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Nj future redevelopment forum 2014 mixed use pellegrinelli


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Nj future redevelopment forum 2014 mixed use pellegrinelli

  1. 1. Steven Pellegrinelli Senior Vice President OceanFirst Bank
  2. 2. The Challenge of Financing Mixed Use Redevelopment Projects 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 development.
  3. 3. For Example: 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.
  4. 4. 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 Solutions: Seizure via eminent domain Larger properties owned by single owners such as former factory or industrial sites
  5. 5. Municipal Involvement Municipal cooperation is crucial Municipalities are responsible for land use variances, zoning variances, building permits, etc. Environmental Concerns Since many of the properties are distressed, old factories and industrial sites have environmental issues. These must be addressed and remediated prior to financing.