Commercial Real Estate Finance

One of Philly’s own was featured in a NY Times online piece yesterday.  Bart Blatstein, a Philadelphia developer well known for his retail projects, was featured by the Times for Tower Investments’ work in the Northern Liberties.  The Piazza at Schmidts, Blatstein’s well-publicized mixed-use development, is an example of creative redevelopment in unassuming space.  Developers on the hunt for deals know how hard it is to find a deal with strong economics in this environment.  I remain convinced though, that the developers who are able to be the most creative in reusing space will be the most successful through the current downturn.

The highest and best use may not always be apparent.  But don’t let that deter you from taking a hard look at deals.  Who would have thought that a fairly nondescript area in Northern Liberties could be transformed into a neighborhood that is not only trendy to hang out in, but a place where people actually want to live?  Philly is probably one of the best markets for re-use projects.  Of course, financing is not always available for projects that are not obvious.  But remember, while cost-basis is not everything, it certainly means a lot for an opportunistic equity partner.  If you can show a strong track record of successful re-use, you’ll be surprised to see the response from equity partners willing to participate on quirky deals as long as they can buy it for peanuts.

To take advantage of creative re-use projects, you have to adopt a contrarian way of thinking.  I don’t know what level of competition Blatstein faced in 2000 when he bought the Piazza land at auction, but I’m willing to bet competition wasn’t very tough.  Otherwise, Blatstein probably would have walked away from the auction.  Competition probably wasn’t very tough because no one wanted to be in that area, much less own it.  This is where a contrarian vision comes into play.  Sometimes, jumping on a good deal in spite of knowing where the deal is headed requires you to swim against the current.  If there was ever a time to get creative with redevelopment projects, now is that time.  Yes, there will be some developers who get burned in moving against the tide, but there will be others who get written up in the NY Times 10 years later because they saw an opportunity for creative re-use when no one else did.

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