Originally Posted by
mikeg19
There are several things in this statement that I want to know:
1. Why the Hell aren't banks, financial institutions seeing the potential in these buildings downtown to house this next generation of younger, tech savvy worker that wanna live in a city center, and make it a bit easier to float the loans for these redevelopments?
Because historically banks do not finance speculation they are used after the building is purchased with alternative funding. Banks base loans on the market value of a fixed completed project.Alternative funding is based on ARV or after repair value usually according to a percentage of the speculated value once it is fixed say for instance 60% or what the property would sell for in an immediate fire sale should the project go belly up for some reason.
Which would then leave the remaining 40% needing financed that is where the brown-field and other incentives would come in which infuses the added cash into the project to either account for the properties currant lack of value or give the person that is sponsoring the project some skin or investment into the project.
In the past it was really a matter of basically if you have a good project the money was flowing and funded because the cost of real estate was going up so fast not so much any more.
So now what is needed is if you have a building that is say ready to move into you would find tenants that would be interested and have them sign a tentative lease agreement before the deal is done it proves to the funding partners that it is indeed a viable risk.But that in its self is not so easy to do when you do not have control of the property.There are ways around this if the property owner is per say motivated but it seems as though motivated is not in some commercial property owners vocabulary in Detroit.
2. Is Snyder's proclamation that the tax credits that many of these developments use [[Broderick, Whitney) will either be slashed or eliminated scaring off potential investors or banks to get these projects started?
[I]Yes and no he is picking winners and losers ,he did not have a problem giving GE $43,000,000
after the fact to place a solar assembly plant employing 200 in Ann Arbor,but anybody that knows anything about solar production knows that the plant being built will not be able to produce at the level that is needed for profit ,so he basically funded a tax loss write off for GE at taxpayers expense.
But yes the cuts are having a direct impact and as we are really a global ecomeny and other cities and states are still offering the incentives without the internal pissing contests, it does not matter how cheap the property is it boils down to location location location sometimes it is better to pay a bit more for a better return as everything is relevant.
[/I]
3. Are the prices being asked to live in downtown not "fair" enough to draw in more people thus driving up the demand? Considering a young professional such as myself doesn't want to pay $1200 a month plus all my other expenses just to live downtown. It needs to be reasonable.
Rates are based on supply and demand currently it costs money to purchase and rehab buildings which is repaid by collected rents if you cannot repay based on $600 per month rents it is not a viable project ,if the total costs demand $1200 a month to pay back the note and create a surplus for future repairs and the average rental is $600 well then it becomes a dead project.
4. What ever happened to the Key Group in regards to the planned renovation, greening of the Book building/Tower? Their website says nothing.
Pure speculation on my part but I would guess based on what I described above they may have acquired the first round of funding for the actual "take down " of the property or the purchase which gives them more leverage for future funding requests and now because of fluid market conditions they may have stalled on phase two of the funding who knows and I am just guessing but it is a possibility,and the funding process in itself can be a long endeavor .
5. Can we all live in imagination land for 10 seconds and imagine the Ponchatrain, Book Tower, Broderick, Whitney, UA Theatre, Stott Tower, and all of Merchants Row packed with residential/commercial space at 95% occupancy? I honestly don't think that dream is too far off at this point, which would have seemed insane to merely suggest that 18 months ago.