Currently working on a case study where a big box retail site was acquired with a massive environmental issue that will cost $40M, or $1M per foot of depth to remove enough contaminated soil to bring the site to street level grade. Additionally, there is a proposal to redevelop the site for $74M, exclusive of the environmental issue, into a new experiential open-air luxury retail center that would command above market rents. One of the questions asked is "are there any creative financing vehicles that the Fund could consider using in conjunction with a first mortgage to improve the redevelopment scenario returns?"
Only thing I have thought of is a mezz/pref equity piece...are there any additional "creative financing" vehicles available to developers that help improve returns?
Developers also like to use PACE financing. PACE rolls the payments into the utilities so its non-foreclose-able with 15-20-year amortization. Unsure on it's ability to be refinanced out of, but definitely an interesting avenue we're seeing more and more developers utilize when Lenders won't go higher in the cap stack due to LTV/LTC covenants.
So essentially taking a loan out on a clean energy project that is an improvement to the existing buildings? i.e any clean energy investment (solar, energy/cooling efficiency/water-saving landscaping)?
It's a special assesment, like a property tax lien. It can't be accelerated but they can force a sale if you get far enough behind. Lenders hate it because it sits in front of their 1st mortgage so you get screwed on your rate and LTV.
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