Successfully Navigating Troubled Real Estate Waters in Novel Times
The novel coronavirus is leaving its mark on all aspects of our lives, and the real estate industry is certainly no exception. Whether you’re in the initial planning stages of a mixed-use redevelopment, the mid-point of a lease term, or the final stages of a construction project, the challenges presented by our current environment can make you feel like you’re at the end of your rope. No need. While some of today’s issues are indeed novel, many can be viewed as a 2020 version of past issues that we have helped clients to not only weather successfully but also used as a springboard to advance projects forward as those troubled waters receded.
The Gibbons Real Property Department relies on its transactional, development, redevelopment, and financing attorneys to bring a comprehensive and seamless approach to advancing the interests of our clients. To give some idea as to the breadth of experience we bring to help us identify current issues and strategies, some of the industry areas where we regularly practice include:
- Public/private infrastructure projects (P3s)
- Commercial leasing, conveyancing, and financing
- Redevelopment projects, including PILOT applications, redevelopment, and financial agreements and RAB bonds
- Mixed-use retail/multi-family residential, including affordable housing
- Healthcare facilities, including hospitals and extended care facilities
- Warehouse/fulfillment centers
- Large volume multi-site highway retail
- Fortune 500 corporation new facilities and expansion of existing facilities
- Resorts and hotels
- Ground leases for development and redevelopment projects
- Retail leases
- Real estate workouts and distressed assets
- Alcoholic beverage commission licenses, permits, and related issues
Each of these areas is experiencing unique real estate related issues during the current pandemic, and we have been advising clients on these even as we work remotely. However, many of the issues and challenges share common themes.
For instance, from a contractual perspective, many of today’s issues revolve around the obligation to perform and to do so by certain defined deadlines. That is the case whether the contract is a ground lease with an approval or financing contingency, a redevelopment agreement with a provision requiring the completion of construction by a date certain, or any number of other contractual obligations. Given the high likelihood that current governmental and other restrictions, not to mention potential future directives, will make performance in many instances an impossibility, it only makes sense to review your contracts, identify the issues, and determine the best path forward. It may be that a notice needs to be sent invoking the force majeure clause in the contract. Even while you take that step, it is prudent to review the language in the clause and determine whether COVID-19 and the related governmental responses fall within its scope. If there is any doubt, and even if there is not, consider reaching out to the other party to see whether there is any appetite to amend the agreement to make the obligations of the parties and the timeframes to meet those obligations clear going forward.
From a development perspective, the issues vary depending on whether the project is in the planning stages, and the required local, county, state, and federal applications, as applicable, have not yet been filed; applications have been filed, but permits and approvals have not yet been granted; or the project has been approved, but the conditions of the approval have not yet been satisfied and construction has not yet been completed. Over the next several weeks, attorneys in the Real Property Department will be identifying these issues and more in greater detail and providing substantive analysis to any redevelopment project where the municipality has designated the property as an area in need of help identify paths forward.
For now, from the development perspective, let’s look at the example of a redevelopment project where the municipality has designated the property as an area in need of redevelopment and adopted a redevelopment plan, but you, as the “to be designated” redeveloper, have not entered into any agreements or submitted any applications. Are you at a standstill? Well, in some ways, yes, but for the most part, no. While many municipal land use boards have cancelled public hearings, there is much preliminary work needed that can and must be done before submitting an application for site plan approval. And much of that preliminary work can be done without the need for formal public hearings. For instance, redevelopment agreements can be negotiated over the phone and electronically. If applicable, an application for a PILOT can be finalized and submitted to the municipality; technically, the statute requires that this be submitted to the mayor and referred to the governing body, but only for formal action.
Even though local land use boards will likely not be meeting in the near future, the governing bodies of municipalities may, in certain instances, take action. That will be due, in part, to the passing of legislation by the New Jersey House and Senate (Assembly Bill No. A-3850/Senate Bill No. S-2294), which was signed by the Governor on Friday, allowing a public body to hold public meetings in alternative forms – such as electronically – under certain defined conditions. It will be difficult for municipal land use boards to do this, given the due process requirements and rights of interested parties to participate in hearings regarding applications for development. However, the role of governing bodies, in large part, is to keep local government functioning, and the process of adopting resolutions to do this does not involve the same due process requirements to which local land use boards must adhere. So, at the very least, once redevelopment and financial agreements are finalized, local governing bodies may be able to adopt resolutions authorizing their execution.
The above are just two examples of issues faced in the age of the novel coronavirus. In the coming days, we will be addressing additional issues involving transactional real estate, financing, development, and redevelopment. We will also provide more detail on a very recent Order of the New Jersey Supreme Court extending the time to file both state and local tax appeals. As to the latter, please note for now that the deadline has been extended to the later of May 1, 2020 or 30 days following a determination by the Governor that the State of Emergency declared under Executive Order No. 103 has ended.
If you have any questions or need assistance in connection with a particular issue or matter, please don’t hesitate to contact Douglas Janacek, Chair of the Gibbons Real Property Department. And of course, please view us as one of your sources for all things real estate related as we continue to confront issues and challenges both novel and otherwise.
To view all client alerts in Gibbons “The Coronavirus Pandemic and Your Business: How We Can Help” Series, click here. Please also be sure to follow Gibbons on LinkedIn for a continuous feed of COVID-19 related updates and other important business, industry, and firm news.