CPN - January 2009 - (Page 20) INDUSTRY PULSE DEVELOPMENT Attitude Adjustment Developers Adopt New Strategies to Move Forward in Tough Environment By Eugene Gilligan s the credit crunch choked off funds for development and the recession reduced the need for new buildings, 2008 proved to be a tough year for developers. But some managed to carve out continued business. Atlantic Development Group L.L.C. co-founder & principal Peter Fine used a sports analogy to describe how his firm kept busy. “Our company is like Dustin Pedroia,” the diminutive but ultraproductive Boston Red Sox player who was recently named the American League’s Most Valuable Player. “We’re like the solid second baseman who hits .310.” Many developers will face a challenging environment in 2009, as well, but the strategies of those like Atlantic Development provide tactics to drive business. Some developers have achieved deals by sourcing capital more creatively, and others have devised new targets to stay active. Still others have benefited from serving as key participants in community revitalization projects. Non-residential development activity in 2008 was “holding up A Corp. is also looking well” until September, for opportunities when activity slowed to step into trousignificantly in the bled projects that wake of the governmay require development bailout of Fannie ment expertise, said Mae and Freddie Mac CEO Marty Collins. and the collapse of That means that the Lehman Brothers Inc., breadth of services according to Kenneth that the firm typicalSimonson, chief econly brings may not be omist for The Associatrequired, as these ed General Contracprojects are already tors of America. A under way. But workgood number of develing on them could opments, whether in be a way for the the planning or cefirm to strengthen ment-pouring stage, existing relationwere put on hold in ships with partners the fall, added Ray Developers are seeking unique capital sources. Key Real Estate and to forge new Quartararo, internation- Development’s 396 Alhambra office building, rising in Downtown ones, Collins noted. al director & Northeast Miami, will nab $130 million in equity financing from Grupo JB. The company is regional manager for ment, which specializes in afford- also using this time to plan and Jones Lang LaSalle Inc. Simonson expressed little able and market-rate housing in obtain entitlements for future optimism that 2009 will bring a New York City, is managing a con- projects. “We work on projects high level of development activi- struction pipeline of $500 million in fairly high-barrier-to-entry ty, observing that “the chill is worth of residential and mixed- markets, and getting entitledeepening.” And Quartararo use projects and recently locked ments can … take two to three noted that confidence and capi- in $62 million in construction years,” he said. “This is a great tal must begin flowing in a differ- financing for a 156-unit residen- time to be doing that.” In today’s capital-constrained ent direction in order to kick- tial and retail development in environment, particularly proManhattan’s Bowery district. start development again. The firm’s conservative ap- nounced for development, findNonetheless, Atlantic Developproach has stood the company in ing new avenues for capital also Crystal Ball good stead during this turbulent helps. In December, 396 Alhamtime, Fine said. “We are long-term bra L.L.C., a joint venture The credit crunch and the recession have made development more challenging, players, we hold on to everything between Alhambra Investors but many developers, rather than folding up their tents, are looking for opportunities we build and we put a lot of equity L.L.C. and Jose Cuervo Group to expand their businesses. into our projects,” he explained. affiliate Agave Florida Investors Companies of every stripe are constructing more complex Web sites, and Conservative underwriting is also a L.L.C. for example, announced KDC will actively seek to acquire data centers in low-cost-of-energy cities, according constant on its projects,as the com- that it would build a $130 milto CEO Steve Van Amburgh. The firm will buy centers that come with excess land pany bases its pro formas on rents lion, 15-story office tower in for expansion and then lease each to one to eight clients. that are at or below market value, Coral Gables, Fla., and refurbish Healthcare real estate services firm Lillibridge sees fruitful opportunities in greena vacant seven-story office he added. field development. “Hospitals and healthcare systems are looking to expand into Atlantic will proceed with tower that once served as the outlying areas with population growth, where the hospital could put a free-standing medical building,” said senior vice president John Montgomery. “Hospitals are looksome affordable housing projects Latin American headquarters of ing to build facilities that are not on their main campus.” in 2009 and may also find some Exxon Mobil Corp.The affiliate Affordable and market-rate housing specialist Atlantic Development Group L.L.C. of the Jose Cuervo Group, peropportunities to step into broken will stick with residential development, said principal Peter Fine, though the compadevelopment deals, whether as haps best known in the United ny may expand into markets beyond New York City; he named Southern California an equity partner or to buy debt, States as a maker of tequila, is as a possible target. providing any additional capital Fine said. With a focus on building planned communities in rural areas near large military needed to complete the project bases, American Dream Development sees potential in seniors housing, said presion top of an acquisition loan BUILDING RELATIONSHIPS dent Jeff Burton. “With their stock portfolios going down and housing values falling, With expertise in developing from HSBC. more seniors may stay in their homes. Some developers may get out of seniors Agave Florida has overseen hospitality-centered, urban mixedhousing, but long term, it should be healthy.” use projects, Gatehouse Capital the development of 1 million COMMERCIAL PROPERTY NEWS • January 2009 • www.cpnonline.com 20 http://www.cpnonline.com
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