Page 114 - Beyond Decommissioning

Relevant factors for redevelopment 95

It has been noted that to receive bank loans for adaptive reuse projects appears often
difficult. Banks tend to regard these projects as having a higher risk. To offset the
higher risk, developers are often required by the banks to budget for potential reme-
diation costs (environmental claims, unexpected contamination, etc.) before a loan is
granted.
Sources of funding change over time—eligibility rules, financial conditions (e.g.,
interest rates and reimbursement dates), output requirements, cash flows, etc. There-
fore, it is vital for the developer to stay in touch with the funding bodies and get timely,
up-to-date information about any forthcoming changes.
Where a mix of funding is needed to get a project started and seamlessly managed it
will be vital to prepare a fund raising strategy including a realistic schedule of funding
availability. Sometimes, one funding source will be contingent upon another to make
sure that the project works. Securing at least one reliable lead funder at an early stage
of the planning is critical.
Cash flow management will be also important as funds are normally drawn down in
arrears and in some cases funds can only be drawn down up to specified proportions on
particular dates of the year.
A related aspect is the need to provide information about the project progress to the
funding bodies: reporting requirements can be significantly different for single bodies.
Many funders impose formal monitoring arrangements on the recipient, which will
require extra work to plan for, gather, summarize, and report information according
to predetermined formats and at stipulated hold points.
According to Sugden (2017) there is no algorithm to determine if the adaptive reuse
of a given structure is more profitable than to demolish it and construct a new one.
Three major factors are identified in this study that affects the economic outcome
of adaptive reuse:
1. construction costs;
2. the total area of the building which determines the leaseable or sellable space of the structure;
and,
3. the estimated value of the property.
A new trend came to light recently in London, but it may precede broader impacts.
Given the extremely high housing prices and the profitable returns on housing invest-
ments, and the nation-wide and municipality’s policy discouraging the use of green-
field lands for new builds, a number of industrial establishments have been expelled
from London over the last 10 years and high-rise buildings have taken their place. This
environmental change, although consistent with the general replacement of industries
by services in developed countries, has resulted in a significant social impact. An
economy that provides a good share of London’s jobs is being chocked.
The rate at which London loses its industrial land is supposed to be a carefully man-
aged process, with strategic assets abandoned only after due consideration of projec-
ted supply and demand. It has been estimated that over the last 7 years, London has lost
industrial space at almost three times the planned rate, with more than 600ha turned
into other uses. The conversion process has been much facilitated by the extension of
“permitted development” rights, allowing the change of use without planning