed-use, land) and life cycles in areas such as real estate private equity, financial consulting, acquisitions and development. §  MBA in Banking and Finance, Case Western Reserve University, Ohio (nominated to the Honor Society of Beta Gamma Sigma) §  Master in Engineering, Cornell University, New York §  Bachelor in Civil Engineering, University of Pune, India §  California Real Estate Broker’s License Holder §  Member ULI, NAIOP, Cornell Real Estate Council (CREC)