The Neuried municipal council is currently walking a tightrope. The committee must determine the criteria for the investor competition to market the property behind the old town hall on which apartments are to be built. On the one hand, the municipal councils want to achieve the best possible price and at the same time they have to weigh up the specifications they make, for example with regard to the sustainability of the building, the building materials used, the architectural design or the proportion of social housing use. Because every edition brings reductions in price. The fact that the property is leased out is an additional hurdle.
This is “new territory” for the municipality, as Andreas Braun, head of the building authority, says. Usually, a piece of land is sold to an investor – he has to calculate for himself how he can profitably develop residential and commercial premises there. With the leasehold concept, it works exactly the other way around. “We have to think about what could be attractive for the investor,” says Braun. How many specifications can you make without having to accept too many losses in the ground rent? Mayor Harald Zipfel (SPD) demonstrates this with examples: “The desired green facade is expensive and lowers the long-term lease. If we demand that the investor also creates and paves the public areas, the long-term lease also falls.”
The list of the so-called “limiting parameters”, or “shackles” as the mayor calls them, can be continued at will. “We have to decide what is important to us,” says Zipfel. According to Braun, Article 75 of the municipal code always hovers over the weighing process. This stipulates that no property may be sold below value. What happens if the submitted offers are below the value of the property, Braun does not want to think any further. “We will try to avoid that.”
“That’s our cherry on the cake,” says building authority manager Andreas Braun
The municipality is advised by lawyers and a specialized consulting office. The first criteria were already discussed in the most recent building committee meeting. “It’s an ongoing process,” says Braun, which will continue over the coming weeks. The meeting made it clear that specifications for architectural design could be among the indispensable criteria. “It’s not just about the price for us,” said Mechthild von der Mülbe (SPD). The head of the building authority, Braun, also admitted that he felt “uncomfortable” when no design criteria were specified. “This is our icing on the cake,” he says of the property in the town center. The decision in the building committee on the proportion of social land use that an investor must meet was simpler: 30 percent of the new apartments should be created for socially disadvantaged tenants and not 20 percent as was the case with the development of the former Hettlage area. In the municipal council meeting on September 27th, the first criteria are to be finally decided.
The municipal council must also decide on the award procedure. The lawyers recommend a two-stage process that offers opportunities for competitive negotiations with investors. Zipfel is skeptical. “Are we really getting what we want with this?” he asked at the meeting. In the case of the partial construction of the recently completed elementary school, for example, a timber construction was specified in costly negotiations, but afterwards a concrete building came out of it, which only received a wooden facade. “We fell flat on the nose with the two-stage process.”
The sale of the property on leasehold terms is currently a challenge. “There are uncertainties as far as interest rate developments are concerned,” said the advising lawyer at the meeting. In addition, the construction costs are exploding. All of this makes the calculation a challenge for an investor. Zipfel is “not so critical”, as he says: “Do we know how much better the market will be in the future? We’d rather sell now than later.” He has many inquiries from investors on the table who finally want to apply. Head of the building authority Braun is even observing a “paradigm shift” in the industry: The switch to leasehold – otherwise not the most popular investment model – is quite interesting for some project developers. In these unpredictable times, they would not have to put the entire purchase price on the table, but could start with a low one-off payment.