Sunday, November 30, 2008

50 Reasons to Dislike a Multifamily Project - Neighborhood Issues

Back in the early 1980’s I was a hatchet man for a multifamily lender that had a full pipeline but didn’t want to do any more business. My job was to review the loan request, visit the site if necessary, and find a way to kill the deal without getting sued.

I quickly learned this was a surprisingly easy task; there are few multifamily projects that don’t have flaws. Over the years I’ve refined the list, and I’ve settled in on 50 factors, which I’ll itemize in the next few posts.

Obviously, if you view all 50 as deal killers you’ll never make a loan. In fact, there are just a handful I would consider extremely important. The others are listed because there is some logic to the objection, and in combination with other factors may be a good reason not to do a deal.

This post deals with issues in the neighborhood. The first two issues are very important because they substantially reduce potential tenant traffic. The others on the list might offend some tenants, but probably not enough to substantially affect a project’s success.

Issue Comment
Lack of proximity to shopping, employment, services, freeways, transportation Tenants prefer easy access
Derelict cars, abandoned furniture, shopping carts, tagging, trash, poorly maintained properties Tenants prefer a well maintained orderly environment
Airport flight path Noise
Railroad lines Visual, Noise, Safety
Transmission lines Visual, Health
Pipelines Safety
High traffic streets Traffic, Noise, Safety
Landfills, wastewater treatment plants Visual, Health
Electrical substation Visual, Health
Manufacturing/distribution facilities Visual, Noise, Safety, Traffic
Pawnshop/pornography stores, etc. Visual
Stadiums, Playfields Traffic, Noise, Disorder
Schools Traffic, Noise, Disorder
Churches Traffic, Noise
Bars/Taverns Noise, Disorder