Retaining Green Benefits in Troubled Projects

1
Retaining Green Benefits in Troubled Projects

• Presented By
• Sblend A. Sblendorio

2
Attractive Green Entitlements

• Projects receive special benefits from green
  attributes
• Numerous green projects are distressed -- as are
  numerous retail projects
• Special benefits have value
• Municipalities remain willing to preserve green
  attributes

3
Attractive Green Entitlements

• Reduced impact fees
• Frozen impact/processing fees
• Expedited building permit process
• Streamlined environmental review
• Financial incentives tied to green attributes
• Caps on carbon tax or exemptions from carbon tax

4
Vested Rights in Green Entitlements

• General plans, specific plan, and zoning do not
  grant vested rights
• Municipalities can change zoning
• Permitted construction can vest entitlements to a
  limited degree
• Development agreements are best solution for
  vesting entitlements

5
Development Agreements

• Common in California and other states, but may
  have different name
• A contract between the municipality and developer
  that vests entitlements and special benefits
• Cannot be changed unilaterally by future
  decision-makers
• Can live for decades

6
Development Agreements

• Vested entitlements lock in value of special
  benefits
• Rights can be acquired through purchase of
  project and assignment of vested entitlements
• Acquisition through bankruptcy has its advantages

7
Bankrupt Projects

• Distressed means cheaper
• Liabilities (liens) may be stripped away
• Lenders more negotiable
• Subject to open auction
• Lead bidder has advantages (break up fee /
  bidding increments)

8
Assumption and Assignment of Vested Entitlements

• Needed for development agreements
• Applicability of Section 365 of the Bankruptcy
  Code
• Development agreements are executory

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Assumption and Assignment of Vested Entitlements

• Curing of any breaches of development agreement
• Consent of municipality
• Tax allocations
• Rebuild relationship with municipality

10
Sum Up

• Distressed attractive projects with generous
  entitlements based upon green attributes
• Acquiring through bankruptcy can turn project
  into a winner

11

• Sblend A. Sblendorio925.224.7780
  sas_at_hogefenton.com
• Byron F. Mellberg408.287.9501
  bfm_at_hogefenton.com

Silicon Valley Office 60 S. Market, Suite
1400 San Jose, CA 95113
Tri-Valley Office 6155 Stoneridge, Suite
200 Pleasanton, CA 94588