The current pandemic presents a wide range of challenges to the real estate development and construction industry. Uncertainty surrounding the duration of the crisis makes it hard for developers and owners to anticipate how a recovery could unfold.
While some have the means to wait and see what happens in the market, especially if they have several projects in the pipeline, others aren’t so fortunate.
As projects are cancelled or delayed due to the pandemic rendering their projects financially unviable, owners and developers must take a proactive approach to repurposing plans.
As you contemplate whether to repurpose development plans for a different use, consider the following construction factors first.
1. Lenders and Capital Markets
While real estate construction and development has been turned upside down, the impact may be felt the hardest in the capital markets. Deal flow in real estate has fallen at an unprecedented rate. This short-term volatility creates uncertainty for lenders who are seeing their liquid assets evaporate as a result of margin calls. Without working capital, they can’t issue new loans to owners and developers who are looking to build.
As we are actively working with the pre-eminent construction lenders and capital market investors, we are able to maintain a pulse on the ever evolving construction lending and investment landscape. A limited number of investors are looking at various project types and some have narrowed their focus to student housing and multifamily developments.
Building a relationship with us can help you reevaluate the intended use of your project to ensure proper financing and introduce you to the construction lenders and capital markets investors who are currently investing.
Next, you’ll want to take into consideration existing entitlements. These are required to develop a piece of land, but differ based on the type of real estate being constructed. You’ll also need to factor in the location when determining whether it’s possible to repurpose your project, as environmental approvals are required as a prerequisite for building permits.
Third-party research can help to validate the program of your repurposed project. Look at the data and compare it. Is it realistic, given the current design? How will the scope change? Will it make enough money?
We can help you determine the feasibility of the project and put together a realistic schedule and budget.
3. Financial Objectives
Finally, you’ll need to think through financial objectives. Make sure to ask the following questions when considering whether to repurpose a project:
• What has been funded to date? What will be funded in the next six to 12 months? Who is funding the project?
• What projects can be adapted or altered based on the current design (approvals, entitlements, etc.)?
• What repurpose plan will achieve your financial objectives? Consider the budget, schedule, development and return.
Asking these questions can lead to establishing a financial model for the entire project, and answer whether your financial objectives will be met.
Contact Us to Ensure Your Project’s Success
Are you considering repurposing a project? Download our Corporate Brochure to learn more about our services, and how CM&D’s experience can ensure your project’s success.