“innovative approaches to land assembly” assembly presentation.pdf · innovative land assembly...
TRANSCRIPT
Prepared by
Basile Baumann Prost & Associates177 Defense Highway, Suite 10Annapolis, Maryland 21401
bbp A S S O C I A T E S
“Innovative Approaches to Land Assembly”
A Holdout’s Last Stand
AGENDA
Barriers to Land Assembly
Innovative Land Assembly / Financing Techniques
New Model for Land Assembly
Case Studies
Questions?
Barriers to Land Assembly
Private property owners uninterested/unwilling to sell- Understanding objectives- Money vs. other
Finding capital: financing land assembly challenging because of no demonstrable short-term revenue stream
- Need for patient money- Land Banking
Speculative rush pushes up land values- Clandestine approach (straw men) to land assembly (e.g.
Disney World)- Plans of area tend to raise land value expectations- Land value ratchet
Barriers to Land Assembly
Acquisition Costs – property owner expectations of the value of their land
- Price of individual parcel v. the value of all of parcels assembled - Existing value v. reuse value
Ownership- Fractured- Absentee owners- Title issues
Structural government barriers- Particularly for government owned property- City and County having jurisdiction over same property (taxation handled
by one and redevelopment by another)
Barriers to Land Assembly
Inflexible zoning / regulatory environment- Time period to get site assembled, entitled, zoned, platted and approved
Legal issues: takings, due process and the use of eminent domain (e.g. Kelo v. City of New London)
Not planning for infrastructure concurrently with land assembly process (NIMBYism reaction)
Innovative Land Assembly / Financing Techniques
State housing finance agency funds have shown to be effective sources of capital and leverage money for land assembly (e.g. affordable housing)
Brownfield funding offers model for funding of land assembly (e.g. EPA pilot grants, clean-up funds, etc.)
California cities use TIFs to assemble land
Corporate and family foundations (patient money)
Innovative Land Assembly / Financing Techniques
Corporate and family foundations (patient money)
Private sector incentives (density bonuses, rezoning, taxes, etc.)
Most innovative land assembly financing techniques built on public/private partnerships
Incentives for owners- Tax issues- Value expectations
Like Kind Exchanges (1031)
New Model for Land Assembly
Turning the landowners into pro rata shareholders in a development entity that would acquire unified ownership and the development project
New development entity could be LLC or special purpose development corporation
Landowners could receive shares based on the proportional “value” of their property/improvement
Shares would reflect market value of the entire development project, not just their parcel
Market-based strategy would allow landowners to participate in upside of development project
Skyland Redevelopment, Washington, DC (Anacostia Metro Station Area)
FINANCING LAND ACQUISITION / ASSEMBLY
Redevelopment of rundown strip mall and adjacent vacant property
18.5 acre site which includes 1940s-era Skyland Shopping Center (11 acres) and vacant residentially zoned land (7.5 acres)
Project Co-Developer: National Capital Revitalization Corporation
Goal is to implement City and community’s vision for the site and improve the neighborhood
Skyland Redevelopment, Washington, DC
FINANCING LAND ACQUISITION / ASSEMBLY
17 different parcels controlled by 15 property owners, 30 different tenants
Previous attempts to assemble land have failed
Community & government support
Government financed study shows retail sales leakage
FINANCING LAND ACQUISITION / ASSEMBLY
NCRC (local government development corp.) purchasing property and will act as the landowner
NCRC selects developer to undertake vertical development; will pay ground lease
Project build out includes:
- Total of 915,000 sq. ft. - 315,000 sq. ft. of retail- 600 residential units- $125 million project
Skyland Redevelopment
FINANCING LAND ACQUISITION / ASSEMBLY
FINANCING LAND ACQUISITION / ASSEMBLYNCRC forms $150 million strategic equity partnership with Morgan Stanley to provide investment capital for its projects in DC, including Skyland project- Translating totality of real estate assets into LLC
Received additional $40 million in TIF financing- Assist with land acquisition- Attract new tenants to site- Infrastructure upgrades
FINANCING LAND ACQUISITION / ASSEMBLY
Property acquired by NCRC through negotiation and potential condemnation
Relocation company assisting business owners at Skyland
Selected property owners looking at potential participation in project (equity investment approach)
Equity Investment Approach to Land Assembly
Landowners contribute their land (and improvements) as “shares” and receive a portion of the distribution from cash flow generated
Value of the asset- LLC shares- Cash & LLC shares- Cash
Vertical developer pays long term ground lease to NCRC
Opportunity for all parties to participate in project’s upside
LLC business entity minimizes landowners and NCRC risk exposure
Equity Investment Approach to Land Assembly
New Town at Capital City Market, Washington, DC
FINANCING LAND ACQUISITION / ASSEMBLY
Redevelopment of 24-acre underutilized site into mixed use Town Center
Creation of a “New Town at Capital City Market Revitalization Development and Public/Private Partnership Act of 2006”
FINANCING LAND ACQUISITION / ASSEMBLYNew Town at Capital City Market
Adjacent to rail line
Former freight rail utilization / wholesale produce / meat market
Formally along WMATA (Metro) transit line with no station
Creation of infill transit station through small area plan / Benefit Assessment District (developer / property owner driven)
Market area quadrant not seen as development site but retained wholesale market
New Plan provides for retention, upgrading, consolidation of market places
Development maximized next to transit station
FINANCING LAND ACQUISITION / ASSEMBLYNew Town at Capital City Market
Existing major property owner / operator / small developer
Familiar with market, operations, owners, tenants
Undertakes Predevelopment Activities- Planning- Market Evaluations- Community Liaison
Introduces / passes special legislation
Attracts major developer / money (Apollo)
FINANCING LAND ACQUISITION / ASSEMBLYNew Town at Capital City Market
City Council approved legislation designates one of the property owners as developer (joint venture)
District model for developing large tracts of underutilized land to create workforce housing, needed community facilities / services, jobs, and increase tax base
FINANCING LAND ACQUISITION / ASSEMBLYNew Town at Capital City Market
Site will be rezoned from low-density, light industrial uses to mixed use commercial
Authorizes use of tax incentives, economic and other development initiatives
FINANCING LAND ACQUISITION / ASSEMBLY
New Town at Capital City Market
Financial toolbox includes tax abatement, TIF, PILOT
Once developer obtains control of 50% of land then remaining land can be acquired through condemnation- 45+ property owners- Other participating land owners include DC, Gallaudet
University (these owners control > 50%)- Eminent domain still requires Council approval
(Bill however unanimously passed by Council)- Creates incentive to participate under potential
eminent domain threat
FINANCING LAND ACQUISITION / ASSEMBLYNew Town at Capital City Market
Address Objectives / Concerns of Owners
- Low Value Basis- Relatively Significant Cash Flows- Increasing Property Tax Burdens- Management / Administrative Issues- Code Violation Issues- Value Expectations- Historic Attachment to Market
FINANCING LAND ACQUISITION / ASSEMBLY
New Town at Capital City Market
Plan allows for existing property owners and/or lessees to:
- Invest in the project and become equity owners- Become fee simple owners in the new retail and
warehouse facility- Participate in like-kind 1031 property exchanges
Plan allows existing retailers and wholesalers to continue their businesses in new revitalized market
Plan addresses project phasing
FINANCING LAND ACQUISITION / ASSEMBLY
New Town at Capital City Market
Plan addresses needs of existing tenants- Upgraded new space- Replaces physically/functionally obsolete space- Addresses code/health violations- Condominium creates ownership opportunities- District incentives maintains relatively modest
occupancy costs
MODELS FOR LAND ASSEMBLY
Public Model – Skyland
Private Model – New Town at Capital City Market
Requires Predevelopment Packaging
Addresses Multiple Stakeholders- Tenants- Property Owners- Community- Public Sector- Future Private Developer
Addresses Financing Issues
Questions?
Jim Prost and David StarnesBasile Baumann Prost & Associates177 Defense Highway, Suite 10Annapolis, MD [email protected] / [email protected]