Financing Redevelopment 101 Bob Waxman, LRA
Development Phases Planning & Consensus-building Predevelopment Trunk Infrastructure In-Tract Land Development Vertical (Buildings) Parks, Open Space & Amenities
Planning & Predevelopment Tasks (Uses of Funding): Master Planning Entities formed or hired Receive custody of military base (EDC) Maintain the base Begin hard design & engrg. Plan organization and depts. Formalize financial plan Financing Sources: Planning Grants--OEA Caretaker Agreement Net Rental Income Economic Development Conveyance (EDC)
Planning & Predevelopment Planning Grants For master planning & related departmental expense Caretaker Agreement -- Negotiated Interim support pending EDC (Land Transfer) For physical maintenance of the base Can continue beyond EDC date Net Rental Income (Existing Military Housing) Obtain interim lease concurrently with Caretaker Agmt. Procure a property manager ASAP!
Planning & Predevelopment Economic Development Conveyance (EDC) “Seller Financing” Leasehold, converting to fee/deed of trust Negotiate hard on this!!! (economic/environmental risks) Asset-backed Credit Line (Rental Housing), after EDC Preliminary, capitalizable predevelopment costs To be “rolled over” into other financing
Trunk Infrastructure Development Tasks (Uses of Funding): Engrg. and cost estimating for base-wide infrastructure Streets/roads Utilities Demolition of structures in rights-of-way Construction of the actual infrastructure Financing Sources: Grants (e.g., EDA, municipal matches) Revenue Bonds (payback pledges) Overall Finance Plan MUST be in place now
In-Tract Land Development Tasks: Development of each neighborhood w/in reuse plan Deliver finished lots/superpads to vertical developers Streets w/in neighborhoods, alleys Utility supplies and distribution Financing Sources: Real Estate Loans Draw Loans Revolving Lines of Credit Reinvestment of accumulated earnings (later)
In-Tract Land Development--Pricing Developed neighborhood (land) should absorb and cover: The cost of the land Its share of overall trunk infrastructure costs Its direct in-tract development costs Transaction-specific costs, depending on each deal Its share of financing costs Its share of departmental overhead All should be incorporated into property pricing for private builder/developers.
Vertical Development (if applicable) Much more complicated to manage than land development More product liability than the entity is comfortable with? Financing Sources: Real Estate Loans Draw Loans Revolving Lines of Credit You’ll need equity in the land
Parks, Open Space, Public Amenities Non-revenue generating = Limited revenue bond financing Parks, Open Space, Schools, Demolition, Environment Financing Sources: Tax Increment Revenue Bonds Property Tax Base is ZERO!!! Issued by one of several entities Local Redevelopment Authority City/Other Urban Renewal Authority Local Improvement District
Other Challenges “Transitional” (Homeless) Housing/McKinney Act Allocate Property Buy out Affordable Housing Subsidy likely needed Environmental Surprises Slow military response Remedy with Privatization/Insurance Public amenity financing should include flexibility/ prioritization for problems
Opportunities Profit sharing with builders Tap fees Impact fees City subsidies Marketing fees from builders Recycling asset values for revolving credit Define dept. operations so they can be financed, especially in formative years
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