Nj future redevelopment forum 2014 mixed use pellegrinelli
Senior Vice President
The Challenge of Financing Mixed Use
Mixed-use by its very nature, represents
increased risk to the financing entity
Disparate revenue sources, from
disparate market sectors
From a banking perspective each market
sector must be evaluated, each market
sector must make sense for the
A Mixed Use development with retail stores
on the first floor and offices on floors 2 -3,
with residential on floors 4 -5.
Right now retail is weak, underwriting
would be critical of retail space and
use higher vacancy rates
and higher capitalization rates.
Office space is improving but still not good, with pockets of
activity at best.
“For rent” residential is strong right now with low vacancy
rates and low cap rates.
All these factors must be evaluated when making a
credit decision on mixed use property.
The Challenge of Disparate Property Owners
In a downtown location, one square block can have multiple
property owners. Some may embrace the project, some may not.
One hold out can delay a project significantly
Distressed areas where the bulk of the property
might be owned by the municipality
Seizure via eminent domain
Larger properties owned by single owners
such as former factory or industrial sites
Municipal cooperation is crucial
Municipalities are responsible for land use variances, zoning
variances, building permits, etc.
Since many of the properties are distressed,
old factories and industrial sites have
environmental issues. These must be
addressed and remediated prior to