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Sunday, 17 March 2013 22:00

Role of incentives

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That’s placed incentives front and center on most projects, say developers, brokers and others connected with the industry.

Luckily, municipalities and rural communities alike have been open to new developments, even if just to help rebuild their tax base with new revenue, said Patrick Lennon, partner at the Kalamazoo office of law firm Honigman, Miller, Schwartz & Cohn LLP.

But brokers and developers say the process of applying for those incentives, including the state’s new Community Revitalization Program and Brownfield Tax Increment Financing, can be a tedious and drawn-out endeavor.

Most often these incentives are crucial to getting urban projects off the drawing board.

That’s certainly not news to John Wheeler, partner and vice president of business development for Orion Construction Co., a veteran of development projects in West Michigan and across the state. The key to piecing together projects, he said, is to approach development by filling a need, not creating a want. To that end, there are widening opportunities for office and residential development in urban settings, he added.

“Urban entertainment and living are going to take off and market-rate residential downtown is really underserved,” he said. “If we don’t provide some relief, we’re going to miss out on some good companies and employees.”

One problem with building new developments is that construction costs are a huge burden that developers would need to recoup via high rental rates. That’s where the incentives are supposed to come into play as bridge financing.

“(The incentives) should reward good development and bring not so good options to a minimum standard,” Wheeler said. “The whole idea is to create employment, not welfare for developers.”

Incentives like the Community Revitalization Program need some tweaks, Wheeler said, but for the most part when developers need resources, the MEDC and other government partners do what they can to help.

Grand Rapids-based 616 Development is another company well-versed in using incentive programs to make projects work, said President Derek Coppess.

While much of the support for 616 Development’s projects comes from a revolving stable of investors, the company takes the same relationship approach in working with city and state officials as it does with investors.

“Nothing’s perfect and it’s going to be a little clunky, but at the end of the day, we’re so focused on upward and forward and we just need to evolve like any business in a changing market,” Coppess said. “Do what you say you’re going to do, follow through and (partners) are probably going to want to work with you again. Don’t be a pain in the ass. That’s the gist of it. If you can build a mutually beneficial relationship like that, you can do a bunch of business together.”

Coppess said the demographics of his investor group seems to be changing from older investors to new, younger investors for projects. Along with that shift comes a new investment philosophy.

Read 86906 times Last modified on Monday, 18 March 2013 07:53

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