Monthly Archives: December 2018
Let’s explore land development strategies for getting the best result with the least pain. Rest easy… I’m not writing this to persuade you all to retain my firm for your design, engineering, and land development needs (though I wouldn’t mind, and my contact information is provided)! But since I’ve been around the block long enough to see even savvy business people get hurt by the convoluted, unpredictable, costly, and sometimes unfair world of land development, I feel compelled to share my experience and offer some advice to help others avoid the pitfalls and heartache of such a process.
Despite the perception that land developers are all super-wealthy and greedy, I’ve seen development projects get caught-up in litigation for years, at an expense of millions of dollars, for deals that marginally make financial sense, yet provide a needed service, housing, or economic development opportunities for the community. I’ve seen deals that die (and orphaned properties languish in the process), because a developer was denied access to certain incentives that might render a project feasible, all because he/she is perceived to have “deep pockets”.
But more impactful to me as a professional, I’ve seen many that do not have the experience, knowledge, and expertise in land development strategies get themselves in substantial trouble by either not conducting the proper due-diligence, overpaying on property because of ignorance of value, or listening to poor advice. These are not the big developers that we all know and love (or hate), but the small business owner that is fortunate enough to expand a business and now needs to add to his/her facility or even open at a different location. This could also be the franchisee who wishes to operate a retail or restaurant establishment that knows their business well, but is understandably clueless when purchasing and entitling property, and/or seeking capital.
It’s certainly true that no two deals, properties, or situations are ever the same in real estate, but I’ve enumerated several general things to consider when deciding whether or not to “take the plunge”, and also things to be aware of once the “go” decision has been made.
Many of these are more specific to smaller deals and the “non-developer”, but many are also attributable to the larger owner/investor/developer as well:
Land Development Strategies #1.
Understand your true needs… You’ll need to take stock in what you and your organization or operation truly need in terms of space, acreage, accessibility, geography, exposure, proximity to skilled workforce and other resources, etc. Attention must also be paid to future expansion plans based on growth strategies. Only after this is clarified to yourself can it be made clear to your broker, consultant, investors, capital resources, etc. If developing property for investment purposes, your goals are already likely in place…maximize property and get the best possible returns! Read on, as many of the following will resonate for you as well.
Land Development Strategies #2.
Seek assistance as you source property for your program… This one’s easy, as everyone reading this already knows who is the best broker and real estate advisor in the Delaware Valley. Still, there’s no reason not to ask others you trust on issues such as market conditions and trends, property values, likelihood of success to secure entitlements, local government intelligence, etc. Additionally, make certain that the site meets your physical criteria, such as ingress, egress, circulation, parking, loading, building location and orientation on site, and the ability to promote your brand and/or operation.
Land Development Strategies #3.
Understand the challenges and constraints of a property you’re sourcing… There are numerous things to consider under this heading. First, you must know the property’s zoning designation, and how to interpret it’s meaning relative to permitted uses, density, height, number of stories, parking requirements, etc. These things are not only public policy and matters of law, but also make sense for you… Who wants to build a new manufacturing facility next to a group of single-family homes, a high rise commercial building near a horse farm, or build homes next to a nuclear power plant? Beyond zoning, you must also be aware of the local political climate and fervor, and assure that any “Not-In-My-Backyard (NIMBY)” issues are innocuous and easy to deal with. Quite frankly, I’ve found that if a municipality clearly doesn’t want your development or project, even if the zoning is appropriate, sometimes it’s better to not even start down that path and select another location.
Land Development Strategies #4.
Assess, Manage, and Mitigate Risk… When developing property or expanding a facility or operation, you must pay attention to the following general risk categories:
a.) Environmental Risk
b.) Market Risk
c.) Entitlement Risk
d.) Finance Risk
e.) Construction Risk
All of these can be daunting to the real estate neophyte, and downright dangerous if proper due-diligence isn’t undertaken. However, with the proper consultants, these risks can be understood, identified, quantified, and mitigation strategies can be implemented. Make sure these risks are understood before “hard money” deposits are released to Seller, as the costs associated with these risks are commonly grounds for negotiating purchase price.
Land Development Strategies #5.
Understand property’s value, and DON’T OVERPAY! There are a few methods to determine the fair price that you should be paying for property (sale or lease), but don’t be pressured to accept a price that doesn’t work for you. Chances are that if a price doesn’t pencil-out as you evaluate a deal, it won’t work for other interested parties either. Many times, a rejected offer comes back, and you might find yourself back in driver’s seat a month or two later, and at your number.
Land Development Strategies #6.
Understand all documents you execute… Many savvy business owners, operators, and land developers can review documentation for “business terms”, but I recommend also having your attorney review for “legal terms”. This can include Purchase and Sale Agreements, Option Agreements, Partnership/Operating Agreements, Financial Agreements, Leases, Developer Agreements, etc.
Land Development Strategies #7.
Understand available programs and grants that may apply… If developing property, there may be property tax incentives and other programs to help the deal’s proforma, which can make an otherwise lean deal become more sensible. There are several other grants and programs available for those looking to simply expand their business, based on your positive impact on the community and job creation/retention. The flip side to this is just as important… if not vigilant, a town may impose unfair fees on your project, such as impact fees, off-site infrastructure improvement costs, and funds for affordable housing and others. Again, make sure you’re aware of these, and have your attorney review any documents that memorialize any negotiated impact costs.
Land Development Strategies #8.
Hire the best team of consultants possible… There are numerous strategies to accomplish this goal, and some may have better results than others on a deal-by-deal basis. For instance, many say to retain a local and “connected” land-use attorney to advance the project through Zoning and Site Plan Approval process. I agree in some cases but not others. If your project requires these types of land entitlements, it is imperative that you retain consultants that not only have experience in their specific disciplines, but their expertise must be specific to your project, your program, and with the types of entitlements required. These consultants consist of the land-use attorney, architect, civil engineer, professional planner, landscape architect, traffic/transportation consultant, environmental scientist, wetlands specialist, real estate valuation expert, market research specialist, and others based on specific needs of the deal. It’s also imperative to have a single “quarterback” run the process. For more experienced and savvy developers, this is usually someone in-house (or the principal him/herself). Sometimes it’s the attorney, and sometimes it appears that NOBODY is truly steering the ship.
These considerations are generic in nature, but I’d be delighted to elaborate on these and other deal-specific strategies to assist getting your project or development deal to the finish line. Best of luck to you all on your future growth, expansion or development plans.
Alan S. Brandies
VP Client Relations and Business Development
Jarmel Kizel Architects and Engineers
42 Okner Parkway, Livingston, NJ
Jarmel Kizel Architects and Engineers is a full service and uniquely diversified consulting firm, specializing in architecture, planning, interior design, structural engineering, civil/site planning, and MEPF services, serving building owners, developers, facilities mangers, and end-users. We are active in many sectors, mostly focused on multi-family residential, child daycare centers, corporate interiors, health and wellness, and others. We also possess decades of land-use and development experience, and offer full “Development Advisory Services”, including deal facilitation and entitlement management. Please visit our website for more information, and call Alan Brandies for more details.
With trade tensions escalating and interest rates in the national and Philadelphia commercial real estate market on an upward path, economists are increasingly warning the U.S. economy is in danger of slipping into recession in 2020.
While risks of an eventual national economic slowdown in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – are real and should not be ignored, Philadelphia-focused real estate investors can take comfort the region’s economic indicators are flashing positive signs for 2019 as the Philadelphia-Camden-Wilmington metropolitan area’s job gains have strengthened in recent months to a rate of 1.4 percent year-over-year.
This Co-Star Research report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
The industries powering Philadelphia’s recent job gains are:
Healthcare: In University City, Penn Medicine is now wrapping up construction on the first phase of its 540,000-sf Center for Healthcare Technology. Meanwhile, work continues at the healthcare giant’s largest capital project ever, the 1.5 million-sf Pavilion Hospital, which is expected to be completed in 2021. AmeriHealth Caritas, AmerisourceBergen and Sparks Therapeutics have all recently announced major Philadelphia-area expansion plans.
Information Technology: Philadelphia-based Comcast is in the process of hiring roughly 1,500 new employees as it staffs its recently completed Comcast Technology Center.
Distribution: Retailers and e-commerce firms have been on a tear building new distribution facilities in the region to expedite delivery times for their East Coast customers. Just weeks ago, Amazon completed a major distribution center in Burlington New Jersey expected to employ 600 people, one of five massive distribution centers Amazon has opened in the metropolitan area since 2013.
Many of Philadelphia’s largest publicly traded companies are flush with cash following the passage of the Tax Cuts and Jobs Act of 2017, which sliced the U.S. corporate tax rate almost in half. Over the most recent four quarters of business among some of the leading national and Philadelphia commercial real estate properties, top local employers – including AmerisourceBergen, Aramark, Comcast, and FMC – reported all-time highs in net operating incomes that more than doubled what had been collected during the preceding four quarters.
While the recent tax cuts affecting U.S. and Philadelphia commercial real estate listings are expected to add at least $1.9 trillion to the federal debt by 2028, according to the Congressional Budget Office, they clearly have boosted companies’ willingness to expand payrolls.
According to data from the world’s third-largest staffing firm, Manpower, the percentage of companies in the Philadelphia-Camden-Wilmington metropolitan area planning to increase staffing levels is at the highest levels recorded during this economic expansion. Meanwhile, the percentage of firms in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – planning to reduce their staff is near rock bottom.
Philadelphia’s employment growth could still decelerate in the quarters ahead despite local companies’ aggressive hiring plans. With the unemployment rate among national and Philadelphia commercial real estate listings now well below 5 percent, employers will likely find it increasingly difficult to fill many open positions.
On the spectrum of economic challenges, this is one of the less-threatening problems to face, in part because a tight labor market also supports above-average wage growth. Still, the dwindling supply of available workers was likely a driving force behind the brief slowdown in job growth that took hold here in 2017.
The stage is set for total employment to continue rising in Philadelphia through 2019. The question is how strong and how sustainable these job gains will be.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (email@example.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.
Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.
As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals. If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.
Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.
There are two big changes for solar in NJ for 2019 including the end of the SREC program and the start of the Community Solar Pilot Program. Let’s dig deeper into these changes.
Big changes for solar in NJ for 2019 #1. NJ SREC Program Ending Soon (Jan 2019)
The Solar Renewable Energy Certificate (or, SREC) is a key underpinning of the solar industry in New Jersey.
This SREC is an incentive offered to a solar installation on an ongoing basis as the installation generates electricity. Due to the rising cost of the SREC program, NJ passed legislation in May 2018 to phase out the SREC program. The state targeted to end the SREC program when solar achieves 5.1% of total state electricity – anticipated to occur around 2020. Since May 2018, the solar industry has responded by ramping up the pace of new applications submitted into the NJ SREC program. In addition, the state may determine that the 5.1% goal includes not only solar projects that have already been installed and operating, but also solar projects that are planned in the pipeline (red-line vs blue-line above). Based upon the current pipeline, the SREC program would achieve this 5.1% goal, not in 2020 as anticipated, but as soon as January 2019 (next month). The SREC program could close to new applications and planned solar projects would be in limbo.
What can you do?
Many planned solar projects are submitting applications into the SREC program now – ahead of the possible January 2019 closure. Typically, a solar project might submit this SREC application after some solar development milestones have been achieved (utility approval, town approval, financing secured). However, many property owners are submitting the SREC application in advance to secure SRECs. When the SREC reservation is secured, it is valid for 12-18 months without obligation. There is no penalty if the project is not eventually constructed.
The requirements to register for the SREC program are minimal:
1. Certification Form
2. Site Map
3. Executed Contract
If you are considering a solar project in 2019-2020, we suggest that you submit this SREC registration as soon as possible. Independence Solar can work with you to register a project without committing to an obligation to undertake the project.
Big changes for solar in NJ for 2019 #2. NJ Community Solar Pilot Program Starting Soon (Feb 2019)
NJ will start a Pilot Community Solar program in February 2019. For property owners, this new program may now make solar feasible on sites where solar did not previously make sense. Under Community Solar, projects can be sited centrally (for instance on a landfill, brownfield or large rooftop) and the power can be connected directly to the electric grid. Previously, this exported power would be valued at wholesale rates ($0.03 – $0.04 per kWh), but under Community Solar, the power would be valued closer to retail rates ($0.08 – $0.10 per kWh). Community Solar directs credits from this power to low and moderate income households or to renters that could not otherwise benefit from solar energy. The goal of Community Solar is to distribute the savings from solar energy more equitably.
For property owners, the take-away is that the underlying electric bill at a property is no longer relevant and sites with no electric bill could now be considered for solar energy. The following sites might now be viable for solar energy:
• Large Rooftops (> 100,000 sf)
• Land parcels (>10 acres)
Independence Solar is currently collaborating with the NJ BPU to craft the requirements of the Pilot Community Solar Program. Please contact us if you would like to explore if this new Community Solar program could create value for your site or property.
For More Information about these two big changes for solar in NJ for 2019, Contact:
President & Founder
1008 Astoria Boulevard
Cherry Hill, NJ 08003
Keith Peltzman is president and founder of Independence Solar with offices in Cherry Hill, NJ and Boston, MA.
Independence Solar is a turnkey installer of commercial solar energy. Since 2007, the team has developed and built over $200 million of solar projects, including the largest rooftop solar array (9 MW) in North America at the Gloucester Marine Terminal in NJ. Independence Solar forges long-term partnerships to maximize returns on our customers’ solar energy investments.
Let’s look at some of the NJEDA small business financing programs. The New Jersey Economic Development Authority (“NJEDA”) is an independent state-level financing agency providing various programs and services that support business growth and expansion in New Jersey. NJEDA small business financing focuses on job growth and retention, making loans more accessible to business, and reducing risk for banks while administering several incentive programs that support job creation and real estate development.
NJEDA Small Business Financing Programs
The NJEDA menu of programs including small- and medium-sized business financing programs that assist with real estate acquisition, fixed assets, and working capital. Three programs in this category are the Premier Lender Program, Direct Loans, and the Small Business Fund.
NJEDA’s Premier Lender Program provides up to $2 million in loan participation to supplement financing from banks for fixed assets. NJEDA may also provide loan guarantees of up to $1.5 million for fixed assets. Funding is limited to $65,000 per job created or retained within two years, with 100 percent loan to value for real estate and 90 percent for equipment.
The program makes it easier for businesses to qualify, creates blended terms, and reduces bank risk. Direct Loans also provide up to $2 million in financing, limited to $65,000 per full-time job created or retained within two years. Businesses located in targeted urban areas, regional centers, and metropolitan planning areas may apply for up to $3 million. NJEDA may also approve loans for working capital of up to $750,000. Direct Loans rates are the higher of either the five-year U.S. Treasury or two percent.
The Small Business Fund focuses on creditworthy small, women- and minority-owned businesses in New Jersey. Businesses that have been in operation for at least one year are eligible for up to $500,000 in fixed-asset or working capital financing.
Not-for-profits in operation for three years are also eligible to apply for this program. These financing programs are just a few of the full menu of NJEDA financing and incentive programs available to business.
In 2019, look for a greater focus on small business with a few new NJEDA small business financing programs as Governor Murphy’s administration implements their goals to develop the state economy with an emphasis on small business, innovation, and technology.