Developers, Shoup, Banks, and Catch-22

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Developers, Shoup, Banks, and Catch-22

Here’s a take I hadn’t considered: What if banks wouldn’t loan on a development if the number of parking spaces didn’t meet the industry average, EVEN IF the local zoning requirements had been removed and the number wasn’t required. Read all about it here

It seems developers are being caught in a Catch 22. Cities are following the lead of Shoupistas and removing parking requirements on development to assist in getting new buildings going in downtown areas. This helps in development, and certainly in attracting “sustainable” businesses into the areas. It makes sense in every way, until the developer goes to get his loan from the banks.

Here’s the banker’s quote:

“We’re not going to make a loan without getting comfortable with the parking element and the parking strategy,” explains Michael Morris, executive vice president of real estate for Zions Bank.

Other factors besides parking ratios also play a role, he says, including the overall economy and the mix of equity and debt.

Construction lenders could be “flexible” and approve transit-oriented projects, Morris says, so long as long-term lenders are content. But he predicts parking at housing units, regardless of location, likely will remain a premium.

“I don’t know if public transportation or fuel efficiency or the green movement is going to change that in the near term,” Morris adds, before pausing. “As a corporation, we’re open-minded and will participate in the dialogue. And we’ll do what makes sense.”

Sure, it sounds like they can be “flexible.” But just show up with a number of parking spaces that doesn’t meet their requirement and see what happens.

Think about the problem with housing units – By reducing the number of required spaces, the developer can unbundle parking from the building and lower the cost for housing. People who live near their work can forgo a vehicle, and all is right with the world.

Not going to happen if banks have their way. The article goes on to say that cities and developers are in an ongoing educational process with banks but it is slow.

Just another problem in dealing with the recession, development, and financing.

JVH

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John Van Horn

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