Citibank’s Destiny: Keep Funding Those Draw Requests

Audience question from my Eco Tuesday talk last night:

What are some of the challenges being faced by green project developers in today’s market?

Tough capital markets, along with soft economic and market fundamentals are creating adverse conditions for successful projects, green or not.  And tough conditions can also make bank and borrower relations turn pretty ugly.

Check out this Wall Street Journal article, detailing a legal street-fight between Citibank and the owners of Destiny USA, a green retail development in Syracuse, NY, currently under construction (again). It lays out the worst nightmare that can happen to a development and is happening more often — when a lender stops funding construction loan draws, presumably due to some violation of the loan documents.

DestinyUSA got a judge to force Citibank to keep the draw payments coming. The judge noted that Citibank’s reasons for halting payment of loan draws were not based upon any violation of the loan documents. He also said that Citibank was probably trying to conserve capital, even though it received TARP funding. Of course, Citibank has a completely different view of the situation.

And what was on the line for green development overall?

DestinyUSA has has announced many so environmental and social initiatives for its 1,000,000 square foot development, that  you can almost think of it as a test lab for retail sustainability practices.

Of course, the standard caveat for green development applies here –  we’ll have to see if this all really comes into effect as announced when the project is fully opened.

Nonetheless, their potential existence within a retail project would be a great leap forward for the greening of retail, as well as show the way for new work models that improve worker well-being.

Examples:

- LEED-Platinum certification targeted.

- Tenants to be provided with LEED-CI buildout guidelines.

- “Green parking” — parking spaces reserved for hybrid vehicles.

- Policy of 95% construction waste diversion.

- Renewable energy: The project will be powered by a free-standing on-site renewable energy plant powered by municipal solid waste (MSW) generated by the facility and providing over 16 Megawatts of power.

- Workforce model: workers hired for construction will be kept on and retrained to work in the development once it is operational. This is an idea we like alot; it could be replicated by many other developers (assuming they successfully navigate their projects through the tough market environment).

Hopefully enough green developments currently under construction will avoid the problems experienced by DestinyUSA and other developers, and survive the current market in order to open successfully and move the industry forward.