Selling land to a developer or to a fund: how each one runs the numbers

Why each buyer arrives at a different number

All professional buyers use the logic of the residual method, but each fills it in with its own assumptions: the product it will build, its cost of capital, the time it will accept waiting and the return it requires. The guide to selling land describes who the buyers are; what matters here is what each one values.

• The local developer values above all the speed of the licence and the fit with a product it already knows how to sell.
• The fund looks at return and timing: what the capital earns and when it exits.
• The operator (hospitality, student or senior residential, logistics) values location and product, because it buys for its own use or with an investor.
• The international developer or investor, active mainly in Lisbon, Porto and the Algarve, brings a different price and capital base from the local one.

How to approach the buyers

Land advertised on portals is exposed, loses exclusivity in developers' eyes and attracts intermediaries, not buyers. At Harbor Partners the approach is targeted: a list of developers, funds and operators contacted confidentially, one by one, with no public advertisements, who sign a confidentiality agreement before receiving information.

After that, non-binding offers arrive in parallel, finalists are selected, the buyer carries out due diligence and final offers are submitted. It is competition between buyers that protects the price.

Beyond the price: the structure of the sale

The best option is not always a simple sale. A buyer may propose a sale subject to licensing, a swap (permuta) or a partnership. Each trades certainty for value differently, and the choice depends on the owner's timeline and appetite for risk. The permuta and the other alternatives to a simple sale are described in the guide.

What a serious buyer asks for

• an up-to-date land registry certificate and tax record;
• a location plan, topographic survey and, if one exists, a geotechnical study;
• extracts from the master plan and the constraints maps, and whatever exists from the municipal file;
• information on encumbrances, charges, leases or occupations, and a capacity study.

With this gathered, several buyers can submit comparable offers in parallel, and the price stops falling in due diligence.

What to compare in the offers

Price is only one part. The payment timetable, the conditions precedent, the deadline and exit for those conditions, and the negotiation of the preliminary contract (CPCV) through to the deed are also compared. A higher offer with conditions precedent that have no deadline or exit may be worth less than a lower one that is firm.

Next step

Before speaking to any buyer, it helps to know what the land is worth on their calculation. Harbor Partners prepares that valuation, with no commitment, and works for the owner, with no dual agency: it never advises both sides of the same sale.