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May 8, 2008
Increasingly Cautious Lenders Delay Mixed-Use Development
Investor's Business Daily
by Brad Kelly
Shy lenders are trying to avoid mingling with "mixed use." They're putting brakes on developments that blend offices and stores with condominiums, apartments and hotels.
Before the housing bubble's pop and a crunch in credit, developers drew up many mixed-use plans. They were a way to enliven urban blocks and use space economically.
But now it's harder to find lenders who'll back all parts of a project. They vary in which parts of mixed-use they fear.
Some consider office and residential aspects to be higher-risk, says Scott Lynn, a principal at Dallas investment bank Metropolitan Capital Advisors. It's far tougher today, he says, to get financing for mixed-use plans that are part residential, vs. a sole-use retail property.
"Banks are terrified of the residential market and see retail or hotel projects as a safer loan," he said, citing better assurance of income in the latter categories.
...Developers across the U.S. are delaying mixed-use projects as lenders back away, concerned that risks outweigh returns. High construction costs and worsening fundamentals are jeopardizing major plans.
...Two months ago in New York, Forest City Ratner Cos. warned of difficulties with office and residential parts of Atlantic Yards, a $4 billion, 22-acre Brooklyn project. Given lack of demand in both niches, the firm said, it would be hard to get enough leasing commitments to secure financing. This week it issued new designs and outlined a 10-year construction schedule that does include offices and residences.
Posted by eric at May 8, 2008 10:01 PM