Quote:
Originally Posted by Hamilton
711 Montgomery suffered the same fate as the other St Peter's project. The site for 55 Jordan was demo'd a few months ago, but no activity since then.
|
Thanks for the info Hamilton. This is why I get frustrated when I hear NIMBYs and others here saying the city is giving away the farm to developers. The truth is real estate development is a very risky business. A developer can purchase land and spend millions on architectural and engineering fees yet still has to worry about not being granted approval to construct an as-of-right building. We've seen recent successes by developers when the city pulls arbitrary and capricious acts, but there's still legal fees and added interest to the delay in the development timetable that the developer will usually have to eat.
On top of that, we're now learning just how cautious the construction lenders are. They're taking a hard eye on development budgets and pro formas. Because they're not going to lend money unless they have a near guarantee they'll be repaid.
There's maybe 20 or so developments alone in the Journal Square/McGinley Square area that have received site plan approval, but have not yet broken ground probably due to financing. Site plan approval is only good for two years if I recall correctly, and many are starting to approach that deadline. There's some serious issues.
Either we find a way to make it less risky/expensive to build or pro-forma rents need to go higher in order to justify the higher risks from the lenders perspective. I now understand better when I hear that being able to lease apartments at $50/sqft being thrown around as the magic number.
On a side note, this is also why affordable housing needs such an incredible subsidy. The unit cost is still the same as a market rent unit, but the loss of potential income must be made up elsewhere in order to attract construction financing from the lenders.
Without the financing, nothing gets built.