The growth of commercial real estate has been dramatic in the past few years. Development has become more prevalent in today’s economy and market.
How development occurs is through public-private partnerships (PPP). PPPs were created to allow developers more access to financial resources, which is what they use for construction.
Through PPPs, developers obtain financing from a variety of sources, including banks, credit unions, mortgage lenders, and property owners. All of these players work together to help produce a quality building that will generate income for the owner.
Since 2011, there have been over 140 commercial projects constructed using PPPs. These buildings range from small retail locations to large office complexes. Many of these projects were located in downtown Boston due to the abundance of space available.
How do public-private partnerships work?
When a developer wants to construct a new business, market, or educational institution, they negotiate space with another business, institution, or developer to collaborate on a site.
This happens for both commercial and residential projects. As part of the partnership, the corporate partner shares ownership and control of the site with the developer but maintains operational control.
Operationally, the operational partner helps plan and execute the project, including determining property layout and identifying necessary infrastructure. The operational partner also makes financial decisions on behalf of the developer, such as investing capital influxes from local or national sources.
Residential projects typically do not require functional land planning because there is enough room inside residents’ heads to create an adequate space-time zone between buildings.
Who are the players in a public-private partnership?
A public-private partnership (PPP) is an arrangement where a company works with a government or nonprofit entity to develop commercial real estate.
PPPs were created to help governments and businesses expand their infrastructure and capacity by having a large investment from a private sector company.
The government gets a large investment in commercial property and the private sector company handles the development, which can include retail, office, or residential space.
This is very important to grow our infrastructure as it helps get people and goods to and from locations, which is essential for business growth.
Who are the players in a PPP? When who plays what role in a PPP depends on where the development takes place. In most cases, companies work together with local governments as partners in the PPP process.
What is the process for developing a property?
When a developer wants to buy a property, they go through a process called site evaluation. This involves visiting the site to see if it’s suitable for development.
If the site meets the developer’s requirements, then they can go ahead and purchase the property. If not, they can reevaluate the property to see if they can make it suitable for development.
This process takes a few weeks or months and is rarely done more than once. Once it is determined that development is possible, the next step is site construction. This involves building an area on the site that will be used as development land.
What are some examples of public-private partnerships?
A public-private partnership (called a p3 partnership in this article) is a trusted third party that works with developers to assist with government and community projects.
Mostly found in special situations, where the developer needs extra funding to complete a project, a p3 can help by offering additional investment or help with regulation or procedure.
As with any third party help, there can be some challenges that developers must deal with, such as obtaining funding, developing an agreement between the parties, and then having the confidence to use a trusted partner.
Since development has become more complicated and demanding today, having the help of a p3 is highly recommended.
Are there any drawbacks to this method of development?
As the name implies, public-private partnership (PPP) indicates that private investment is used to help carry out a project. This private investment can come in the form of a loan from a bank, or an agreement where a developer agrees to devote a certain amount of capital to infrastructure and services for the project, such as rental income and/or property taxes.
The term public-private partnership was coined in the late 1980s and early 1990s when government agencies and large corporations worked together to develop new urban centers. At that time, there was no word associated with this concept, so an intermediary was needed to create an agreement between the developer and the government.
Today, public-private partnerships are used for almost all types of development.
Has this method of development been successful?
In most cases, the answer is yes. Private-public partnerships (PPPs) have their roots in the public sector, and have re-emerged in contemporary commercial real estate development.
PPPs were initially used in low-income communities where a lack of institutional support was a deterrent to regular investment. Today, they play a vital role in the overall economy by creating jobs and revenue for local governments.
In recent years, PPPs have come into mainstream commercial real estate development with notable successes such as The Peninsula at San Francisco and the forthcoming Union Square New York City Center. Both complexes are world-class destinations that attract large crowds every year.
This article will discuss some of the common roles for public-private partnerships in commercial real estate, and give some tips on how PPPs can be successful members of the team.
What does the future hold for public-private partnerships?
Over the past decade, the U.S. government has made a concerted effort to unleash private-sector innovation and engagement in public-private partnerships (PPP). This is part of its efforts to streamline capital access and economic development throughout the country.
Through Public-Private Partnerships, Small Businesses Get Financing ANGELES – Small businesses can get financing through PPPs, which are contracted partnerships between government and business. These financing vehicles offer small businesses an easier way to start or expand their business.
However, some argue that PPPs prey on small businesses because they do not have the necessary capital to launch their company. Another concern is that some companies use PPPs as a way to shirk federal regulations.
Resources
There are several sources of capital for commercial real estate projects. Most are chargeable to you, the customer, via loans or equity investments. Some require cash up front, but most do not until construction is completed.
Some require a debt-free environment before they offer a loan, and some do not. Most debt companies have a minimum amount they require before they approve a loan.
Some debt companies do not require a minimum amount of investment, but must be able to pay off their loans on time and with an acceptable interest rate.
