Lenders perceive greater risk in mixed-use developments than in single-use developments. This perception is reinforced by how investors evaluate mixed-use projects. Another source of risk is uncertainty about approvals in existing areas, where public opposition can sometimes block a project. Finally, greenfield mixed-use developments face two types of risk: financing for mixed-use, and the lack of an established base of residents to support planned retail.
By reducing the risk perceived by lenders, local governments can it easier for developers to secure investment in green neighborhood developments. Options for doing so include:
- Enhancing public support: Engage the public in learning about benefits of green buildings.
- Streamlining approvals: Streamline the development approvals processes for green neighborhood projects to reduce development costs.
- Accessing long-term investors: Work with state governments and others to link long-term investors such as pension funds with developers of green neighborhoods.
- Encouraging fair risk assessment: With investors and state and federal officials, explore ways to assess risk for mixed-use developments more fairly.
- Providing patient equity: Take part in development financing through provision of patient equity from investors willing to see most of their returns in the medium- to long-term.
An example of patient equity:
The redevelopment of Albuquerque’s Century Theatre Block acted as a catalyst for downtown revitalization. The local government's Historic District Improvement Company (HDIC) contributed patient equity in the form of cash, land, structured parking, and developer fees. These balanced shorter-term investment within the development budget, making the project viable. The Theatre Block opened in 2001.
