developing transit oriented development (tod) via public-private · 1 partne project developing...

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Developing Transit Oriented Development (TOD) via Public-Private Partnerships (PPP) in Lima, Peru: Evaluation of potential and Pilot Project Development for Lima Metro Line 2 Project

Deliverable 4. D - Executive Summary

Final version

April 18, 2018

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Developing Transit Oriented Development (TOD) via Public-Private Partnerships (PPP)

in Lima, Peru: Evaluation of potential and Pilot Project Development for Lima Metro

Line 2 Project

Deliverable 4. D - Executive Summary

Final version

April 18, 2018

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Contents

Contents ................................................................................................................................... 3

List of abbreviations ................................................................................................................. 4

Introduction ............................................................................................................................. 5

Context .................................................................................................................................. 5

Object and Scope ..................................................................................................................... 5

1 General Framework to implement TOD Projects on the areas of influence of the Metro Line 2 stations .......................................................................................................................... 7

1.1 General aspects ........................................................................................................... 7

1.2 Legal and institutional aspects, opportunities and limitations to implement TOD Projects on Metro Line 2 ............................................................................................................................ 7

1.2.1 Limitations in the PPP legal framework to implement TOD Projects and other applicable models under current Peruvian regulation ............................................................................... 7 1.2.2 Description, opportunities and limitations for the development of TOD Projects on Metro’s Line 2 site station areas ............................................................................................. 9

1.3 Selection process and description of the pilot stations ..................................................... 11 1.3.1 Station Pre-selection ........................................................................................... 11 1.3.2 Final Selection - The 3V Approach ......................................................................... 13 1.3.3 Urban Analysis of the Selected Stations ................................................................. 16 1.3.4 Deficit of green areas and urban amenities ............................................................ 23

2 Schematic Proposals ....................................................................................................... 25

2.1 Tingo Maria Station .................................................................................................... 25 2.1.1 TOD Typology .................................................................................................... 26 2.1.2 Objectives ......................................................................................................... 26 2.1.3 Schematic proposal ............................................................................................. 27 2.1.4 Quality Control ................................................................................................... 27

2.2 Central Station ........................................................................................................... 28 2.2.1 TOD Typology ........................................................................................................ 28 2.2.2 Objectives ......................................................................................................... 29 2.2.3 Schematic proposal ............................................................................................. 29 2.2.4 Proposals to promote sustainable mobility ............................................................. 30 2.2.5 Quality Control ................................................................................................... 32

2.3 Hermilio Valdizan Station ............................................................................................ 33 2.3.1 TOD Typology .................................................................................................... 33 2.3.2 Objectives ......................................................................................................... 34 2.3.3 Schematic proposal ............................................................................................. 35 2.3.4 Quality Control ................................................................................................... 36

2.4 Pilot projects benefits ................................................................................................. 37

3 Implementation Plan ...................................................................................................... 38

3.1 Normative - Institutional Roadmap ............................................................................... 38

3.2 Proposed Business Model ............................................................................................. 39 3.2.1 Structurer and Promoter ...................................................................................... 40 3.2.2 Developer and real estate operator ....................................................................... 40 3.2.3 Contractual modality ........................................................................................... 40 3.2.4 Land acquisition process ...................................................................................... 40 3.2.5 Urban planning ................................................................................................... 41 3.2.6 Private investment commitment ........................................................................... 41

3.2.7 Financing and incentives for the private developer .................................................. 42 3.2.8 LVC Mechanisms ................................................................................................. 42 3.2.9 Roadmap ........................................................................................................... 43 3.2.10 Summary of the proposed business model ............................................................. 45

3.3 Financial pre-feasibility ............................................................................................... 46 3.3.1 Summary of financial pre-feasibility results ............................................................ 50

4 Main Conclusions and Recommendations ........................................................................ 51

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List of abbreviations

AATE: Autoridad Autónoma del Sistema Eléctrico de Transporte Masivo de Lima y Callao

(Autonomous authority of the Electrical System of Massive Transport of Lima and Callao). Is a technical bureau of the Transport and Communication Ministry

BRT: Bus Rapid Transit

CDAET: Certificado de Derechos Adicionales de Edificación Transferibles (Certificate of Additional Transferable Building Rights)

Line 2 Contract: Concession contract for the design, financing, construction,

electromechanical equipment, system equipment and provision of rolling stock, operation and maintenance of the Project "Line 2 and branch Av. Faucett - Av. Gambetta of the Lima and Callao Metro Basic Network"

DAET: Derechos Adicionales de Edificación Transferibles (Additional Transferable Building

Rights)

EMILIMA: Empresa Municipal Inmobiliaria de Lima (Municipal Real Estate Company of Lima)

IMP: Instituto Metropolitano de Planificación (Metropolitan Institute of Planning)

LVC: Land Value Capture

MML: Municipalidad Metropolitana de Lima (Lima City Hall)

MTC: Ministerio de Transportes y Comunicaciones (Transport and Communication Ministry)

MVCS: Ministerio de Vivienda, Construcción y Saneamiento (Housing, Construction and Sanitation Ministry)

TOD: Transit Oriented Development

PE: Plan Específico (Specific Plan)

PGSU: Programa de Generación de Suelo Urbano (Urban Land Generation Program)

PLAM 2035: Plan of Urban Development of Metropolitan Lima to 2035 (Plan de Desarrollo

Urbano de Lima Metropolitana al 2035)

PPP: Private Public Partnership

PPP Law: Legislative Decree No 1224 “Legislative Decree of the Frame for the Promotion of Private Investment through Private Public Partnerships and Projects in Assets” and its

Regulation approved by Supreme Decree No 410-2015-EF and its modifying and complementary normative.

PROLIMA: Programa Municipal para la Recuperación del Centro Histórico de Lima (Municipal Program for the Recovery of the Historic Center of Lima)

RATDUS: Reglamento de Acondicionamiento Territorial y Desarrollo Urbano Sostenible (Regulation for the Territorial Conditioning and Sustainable Urban Development)

UGU: Unidad de Gestión Urbanística (Urban Management Unit)

USD: United States Dollars

WHO: World Health Organization

ZR: Zonas generadoras (Generating Zones)

ZRE: Zona de reglamentación especial (Special Regulatory Zone)

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Introduction

Context

A mass transport infrastructure has the potential to boost economic growth and social inclusion in its zones of influence, as long as the implementation of this infrastructure is coordinated with the urban development of the surrounding areas. In this context arises the concept of Transport Oriented Development (TOD), as a complement to mass transport

infrastructure implementation.

TOD is defined as interventions of urban transformation around mass transit systems which benefit from better accessibility to public transportation, improve sustainable urban mobility (pedestrian and cycle network) and generate compact urban spaces, of high density, mixed uses and high-quality public spaces; promoting the generation of new centralities in the city by offering more and better opportunities for housing, employment, and entertainment in

such areas.

The metro stations areas are of special attention to the promotion of these processes of urban transformation that generate a land revaluation, and favor the application of Land Value Capture (LVC) mechanisms as source of financing, whether for the transport infrastructure or for the complementary works of urban and mobility improvement.

It should be noted that the TOD Projects are not necessarily lucrative, since they can also include developments of social nature, such as the construction and implementation of

hospitals, schools, libraries, parks and other public facilities, which are generators of urban centrality, job opportunities, among other characteristics of the TOD Projects.

The Peruvian Government has planned a metro basic network for Lima and Callao with six lines: Line 1, elevated, is currently in operation; Line 2, underground, is under construction; Lines 3 and 4 are in phase of prefeasibility studies; and Lines 5 and 6 are in conceptual layout level.

In Peru, there are no previous experiences in TOD, whereby the construction of the Lima and

Callao Metro Line 2 is an opportunity to incorporate the TOD concept in urban development around its stations.

Object and Scope

This document is to the fourth and final deliverable of the technical assistance assignment

mandated by the World Bank "Transport Oriented Development (TOD) via Public-Private Partnerships (PPP) in Lima: Evaluation of a potential pilot project for the Lima and Callao Metro Line 2 Project" (the "Study").

The Study had these objectives:

(i) Evaluate, at prefeasibility level, the viability to develop TOD pilot demonstration projects through PPP schemes, financed with LVC mechanisms;

(ii) Develop three (03) TOD schematic pilot demonstration project proposals in the area

of influence of the Metro Line 2 corridor, but outside the scope of Line 2 Contract given that real estate developments are not included;

(iii) Propose institutional arrangements and regulatory changes in the short-medium term to implement the proposed schematic proposals;

(iv) Make recommendations for potential TOD Projects in future Metro lines.

This deliverable presents the three schematic proposals, the business model to implement

them, and the main conclusions of the Study.

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It should be noted that TOD interventions could be developed inside and outside the

perimeter of a mass transit project. Given that this Study’s objective is to expose proposals that can be implemented in the short term, we have developed only intervention proposals outside the perimeter of the Lima Metro Line 2, since interventions within the area of concession (which includes the entire stations areas) require amendments in the Line 2 Contract.

However, the Study develops, at a conceptual level, the roadmap to outline TOD Projects during the phases of design and later bid for future lines of the Lima and Callao Metro Basic

Network and for other mass transit systems, as the BRT Metropolitano, which we expect to serve as the basis to promote such initiatives in the future.

This Study is especially relevant in the current context since it is presented as an opportunity for reflection -among all the relevant stakeholders in urban, mobility and transport planning for the city- about the necessary arrangements and initiatives to re-plan the city leveraging from the urban interventions resulting from a transport megaproject, as it is a metro. The

creation of new centralities, accessible, that bridge the gaps in public facilities and green spaces will significantly improve the quality of living in the city. Otherwise, the city of Lima,

would be doomed to exacerbate current problems of traffic, pollution, insecurity, and disorganized urban and residential growth.

The document is organized in four chapters:

Chapter 1: General Framework to implement TOD Projects on the areas of influence of the Metro Line 2 stations. Describes the main characteristics of a TOD Project and the

main findings, opportunities and limitations to implement them considering the Peruvian legal and institutional framework. In addition, we present the selected stations.

Chapter 2: Schematic proposals. Presents the proposals developed in the area of influence of the three selected stations.

Chapter 3: Implementation plan. Presents the roadmap, considering the current regulatory-institutional framework, to execute TOD Projects, the business models proposed and the financial prefeasibility analysis.

Chapter 4: Main conclusions and recommendations. Finally, this chapter presents the main conclusions of the Study, as well as recommendations to make viable the TOD Projects, on Line 2 and on future lines of the Metro.

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1 General Framework to

implement TOD Projects on the

areas of influence of the Metro Line 2 stations

1.1 General aspects

TOD Projects can be proposed inside and outside the perimeter of a mass transport

infrastructure project.

Within the perimeter, any development is governed by the contract regulating the transport project, in that sense, the TOD Project is strongly linked to the transport project; for example, the development of commercial and other uses inside the station building.

Outside the perimeter, which is the most common situation for a TOD Project, understood as an urban development outside the station area, i.e. projects of urban centrality that are the

focus of this Study. In this case, the development follows rules and procedures similar to real estate developments.

Since most of the TOD Projects correspond to developments outside the perimeter of the infrastructure project, and incorporate mixed uses, they involve projects of lucrative interest as well as the provision of public facilities and services.

1.2 Legal and institutional aspects, opportunities and

limitations to implement TOD Projects on Metro Line 2

1.2.1 Limitations in the PPP legal framework to implement TOD Projects

and other applicable models under current Peruvian regulation

The Study developed a general framework for the design and implementation of TOD Projects under PPP schemes and within the scope of the Lima Metro Line 2 Project. Nevertheless, due to the nature of the TOD Projects and the regulatory scope of PPP in Peru, we have introduced, within the general framework, other figures and mechanisms of private

investment promotion that allows us to, in the short term, make possible the execution of TOD Projects with zero or minimum impact on the applicable legal framework and the corresponding institutional arrangements, leaving as main challenge the adjustment of the current legal framework that will facilitate the development and execution of major TOD Projects associated to the main transport infrastructure projects. According to the current legislation that regulates PPP in Peru (“PPP Law”)1, PPPs are a

modality of investment whose purpose is to create, develop, improve, operate or maintain public infrastructure or provide public services. According to the same legal framework, PPPs can include under its scope, enunciatively, public infrastructure in general including, road

networks, multimodal networks, railways, airports, ports, logistics platforms, cultural and recreational urban infrastructure, penitentiary, irrigation, health and education infrastructure; public services like telecommunications, energy and public lighting, water and sanitation and other services of social interest, related to health and the environment, like

waste treatment and processing, and education.

1 Legislative Decree No 1224 “Legislative Decree of the Frame for the Promotion of Private Investment through Private

Public Partnerships and Projects in Assets” and its Regulation approved by Supreme Decree No 410-2015-EF and its amending and complementary standards.

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Likewise, according to the PPP Law, PPPs can include the provision of services related to

public infrastructure and/or public services that the State must provide, but not limited to, toll and tariffs collecting systems, applied research and/or technological innovation. PPP projects are not projects whose only scope is the provision of work force, supply and installation of equipment, construction or execution of public works, nor the exploitation and/or the maintenance of State assets under private domain or the development of private infrastructure.

As it can be understood from the legal framework explained above, the PPP is a mechanism to promote private investment designed to cover the needs of public infrastructure and/or the provision of public services or related services, therefore, taking into account the definition of TOD Projects described above, these could not be developed and/or executed through PPP.

The purpose of TOD Projects is not to develop a public infrastructure, as it is the construction, operation and/or maintenance of a hospital, school or a highway; on the contrary, their purpose is to develop projects of multifunctional areas that put together a set of different objectives, which can be mainly of private nature. Consequently, due to the

definition of PPP in the Peruvian legal framework, it is not feasible to develop TOD Projects, including all its characteristics, through PPPs schemes, unless the concept of PPP is redefined

and the current Peruvian legal framework is adjusted, or an exceptional regime applicable to TOD Projects is created; options that would represent a substantial legislative change. Nevertheless, if within a TOD Project one of the elements is a public infrastructure that provides a public service (such as a public hospital or a public school) or public facilities, such element in particular could be implemented through a PPP.

Even though in Peru the PPP mechanism is not the best for the development of TOD Projects, there is another mechanism regulated by the PPP Law called “Projects on Assets” that would allow the development of TOD Projects. It is important to note that Projects on Assets are not PPP, in that sense; PPP rules do not apply to such mechanism. The Projects on Assets mechanism constitutes a modality of

private investment promotion over assets, projects or resources owned by a public entity, that is under the scope of the referred regulation (Ministries, Regional Governments or Local

Governments), and which are freely available. In this regard, we must point out that the term “asset” refers to any material or immaterial good of property of a public entity2 (under the scope of the corresponding regulation). In that sense, the characteristics of “ownership” and “free availability” are consistent with the

above-mentioned legal framework, by establishing that the Ministries, Regional Governments and Local Governments promote the private investments over assets of their ownership, i.e. those which are of their property and that are not destined to a particular purpose such as the provision of a public service. Pursuant to the referred legal framework, Projects on Assets can be developed under two schemes:

1. Disposal of assets, including total or partial transfer, even though a real estate swap. 2. Use transfer, leasing, usufruct, surface or other contract modalities allowed by law. It is important to highlight that the contracts of Projects on Assets cannot commit public

resources or transfer risks to the public entity, except if there is an express legal provision.

In this sense, a TOD Project could be implemented through the Project on Assets mechanism if the State were the owner an asset (a site) large enough to implement all the characteristics of a TOD Project in such asset and close to a Metro station.

2 Orientation guide for the application of the Legislative Decree No 1224.

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Finally, it is important to point out that Projects on Assets, as well as the PPP, can be filed

and promoted by private investors as well as by public entities that are under the corresponding regulation according to the rules contained in the mentioned legal framework. Nevertheless, according to our analysis of the Lima Metro Line 2 Project, we conclude that the State should drive the development and execution of TOD Projects through the Projects on Assets mechanism over assets of its ownership or through PPP projects if it corresponds.

1.2.2 Description, opportunities and limitations for the development of

TOD Projects on Metro’s Line 2 site station areas

On March 28, 2014 the public tender for the integrated projects for the concession of the Project “Line 2 and branch Av. Faucett - Av. Gambetta of the Lima and Callao Metro Basic Network” was awarded to the Consortium “Consorcio Nuevo Metro de Lima”, integrated by

Cosapi S.A., Salini Impregilo S.p.A., Iridium Concesiones de Infraestructura S.A., Vialia Sociedad Gestora de Concesiones de Infraestructura S.L, Ansaldo Breda SpA. and Ansaldo STS SpA. The Closing Date (subscription of the Concession Contract) took place on April 28,

2014. According to the Line 2 Contract, the purpose of the agreement is to grant the

concessionaire, among others, the right to the exploit the Concession Goods during the term of the contract, being the frame of action of the Concessionaire, according to the Line 2 Contract, the area defined as Concession Area, which does not include the urban areas outside the metro’s layout and its stations. As established in the cited contract, the exploitation of the Concession Goods includes their operation and maintenance according to the terms of the contract. Nevertheless, the Line 2

Contract also considers the rendering of Complementary Services or Optional Services (according to their definition in the contract) by the Concessionaire as well as the charging for rendering such services. Such services can be provided in the stations included in the project, as well as in other Concession Goods. Regarding the Complementary Services, the contract defines them as: (i) lease of commercial spaces in the stations; (ii) lease of spaces for publicity; (iii) lease of spaces

inside the stations and rolling stock for programs and publicity via radios and television, amongst others; (iv) maintenance and reparation services for other operators’ rolling stock; (v) the right of way for the public services network. In the same way, the Line 2 Contract establishes that the Optional Services are referred to: (i) parking lots; (ii) lease of commercial, entertainment or cultural spaces, warehouses, (iii)

others. Consequently, the Line 2 Contract would allow the Concessionaire, in a limited way, to develop some TOD Projects, as long as these developments only consider the Complementary or Optional Services as defined in the contract and contingent upon the decision and interest of the Concessionaire, with prior authorization and agreement regarding compensations with the grantor (MTC). In that sense, a priori we consider that

there are no incentives for the Concessionaire of Line 2 to execute developments with TOD characteristics inside or outside the stations, especially if the concession itself is co-financed, meaning that it is not profitable by itself. On the other hand, given that the Lima Metro Line 2 stations area are part of the concession,

the Peruvian State cannot develop directly any TOD Projects in these areas, being necessary in this case to modify the Line 2 Contract in order to grant this power to the State,

specifically to the MTC, eliminating the Concessionaire’s exploitation right over the stations. Another important issue to consider, is that the AATE, the technical arm of the MTC and current manager of the transport project, does not have the powers to act as a real estate-urban agent inside or outside the Lima and Callao Metro Basic Network, so it would be required to modify the AATE’s assignment object, its Operations Handbook and its budget;

modifications that have substantial impact on the legal nature of the entity.

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Notwithstanding the aforementioned regarding the PPP legal framework and the scope of the Line 2 Contract in relation to the development of TOD Projects, and considering that in Peru there is not an institutional-legal framework to design and execute TOD Projects, other legal frameworks, as the one referring to the urban planning and the Regulation for the Territorial Conditioning and Sustainable Urban Development-RATDUS, have been evaluated in order to enable these type of projects.

Regarding the urban planning rules, we consider that the promotion of TOD Projects must start from a modification of the previously mentioned regulation, incorporating in it guidelines for the development of this kind of projects and the corresponding institutional arrangements. With regard to the existing instruments in the regulation that can be used to propose specific

TOD developments in the areas of influence of the Lima Metro Line 2 stations, we have: (i) The PLAM 2035, which is pending to update and represents an opportunity to

incorporate in it TOD Projects. (ii) The PE where TOD interventions can be proposed on the areas of influence of the Metro

stations, areas that must be designated as ZRE. The PE can be proposed by the Municipalities or by privates through an UGU. In any case, the corresponding District

Municipality (Local Government) always intervenes given that it is required to be part of the UGU.

In the short term, it is possible to incorporate a TOD pilot in the area of influence of the Central Station if such pilot were included in the Master Plan of the Historic Centre of Lima to 2035, being of vital importance that the multiple actors involved in its definition are promoters of the TOD concept and the proposed pilot.

Regarding the designation of the State as a land agent and promoter of TOD Projects, it should be noted that in Peru there does not exist a public entity that centralizes the management of the public land and that has the capability, at a budget and powers level, to acquire or expropriate private land and to liberate interferences. According to the applicable legal framework, the acquisition and expropriation of land can be executed for a project that

is declared of national interest and be led by the public entity sponsor of the project.

As well, there is no public entity that can act as a land and real estate bank, urban development agent or real estate operator, manager and project structurer entity, and funds manager. In that sense, the Study of institutional Arrangements proposes the creation of a public

entity with the power to serve as an urban promoter to coordinate and align the different interests and actors involved, being an authority with administrative and financial autonomy, and legal personality that allows it to become the metropolitan managing entity in matter of re-urbanization in the zone of influence of the metro lines. It is worth mentioning that, even though EMILIMA has powers to act as a real estate agent in TOD Projects, its action is limited because: (i) it depends on the MML, (ii) does not have a

budget nor has incentives to execute urban developments; and (iii) does not interact with the transport system manager (MTC-AATE). The PGSU could also become a land agent and promoter of TOD Projects if it is approved the MVCS’s proposal to grant PGSU powers to acquire private land and lead projects of urban

habilitation and edification of social housing, articulated with other entities and programs.

In relation to the LVC mechanisms, it is important to highlight that the concept of Air Rights is not defined in the Peruvian legal and institutional framework, so it is not possible to use them to finance TOD Projects. In order to apply LVC mechanisms, the Air Rights must be defined, instrumentalized and regulated in the RATDUS so that each Municipality can apply them.

Notwithstanding the abovementioned, the current legal framework develops other rights, which, even though they do not generate an additional value to the public land agent (if

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there were one) to finance TOD Projects, it does favor specific real estate-urban

development adjacent to the Lima Metro Line 2 stations areas. Bellow a description of the mentioned rights: o The DAET allows to transfer the potential right of urban edification of a property located in

a Generating Zone, to another property located in a Receptor Zone. o The Bonus by Height of Sustainable Construction (Bonificación por Altura de

Construcción Sostenible) allows a greater building height for sustainable constructions.

o The Inclusive Zoning (Zonificación Inclusiva) offers a density or height bonus in exchange for a percentage of social housing.

1.3 Selection process and description of the pilot stations

1.3.1 Station Pre-selection

The process for selecting three pilot projects has been done in two stages.

First, a multicriteria analysis was developed to identify the seven stations with the greatest potential for TOD. The methodology to identify the first seven stations utilized geographic information systems (GIS), analyzing the information within an 800m buffer around each of

the stations.

The analysis sought to identify the areas, within the scope of influence of the Line 2 corridor, where a TOD Project would have a greater:

1. Urban impact 2. Socio-economic impact 3. Impact in reducing deficits of amenities and public space

4. Impact in improving accessibility and urban mobility 5. And where a TOD Project was most viable in legal and institutional terms

A number of specific criteria were analyzed including an land uses, identifying where there were large single uses, such as industrial lots, that would be incompatible with a TOD

Project. These uses, along with large State owned properties, presented an opportunity as areas of great change. Another criterion was the connectivity at the pedestrian level, to

identify which areas had urban layouts with greater accessibility for pedestrians to the future stations. The analysis also identified where a DOT Project could respond to an existing urban problem such as identifying where there is currently a shortage of public spaces or public amenities. Another important criterion was to identify where larger scale lots could be adapted to create a more walkable urban environment, and permitting large-scale developments. Another important factor was to identify which areas had greater population and employment densities. In these cases, a TOD Project could reinforce existing centralities,

or generating new ones.

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Figure 1: Stations characterization in Lima Metro Line 2 stations

Source: Llama Urban Design

The identification and quantitative and qualitative analysis of these variables allowed the pre-selection of seven stations for the pilots, which are listed below, from west to east:

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1. Oscar Benavides

2. Tingo Maria 3. Central 4. Hermilio Valdizan 5. Mercado de Santa Anita 6. Vista Alegre 7. Municipalidad de Ate

Of all the stations studied, the one with the greatest potential for a TOD Project was Tingo

Maria Station for the following reasons:

Existence of large lots on public land owned by the MTC Existence of several large industrial lots Potential for urban regeneration to create new public space (new streets) and green

spaces

The station Oscar Benavides presented similar conditions to the Tingo Maria station, with a greater area of industrial uses. However, given that its zone of influence straddles two different

provincial governments (the Constitutional Province of Callao and the Metropolitan Municipality of Lima) a TOD Project in this area would require greater coordination efforts among the municipalities involved, at district and province levels.

The stations whose areas of influence involve the Historic Center of Lima and the district of Ate present a greater opportunity to be adopted as policy, as PROLIMA (the planning authority

for the Historic Centre) and the municipality of Ate have shown their interest in adopting the TOD pilot projects into their urban development plans. This means an improved viability of TOD Projects within these jurisdictions.

1.3.2 Final Selection - The 3V Approach

The seven pre-selected stations were analyzed using the Bertolini Method, leading to the selection of the three stations for the development of the three schematic proposals for TOD

pilot demonstration projects.

In 2017, the World Bank published a report outlining how to analyze the potential of different

areas for TOD Projects. The report "The 3V Approach"3 considers the node value, place value and market value for each station of a mass public transport network. This work establishes a standardized methodology for TOD Projects, and serves as a tool to group stations based on their different values, as a tool to form typologies and facilitating the process of selecting stations.

The 3V Approach serves as a tool to understand the strengths and weaknesses of the stations. In addition, under the same analysis, after implementing a TOD Project, we can measure the impact of this development over time; even compare different proposals for a masterplan.

3 Salat, Serge; Ollivier, Gerald. 2017. Transforming the Urban Space through Transit-Oriented Development: The 3V

Approach. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/26405

License: CC BY 3.0 IGO

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Figure 2: The 3V Approach

Own production

Based on the 3V Approach, the three stations with the highest scores were:

1. Central 2. Tingo Maria 3. Hermilio Valdizan

To see the results of the 3V Approach in detail, consult the Report 3 of this Study.

NODE VALUE

Based on the location within the

system

PLACE VALUE

Based on urban characteristics

MARKET VALUE

Based on economical potential

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Table 1: Summary of variables analyzed for the selected stations

Own production

Tingo Maria Central Hermilio Valdizan

Land Use A varied mix of uses. There is a large percentage of industrial

uses.

A fine grained mix of land use, promoting walking. Uses include, housing,

amenities, shops and restaurants. Many lots are used for parking and

interprovincial transport terminals. Many buildings present a high structural

risk.

Industrial uses represent over 30% of the programme in the

area.

Building Heights Low rise, with some new

residential towers. Mainly between 1 to 3 storeys. On

avenues, buildings are slightly higher. Low rise - 1 - 3 floors

Zoning

The area is zoned for residential - workshop mix, along with mid-

density and low density housing. Along Venezuela Avenue, there is a concentration of industrial

uses.

Area is zoned as a "special treatment area" due to its heritage status (ZTE - 2,

ZTE - 1).

Between Ate and Santa Anita. Most of the area is designated for industry, in large lots. Some

areas are zoned for light industry workshop/housing. To a lesser extent there are some areas

zoned for medium density residential lots.

Urban Mobility

Apart from the Metro line 2, the

complimentary bus route (5) and feeder routes pass through the area. There is currently a low

pedestrian flow

High level of accessibility due to the confluence of different modes of

transport.

Mostly informal: motorcycle taxis that supply on a

neighborhood scale. Bus routes are concentrated along the

Central Highway.

Topography FLAT FLAT Flat, with some small rocky

outcrops

Public Spaces System of small parks in

residential areas. Breña does not have parks.

Public spaces of metropolitan scale (large parks), presence of various

historical plazas.

There are a few neighborhood scale parks in the middle of the

residential blocks. Many of them are fenced in.

Green areas Deficit of green space. The majority of green area is

inaccessible, and fenced.

The area around the Central Station has a n adequate provision of parks including the

Exposition Park and Campo de Mart .

There is a substantial deficit of green space. Green space is

concentrated along inaccessible road medians.

Metropolitan Centers

The Amauta Coliseum is used for religious services on Sundays. There is also one university in

the study area

The area contains a number of metropolitan centralities, and provides

an important commercial destination for the city

Lots of markets of large areas and surrounded by perimeter

walls. There are two hospitals in the area.

Public facilities

There is currently a private university, schools, sports fields, a hospital and a health centre in

the area.

The center hosts a diversity of pubic services including museums, educational

institutions and health institutions.

There are three health centers, a technical institute, and two metropolitan scaled markets.

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1.3.3 Urban Analysis of the Selected Stations

1.3.3.1 Tingo Maria Station

The 800-meter buffer area surrounding the future Tingo Maria Station is undergoing a process to become a more residential area. The future station will be located on Venezuela Avenue. This area is characterized by the presence of large industrial lots that function as barriers to pedestrian accessibility, are surrounded by 3m tall security walls, and generate a low intensity of activity in the public realm. For these reasons, they are incompatible with

TOD. The Station area has very low pedestrian flows due to the fragmentation of the urban fabric. Part of the reason is that the future station will be located in one of the least dense areas in terms of population / hectare.

Today, this sector has a large deficit of green area per inhabitant. Similarly, it experiences a shortage of cultural facilities according to the Peruvian national standards. These deficits may worsen if the area is further developed without adequate urban planning. One opportunity, however, is that a series of large properties near to the station belong to the MTC, raising

the possibility of developing TOD Projects in the short term.

Precisely, around the Tingo Maria Station, the industrial uses qualifies this area as not suitable for a TOD Project if there is no further intervention. According to the map of "bendy catchments", one can see that very few destinations are accessible within 500-meter walk from the station due to the large scale of the urban blocks. On the southwest side of the station, the size of the blocks results in an urban fabric that is not permeable for movement

on foot, and the existence of blind walls that surround the lots mean that there is no relation between the private space and the public realm, resulting in an unattractive and dangerous public space.

Figure 3: Urban context of the Tingo Maria Station area. The street is abandoned and without

uses to activate the street

Source: Google Street view

Many of the streets around the station are lacking sidewalks. At street level, one can observe auto shops – uses that are not compatible for a TOD Project. Without a redevelopment project, there is little logic in locating the Tingo Maria Station in this place. In particular, the low population density and concentration of industrial zones are strong reasons not to build

the stations here.

17

Figure 4: Urban environment near the future subway station - without sidewalks, dominated

by auto body shops

Source: Google Street view

18

Figure 5: Tingo Maria Station urban analysis

19


1.3.3.2 Central Station

The area within a radius of 800 meters of the future Central Station is part of one of the first

planned extensions of the city. The area includes the Exhibition Park, Neptune Park, the

Exhibition Palace (now the Lima Art Museum) and the Italian Art Museum. The majority of

the study area is located within a heritage area with special zoning ordinances. The avenue,

Paseo Colon, together with the Exhibition Park, listed urban-monuments due to their

historical character.

The area is characterized for being a major center of commercial uses including offices and

stores. For this reason, it is extraordinarily active during the day, but largely abandoned at

night. Lima Center is still one of most important urban centers at a metropolitan level, and

one of the most representative spaces of Peru.

The pedestrian flows in this case is much higher than in the other areas studied. The counts

are especially high around the future exit of the metro station, exceeding the current

capacity of the sidewalks in some cases. The overcrowding of sidewalks would be much more

critical following the arrival of the central station, and would collapse the mobility in the area

if the station development were not accompanied with a strategy to widen sidewalks and

accommodate pedestrian mobility.

Unlike the other stations studied, the area surrounding the Central Station has a surplus of

green areas and public amenities because there is a high provision of them, and a low

residential density in the zone.

On the other side, there is a number of large government properties in the area, including a

National Police barracks on Alfonso Ugarte Avenue, which represent opportunities to develop

TOD Projects.

20

Figure 6: Central Station urban analysis

21


1.3.3.3 Hermilio Valdizan Station

The area surrounding the Hermilio Valdizan Station is characterized by the presence of very large blocks. These host major industrial uses, two metropolitan scale markets (Mayorista

and Proveedores), two hospitals, and a technical institute. Due to the scale of the blocks and the fact that the land uses generate very little activity in the public realm, there is a very low flow of pedestrians. Green areas and urban facilities are almost non-existent and today there

is a very low residential density.

Analyzing the “bendy catchment areas” one can see that, from the location of the future station, a pedestrian could reach very few destinations within a 10 minute walk. Without a major urban intervention to generate a more permeable urban fabric, the Hermilio Valdizan Station would not be accessible by the majority of residents living within the 800m buffer area.

22

Figure 7: Hermilio Valdizan (ex La Cultura) Station urban analysis

23


1.3.4 Deficit of green areas and urban amenities

The National Amenity Standards (SISNE) provide a minimum standard for the provision of

urban amenities according to specific population thresholds. This takes into account basic education, health, cultural, parks and green areas per capita.

Compared to the current supply of amenities, one can observe there is a deficit for each station. In terms of basic education at all levels, there are very few public schools near the stations Hermilio Valdizan and Central. In all cases, with the exception of the Central station, the amount of green space per inhabitant is well below the 9 m² per inhabitant established by the WHO.

The Hermilio Valdizan Station area currently has a deficit in cultural facilities and green areas. The Tingo Maria Station area lacks of cultural facilities and green areas, as well as health care facilities.

24

Table 2: Urban Amenities


For more information, see Report 3 of this Study.

25

2 Schematic Proposals

2.1 Tingo Maria Station

Figure 8: Venezuela Avenue in the Schematic Proposal


Figure 9: General Proposal in Tingo Maria Station


26

2.1.1 TOD Typology

Based on the analysis of the area surrounding the Tingo Maria Station, the type of TOD intervention is Plan and redevelop.

(See Report 3 for more details)

2.1.2 Objectives

2.1.2.1 Mixed uses

The proposal seeks to promote mixed uses in new blocks. This map shows the distribution of uses at the street level for the pilot project. The proposal concentrates the largest amount of commercial and office uses within a radius of 200 meters around the station, corresponding to Phase 2.

Beyond the 200-metre buffer, the predominant use would become more residential, but always maintaining a mixture uses to allow for an active public realm.

2.1.2.2 Urban Mobility Strategies

The proposal for the zone of influence

around Tingo Maria Station includes a number of sustainable mobility strategies. These are:

Promote pedestrian accessibility through the generation of new streets for people.

Promote the use of bicycles and cycle

racks through the creation of "streets for people" that allow for the movement of bicycles without the need for segregated cycle lanes.

Generate cycle lanes on avenues.

Create reserve spaces for a future public bicycle rental scheme,

assuming that an integrated bicycle system will be incorporated with the metro in the future.

Figure 10: Proposal of Uses

Figure 11: Propuesta de Edificios



27

Figure 12: Road Network Proposal


2.1.3 Schematic proposal

Potential sites for intervention were identified as those that do not contribute to an urban space of quality because they create barriers, are dangerous spaces or have uses incompatible with urban development projects. Actually, these sites have industrial or institutional uses, or are workshop/housing. The proposal consists of two phases.


2.1.4 Quality Control

The project team has used Graph Analysis Software, Depthmap, to compare the pilot project proposal with the current site conditions. According to an analysis of the integration or “betweenness” of the road network, one can appreciate that, in the proposal, the future Tingo Maria Station is much better integrated with its surroundings. This is shown by the central area being red (highly integrated) in the proposal, compared to the existing conditions.

28

Figure 13: Road Network


2.2 Central Station

2.2.1 TOD Typology

Based on the analysis of the characteristics of the area of influence of the Central Station,

the TOD typology for the Central Station would be Urban Insertion.


Current Proposal

29

2.2.2 Objectives

The proposal for the station’s area of influence is based on the typology, Urban Insertion. The objectives for the study area are therefore aligned with the respective TOD strategies outlined in Report 3 of this study. These include:

1. Improve the quality of public space and promote sustainable mobility, in line with the character of the historic urban landscape.

2. Densify through mixed uses brownfield project, encouraging the development of transport terminals,

and parking lots. Such uses are incompatible with the high public

transport accessibility levels and with the character of the Historic Center as a World Heritage Site.

3. Change zoning to promote housing

and reduce the number of parking spaces required.

4. In large underused lots owned by the State, look for co-development opportunities.

5. Reduce space for private vehicles, and rationalize taxis and traditional bus services in-line with actual demand rather than supply.

6. Contemplate the use of DAETs to promote the protection of historical monuments and, at the same time, facilitate the densification of this part of the city.


The schematic proposal proposes development in three areas. To identify the places to intervene, the technical team looked for lots

belonging to the State with incompatible uses for a TOD Project, buildings with high structural vulnerability where a development project responds to a security issue, and lots with private uses incompatible with TOD.

Three potential development areas have been

identified:

• The National Police barracks

• The lots with high structural vulnerability behind the Palace of

Justice

• The interregional transport terminals located in La Victoria

(For further information on phases, see Report 3)

Figure 14: Heights Proposal


Elaboración Propia

Figure 15: Projects Proposal


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2.2.4 Proposals to promote sustainable mobility

The schematic proposal aims to recover the city for pedestrians in the streets and avenues around the future Central Station. It introduces the concept of “streets for people” – lowering traffic speeds to 10, 20 and 30 km / hour outside of the main avenues.

Along the main avenues, the proposal includes grade level pedestrian crossings to reduce the impact of the avenues as barriers to mobility. In particular, the aim is to improve pedestrian accessibility on Paseo Colon, Wilson Avenue, Washington Street, Alfonso Ugarte Avenue and to create enough space on the sidewalks

to accommodate the large flow of people who will leave the metro.

2.2.4.1 Concept Design for Paseo Colon and Bolognesi Oval


The Bolognesi Oval has undergone a process of change over time, resulting in the loss of trees and public space for pedestrians. The road that used to be two lanes today is five, and

the space in the center, the plaza itself, is inaccessible. It has become a place only to be

seen from a car.

Figure 16: Streets Proposal

Figure 17: Concept Design for Paseo Colón and Bolognesi Oval


31

Figure 18: Concept Design for Bolognesi Oval


The proposal seeks to articulate the city, facilitating crossings at the pedestrian level of the avenues Paseo Colon, Brazil, Alfonso Ugarte, Guzman Blanco and Venezuela. It takes advantage of the location of the Metropolitan Alfonso Ugarte Avenue, Line 2 on Paseo Colon and Arica Avenue and the Purple Corridor on Brazil Avenue to reduce the number of lanes from five to four - two in each direction. The Plaza could continue with the five traffic light

phases.

The proposal aims to achieve:

a. The recovery of the memory of the oval as a civic plaza for the city

b. The reconnection of Breña with Lima through improvements to pedestrian accessibility, reducing the number of crossings needed to get from one side of the square to the other

Figure 19: Central Station – Bolognesi Oval. Section


32

2.2.4.2 Proposal to Recover Public Spaces

In addition to recovering the streets as public spaces, the proposal proposes to articulate a series of existing public spaces that are underused due to their inaccessibility.

In the city center, vehicular traffic has become a barrier to pedestrian movement,

resulting in the transformation of several public spaces into "inaccessible islands".

The proposal includes stitching squares and green areas together through the improvement of pedestrian crossings. This also means promoting pedestrian

accessibility from the Central Station to the

Historical Center and Campo de Marte, in Jesus Maria.

2.2.4.3 Strategies for Recovering Public Spaces

• Reactivation of the central public space along Paseo de los Heroes Navales, eliminating the physical barriers, and articulating it with the rest of the city.

• Azangaro Street: pedestrianisation of the streets surrounding the Palace of Justice.

• Francia Square: pedestrianisation of the streets surrounding Francia Square and Jiron de la Union.

• Improve connectivity from the Exhibition Park to Polvos Azules, in La Victoria.


The technical team used Graph Analysis Software, Depthmap, to develop a comparison of the proposed pilot project with the current conditions. As the historic center has a relatively well connected and permeable urban fabric, the proposal has a minimal impact compared to the other pilot projects, focusing on generating new crossings, turning the Bolognesi Oval into a square.

According to an analysis of the integration of the road network, one can appreciate that the

proposal improves the overall integration of the street network.

Figure 20: Proposal to Recover Public Spaces


33


2.3 Hermilio Valdizan Station

2.3.1 TOD Typology

The sector analyzed has a large number of industrial lots and workshop/housing, currently

incompatible with the densification required for TOD. These represent, however, an

opportunity for urban renewal. Based on the analysis of the characteristics of the area surrounding the Hermilio Valdizan Station, the TOD Typology the area requires is Plan and redevelop.

(See Report 3 for more detail)

Current Proposal


34

Figure 22: Proposal for Hermilio Valdizan Station


2.3.2 Objectives

The proposal for the area surrounding Hermilio Valdizan Station is based on the typology: Plan and redevelop. The objectives for the study area are therefore aligned with the respective TOD strategies:

1. Optimize land use and property ownership

Change zoning for lots currently incompatible with TOD Projects, such as large industrial lots and workshop/housing currently present in the area.

Encourage and facilitate the relocation of industrial lots to compatible areas

in the city.

Identify opportunities for the State to participate in co-development projects that encourage the redevelopment of the area.

2. Provide, expand or improve the quality of public spaces

Propose new green areas and public space to respond to the respective deficit (4.38 m2 / hab, when the minimum required by the WHO is in the 9

m2 / inhabitant).

Break up very large urban blocks with low pedestrian activity, disarticulated with the urban fabric, to create new street layout and new blocks and streets that articulate the existing urban grid and favor pedestrian accessibility.

35

Modify the current zoning to allow a mix of uses that can activate the streets

at the pedestrian level, prioritizing the use of social housing.

Design of safe and friendly streets and roads for pedestrians.


Potential lots are identified as those that have incompatible uses with TOD Projects. These do

not contribute to the quality of the urban space because:

i. They generate access barriers

ii. They promote unsafe spaces

iii. Current uses are incompatible with urban development projects

iv. These lots currently host industrial uses and workshop/housing.

The intervention proposal will be developed in three phases.

(For more information on the phases, see Report 3)

2.3.3.1 Zoning

The zoning proposal includes new land uses, parking fees, and building heights that are consistent with a TOD Project. The following general strategies are proposed:

• That the zoning contributes to the activation of public space, facilitating trips on foot and by bicycle.

• It generates a mixture of uses that allows the possibility of living near employment opportunities and public services.

• It recovers the direct relationship between the facades of buildings and streets or public spaces.

At the specific level, the proposal proposes the following guidelines:

• Prohibit setbacks, in order to eliminate security walls and promote the passive surveillance between buildings and public spaces.

• In streets with a high pedestrian flows, the inclusion of commercial uses (shops) at street level is a requirement.

• The fronts of the stores towards the streets must not have a width greater than 10 meters.

• Limit the concentration of commerce. Stores should be limited to the first two floors

of buildings.

• Instead of a minimum number of parking lots, a maximum of 1 parking space is proposed for every 5 apartments, or 1 parking space per 1000m² of office, shop, hotel or equipment.

• In mixed-use buildings, the ground floor may have a mixture of commercial uses, amenities and housing. Offices / work areas should be located under housing units,

in case the two uses coexist.

• In the case of a hotel - housing building, residential use must be located above hotel uses.

36

The project proposes to replace the current zoning with Special Regulatory Zones (ZRE). This

type of zoning will be defined through a Specific Plan (PE). The area of action of the PE would

be determined by the lots contained in the three phases of the TOD pilot project.

2.3.3.2 Urban Mobility Strategies

The proposal for Hermilio Valdizan has a number of general sustainable mobility strategies. These are:

1. Promote pedestrian accessibility through the generation of new “streets for people”.

2. Promote the use of bicycles, with

the integration of cycle stops in the streets for people who can incorporate the movement of bicycles without the need to have

bicycle paths.

3. Generate bicycle lanes in avenues with linear parks.

4. A number of future bicycle rental locations are proposed, assuming that an integrated bicycle system can be incorporated with the metro in the future.


Graph Analysis Software, Depthmap, was used to develop a comparison of the pilot project with the current conditions. The maps show the integration of the road network today and in the proposal. In the pilot project, the new streets generate a greater level of integration in the road network, opening the possibility of creating new commercial areas, or mixed-use

buildings with commerce on the first floor.


Current Proposal

Figure 23: Road Mobility Proposal



37

2.4 Pilot projects benefits

At the urban level, each pilot project responds to the specific problems of its location. In principal, the projects improves accessibility to the city for people who currently live or will live within a radius of 800m from these stations through the generation of a diversity of uses, the concentration of program in a walkable distance to each station, and in particular

through the creation of a walkable urban fabric.

In the Historic Center, the metro is understood as a catalyst to re-imagine this area as a city for people. Through its strategies to reduce the impact of avenues as urban barriers, the pilot project in Central Station would improve access to the city within a radius of 800m. In addition, the recycling of "brownfield" land such as bus terminals and parking lots would facilitate the recovery of residential uses within the center, reversing a long process of the depopulation of the center.

On the other hand, the proposal would help prepare the city for a transition towards sustainable mobility, generating low-speed streets that incorporate the use of bicycles and improve accessibility for pedestrians.

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3 Implementation Plan

3.1 Normative - Institutional Roadmap

The following roadmap of normative – institutional modifications aims to show the changes that would allow the development and implementation of TOD Projects.

It is worth mentioning that, the activities and tasks required to execute TOD Projects involve the participation of different public entities, at different levels of government and powers of the State, as is the case of the Congress of the Republic, which is why the associated deadlines and challenges may be greater or lesser depending on how the roadmap is structured.

The roadmap below presents efforts of a different magnitude and the participation of

different levels of Government, powers of the State and public entities that will allow the

development of TOD Projects in the area of influence of the Line 2 Project according to what has been presented in the previous two deliverables of the Study:

A) Modifications of legal, normative and institutional nature to support a wider range for TOD interventions

1. Modify the PPP Law and related standards to incorporate TOD developments.

2. Include TOD guidelines and incentives in the urban planning rules to promote

private initiatives.

3. Designate (PGSU, AATE, EMILIMA or PROLIMA, the latter only for the Historical Center) or create a new public entity as a land agent, project structurer and fund manager, with the power to expropriate land and to issue and to collect LVC instruments to finance TOD Projects.

4. In the case of AATE, a change in its statutes is necessary so that it can assume powers in TOD developments, inside or outside the compound of the

metro project.

5. Define, instrumentalize and regulate the Air Rights in the RATDUS, as well as the process for its issuance and collection, allowing the issuance of CDAETS over public land.

B) Inclusion of the power to develop TOD Projects in contractual and planning models

1. Modify the Line 2 Contract so that the Concessionaire can be the promoter or one of the promoters of TOD interventions.

2. Likewise, it is recommended to incorporate in the next Metro lines contracts the possibility to execute TOD interventions, inside or outside the perimeter of the project, promoted and supervised by AATE. To accomplish this, is necessary the modification of the statutes of the AATE,

3. Include a TOD pilot in the Central Station as part of the Master Plan for the Historic Centre of Lima to 2035, in charge of PROLIMA, plan that will be

launched in 2018.

It is worth to mention that for the success in the implementation of TOD interventions in the city of Lima, is essential the commitment of the Local (districts) Governments.

39

3.2 Proposed Business Model

As business model proposals, we have defined seven (07) projects from the three (03) schematic proposals presented above. All the projects promote the generation of urban centralities and they would be executed as mixed-use real estate developments (housing, commercial and offices):

1. Tingo Maria - Phase 1, on the MTC sites.

2. Tingo Maria - Phase 2, on industrial and private blocks adjacent to Venezuela Avenue

and sites around the Amauta Coliseum.

3. Central - Phase 1, on the National Police barracks site.

4. Central - Phase 2, on the sites adjacent to the Palace of Justice and the sites of bus terminals.

5. Central - Phase 3, on sites of bus terminals in La Victoria district.

6. Hermilio Valdizan - Phase 1, on industrial and residential lots in the district of Ate.

7. Hermilio Valdizan - Phase 2, on industrial lots in the district of Santa Anita.

We propose to develop all the projects under the Projects on Assets mechanism, which would outline two business models according to: (i) its applicability in the short or long term; and, (ii) the ownership (public or private) of the sites to be intervened.

In all cases, the projects include social housing, public equipment and the creation of public

spaces necessary for the new population who will live, work and develop their entertainment and trade activities in these areas.

Figure 25: Business Models

Own production

The Public Sector acquires private

sites

Through a publictender, the Public

Sector awardsthose lands to a

Private Real Estate Promoter

The Private Promoterdevelops the TOD

Project, consideringinvestment

commitments in public infrastructure.

The PrivatePromoter delivers

the publicinfraestructura to

the publicpromoter.

The PrivatePromoter sells

residentialapartments,

offices and comercial areasdevelped in the

Project

Potential sitesidentified to

implement TOD Projects

The Public Sector owns the sites

Model 1: Projects on sites of private ownership

Model 2: Projects on sites of State ownership

40

The execution of the projects would have the following stages:

Figure 26: Stages for the proposed pilots

Own production

3.2.1 Structurer and Promoter

From the analysis under Peruvian normative-institutional framework and from the various meetings with private stakeholders, we conclude that a public promoter will have greater

incentives and tools to design TOD Projects.

Given the purpose of the projects (generation of new urban centralities), we suggest the MVCS to be the sponsor of the proposed projects. The recommendation is bases on the fact that the projects are part of a sectoral program, and because, from all identified stakeholders, the MVCS has, today, more competencies aligned with this type of projects.

However, we do not rule out the possibility that the promoter could be another entity such as the MTC or the MML, however, we conclude that these are alternatives of greater complexity

due to: i) the real estate-urban nature of the proposed pilots, and ii) the competencies in force of those entities.

3.2.2 Developer and real estate operator

We propose in all cases to be responsibility of the private sector.

3.2.3 Contractual modality

We propose the purchase-sale modality with investment commitment.

3.2.4 Land acquisition process

In all the proposed projects, we suggest the land transfer scheme, from the public promoter entity to the project developer.

1. Design and Planning

Schematic Proposal and Prefeasibility Study: Initial stage of the Project evaluation. Work coordinated by the structurer and promoter of the Project.

Feasibility Study and Final Proposal: Final technical report that includes coordination with the district municipality and the Planning Institute.

Specific Plan / Urban Development Plan: Approval of the Metropolitan Municipal Council.

2. Public tender

Promotion: The corresponding entity carries out the promotion of the Project, receiving the proposals of Real Estate Developers.

Award: The Project Sponsor closes the contract with the awarded Real Estate Developer.

Evaluation of Offers: The corresponding entity(s) analyze and evaluate the proposals through previously established parameters.

3. Project development

Pre-Construction and Financial Close: Initial stage where the Real Estate Developer performs the design and engineering studies, structure, among others. Meanwhile, procurement of licenses. Finally, the financial feasibility is carried out and the financial closing with banks.

Building: Stage of development of the intervention.

Delivery of units and public spaces

41

In the case of the projects formulated on private sites, we propose the acquisition or

expropriation of the land by the public entity sponsor of the project. It should be noted that, as it was developed in the second deliverable of the Study, in order to make the expropriation enforceable, we require a Law of the Congress establishing that the TOD Project is of public interest/necessity.

3.2.5 Urban planning

In accordance with the general framework developed in the second deliverable, we propose

that all the schematic proposals should be developed in detail in a Specific Plan (PE), or, in the case of the projects on lands of the Lima Historic Center, should be included in the Master Plan of the Lima Center Historic to 2035.

It should be noted that any PE must be proposed by the public promoter in coordination with the IMP and approved by the corresponding municipalities.

Finally, these options were considered for their possible short-term execution. We did not consider The Urban Development Plan of Metropolitan Lima (PLAM 2035) because, by this

time, it is not prioritized, so does have a budget nor release date.

3.2.6 Private investment commitment

All the projects incorporate social housing, public equipment and the habilitation of the necessary public spaces for the new population that will live, work and develop their activities of entertainment and commerce in those areas. The investment commitment would

be distributed as follows:

Table 3: Investment Commitment

Tingo Maria Central Hermilio Valdizan

Investment Commitment

Phase 1 Phase 2

Phase 1 Phase 2 Phase 3

Phase 1 Phase 2

Social housing

Public equipment

Public spaces

According to the design of each project, the social housing corresponds to residences associated to the “Techo Propio” Program from the Mivivienda Fund. In this program, the

value of the houses cannot exceed the cost of S/ 101,250.

On the other hand, the rules of the public tender must contain the design and characteristics of the equipment and public spaces to be built by the private sector.

Table 4: Public Equipment in the Proposals

Tingo Maria

Phase 1

Tingo Maria

Phase 2

Central Phase 1

Central Phase 2

Central Phase 3

Hermilio Valdizan Phase 1


- Health care facilities

- Cultural center

- Reserve for public equipment

- - Reserve

for public equipment

- Sports facilities

- Sports facilities

- Library - Municipal auditorium

- Preschools - Preschools

- Schools

- Schools - Schools

- Sports facilities

- Health care

facilities - Health care

facilities

- Municipal auditorium

- Municipal auditorium

- Library

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In the case of public equipment, prior to the tender, the public promoter must coordinate

with the corresponding National, Regional and Local Governments. The public entity recipient will decide if the infrastructure will be operated in a conventional manner or if it will be done via PPP.

Finally, in the case of public spaces, is necessary the coordination with the municipalities that will receive those infrastructures.

It is not ruled out that the private developer reserves some developments with the same public use to be operated by a private (health, education, sports), thus complementing the

offer of these equipment.

3.2.7 Financing and incentives for the private developer

We propose that the financing of the project run at the private’s risk. The Peruvian market has its own rules for financing real estate projects, in this sense; the proposal follows the following scheme:

Table 5: Financing Structure

% Project cost

Equity of the developer-builder 20-30%

Presale 20-30%

Bank debt Up to 50%

As relevant incentives to attract participants from the private sector in the development of

TOD Projects (which impact on their profitability), we point out the benefits that the public sector can provide for the fast procurement of permits and licenses associated with

construction and access to basic services (such as water, electricity, drainage, among others).

3.2.8 LVC Mechanisms

According to the findings in Reports 2 and 3 of this Study, there are no LVC instruments in the Peruvian legal framework; therefore, the proposed projects have not considered any financing in this way.

The DAETs (see Report 2) were identified in Peruvian urban legal framework; however, their application is limited due to: (i) the potential building right and its benefits correspond to the owner of the property, and, (ii) there is currently no procedure to materialize the instrument.

In this sense, relevant normative and institutional changes are required to be able to use them.

In the case of long-term projects, we have examined the possibility to incorporate into the business model, the possibility of financing through DAETs generated on State owned lands.

To make it viable, we present the following road map in three levels of action:

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Own production

It should be noted that in the case of Air Rights, the same roadmap could be applied.

Likewise, is important to note that the application of the DAET mechanism may be complementary to the operation of the TOD Project. In an operation on public land transferred through a Project on Assets, the DAET may not be the best instrument to

enhance the project’s efficiency. However, outside the scope of the pilot interventions, the DAET mechanism can serve as an incentive for the owners and promoters to generate operations of renewal and densification of uses (once the Receptor Zones are declared).

Because the application model for DAETs in the Peruvian case is still preliminary, it was not included in the financial modeling exercise for the private developer.

3.2.9 Roadmap

Based on the general framework developed in the Report 2 of this Study, and the business model proposed in this section, we develop the roadmap to make viable the TOD Projects proposals:

01

Institutional

02 Urban Planning

03 Financial structuring

1. Define, instrumentalize and regulate the Air Rights in the RATDUS. 2. Designate or create an entity responsible for the issuance, collection and use of DAETS. 3. Regulate the process of issuance and collection of CDAETS on public lands.

1. Define Generating Zones on public lands where the Air Rights cannot be exploited. 2. Define DAETs Receptor Zones on areas around the Metro stations.

1. Set theoretical prices for DAET. 2. Define conversion tables for the DAETS value according to sectors within the Receptor Zones. 3. Promote an exchange market for CDAETs.

Figure 27: Roadmap for the implementation of LVC mechanisms

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Table 6: Roadmap

Stage Roadmap

Land Acquisition / Expropriation (Public sector)

1. Designate a public entity (which could be the PGSU or another program of the MVCS, AATE-MTC, EMILIMA-MML, or another) or create a new entity to be the structurer and promoter of TOD Projects.

2. Grant to this entity the capacities of land agent and assign a budget for this purpose.

Design and Planning (Public sector)

3. Incorporate TOD guidelines and incentives into the general urban and mobility planning guidelines.

4. Define and materialize the incentives for TOD developments in the PE or in the PDU that contains the TOD Project. These incentives must include easy options to accelerate the procurement and coordination between the public promoting entity and the Regional and Local Governments (district and regional municipalities).

5. The structurer and promoter should prepare the proposal and feasibility study of the TOD Projects and manage, together with the IMP and the municipalities, the preparation and approval of the PEs.

Public Tender

(Public and Private Sector)

6. The structurer and promoter will carry out the

promotion of the projects. In this Study, we recommend a public tender.

7. Awards the projects to a private developer and supervises the contractual execution.

Own production

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3.2.10 Summary of the proposed business model

TOD Business Models

Metro L2 Stations Tingo María Central Hermilio Valdizán

Proposal-Phase TM-Phase 1 TM-Phase 2 Central-Phase 1 Central-Phase 2 Central-Phase 3 HV - Phase 1 HV - Phase 2

Districts Cercado de Lima Cercado de Lima Cercado de Lima Cercado de Lima La Victoria Santa Anita Ate

Owner of the land

Public Private Public Private Private Private Privados

LotsParking and sports center of

the MTC

Sites on Venezuela Avenue

and around the Amauta

Coliseum

Police Headquarters on

Alfonso Ugarte Avenue

Sites adjacent to the Palace of

JusticeBus terminals Private sites Private sites

Total area 82,188 m2 339,502 m2 13,439 m2 56,065 m2 19,518 m2 425,430 m2 381,573 m2

Buildable area 28% 47% 100% 70% 100% 45% 39%

TOD Tipology Plan and redevelop Plan and redevelop Urban insertion Urban insertion Urban insertion Planning and development Planning and development

10% of total units 10% of total units 10% of total units 10% of total units 10% of total units 10% of total units 10% of total units

Private developer

investment

commitment

Health center 1,500m2

Library 1,200m2

Cultural Center 10,000m2

Municipal Auditorium 2,500m2

Schools 16,200m2

Sports Equip. 8,000m2

Reserve of Equip. 1,912m2-

Reserve of Equip. 2,906m2

Sports facilities 3,780m2

Preschool 4,160m2

Schools 11,025m2

Health Center 4,410m2


Sports facilities 2,800m2

Preschool 5,600m2

Schools 8,167m2

Health Center 3,266m2


Library 672m2

Avenues and sidewalks

24,875m2 (30%)

Green and public areas

34,009m2 (41%)


68,019m2 (20%)


112,537m2 (33%)

-


16,910m2 (30%)

-


59,578m2 (14%)


173,463m2 (41%)


42,690m2 (11%)


189,834m2 (50%)

Social

housing

Public

spaces

Social

Housing

Social

housingSocial

housing

Social

housing

Public

equipment

Public

spaces

Public

spaces

Public

spaces

Public

equipment

Public

equipment

Public

equipment

Social

housing

Public

equipment

Social

housing

Public

equipment

Public

spaces

46

3.3 Financial pre-feasibility

The financial pre-feasibility analysis was elaborated from the point of view of the real estate developer and considers as a principle to obtain a minimum return of 15%4.

As indicated in the previous section, all projects have a standard proposal where we develop mixed-use buildings, considering multifamily housing, offices and commercial areas.

The financial models consider the following steps:

4 According to the interviews with participants in the real estate sector, the minimum profitability required to enter into a real estate project is in the range of 15% - 20%.

Tingo Maria Phase 1

Year 1

Stage 1: Year 1–3 (16%)

Stage 2: Year 3-4 (12%)

Stage 3: Year 4-5 (12%)

Stage 4: Year 5-6 (12%)

Stage 5: Year 6–7 (12%)

Stage 1: Year 2–3 (20%)

Stage 2: Year 4 (20%)




Stage 1: Year 4

Stage 2: Year 5

Stage 3: Year 6

Stage 4: Year 7

Stage 5: Year 8

Tingo Maria Phase 2

Year 1

Stage 1: Year 1–3 (32%)

Stage 2: Year 3-4 (6%)



Stage 5: Year 6–7 (6%)



Stage 1: Year 2–3 (40%)







Stage 1: Year 4

Stage 2: Year 5

Stage 3: Year 6

Stage 4: Year 7

Stage 5: Year 8

Stage 6: Year 9

Stage 7: Year 10

Central Phase 1

Year 1 Year 1-3 (60%) Year 2-3 Year 4-5

Central Phase 2

Year 1

Stage 1: Year 1–2 (17%)

Stage 2: Year 2-3 (13%)

Stage 3: Year 3-4 (13%)

Stage 4: Year 4-5 (10%)

Stage 5: Year 5-6 (10%)






Stage 1: Year 4

Stage 2: Year 5

Stage 3: Year 6

Stage 4: Year 7

Stage 5: Year 8

Central Phase 3

Year 1

Stage 1: Year 1–2 (20%)

Stage 2: Year 2-3 (15%)

Stage 3: Year 3-4 (15%)

Stage 4: Year 4-5 (15%)





Stage 1: Year 4

Stage 2: Year 5

Stage 3: Year 6

Stage 4: Year 7


Year 1

Stage 1: Year 1–3 (32%)







Stage 1: Year 2–3 (40%)







Stage 1: Year 4

Stage 2: Year 5

Stage 3: Year 6

Stage 4: Year 7

Stage 5: Year 8

Stage 6: Year 9

Stage 7: Year 10

Preconstruction

Period Pre-sales

Period Construction

Period

Sale and Delivery Period

47

All the interventions would be carried out in areas where residential development is limited, so there will be additional costs modify these areas. In this way, the pre-feasibility analysis also includes the implementation and urbanization of the areas of intervention, which include

the implementation and construction of streets and blocks, as well as the implementation of green and public areas. Finally, as a design of the proposals, the inclusion of social housing and the implementation of public equipment will be associated to the projects according to the necessity of each zone to be intervened. Within the financial assessment, all these concepts are included in the investment commitment of the real estate developer (See

Report 3, section 8.4.3).

It is worth mentioning that the information used to estimate the assumptions corresponds to market values obtained by the Advisory Team. Future estimates of costs, prices, among other information were not considered given the arbitrariness for their estimation within the local environment. (For more information on the assumptions, see Report 3, sections 8.4, 8.5 and 8.6).

Below, the results of the financial pre-feasibility assessment:

Figure 28: Housing Offer in the Proposals (In units)

Own production

Tingo Maria 1, 1,535

Tingo Maria 2, 10,171

Central 1, 787

Central 2, 1,572

Central 3, 1,004

Hermilio Valdizán 1, 12,686

Hermilio Valdizán 2, 10,310

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000


Year 1

Stage 1: Year 1–3 (32%)







Stage 1: Year 2–3 (40%)







Stage 1: Year 4

Stage 2: Year 5

Stage 3: Year 6

Stage 4: Year 7

Stage 5: Year 8

Stage 6: Year 9

Stage 7: Year 10

48

Figure 29: Projects Term

(In years)

Own production

Table 7: Financial Pre-Feasibility Results (In USD millions)

Project Revenue Land Cost

(a) Building Cost

(b) Interests & Taxes

Project Profit

Tingo Maria Phase 1 222 29 133 24 36

Tingo Maria Phase 2 1,443 191 864 155 233

Central Phase 1 92 14 56 10 13

Central Phase 2 204 33 126 19 27

Central Phase 3 122 22 75 11 14

H. Valdizán Phase 1 1,552 159 998 156 239

H. Valdizán Phase 2 1,239 117 812 123 187

(a) Includes the discount necessary to obtain the minimum return. (b) Includes the expenses associated to the building and the cost for public commitment.

Own production

Table 8: Market Profitability vs. Required Profitability

Project

Profitability

without discount

Profitability

with discount

According to the evaluation, all interventions resulted in profitable operations. However, all were below the minimum

profitability required (Project IRR). For the analysis, the cost of

the land was considered as a control variable, in that sense, discounts were made in that variable to make profitable the projects.

Tingo Maria Phase 1 12.9%

15.0%

Tingo Maria Phase 2 12.0%

Central Phase 1 12.0% Central Phase 2 7.8% Central Phase 3 13.1% H. Valdizán Phase 1 9.5% H. Valdizán Phase 2 9.1%

Own production

6

43

5 5

3 3

2 6

2

21

7 7

0

2

4

6

8

10

12

Tingo Maria 1 Tingo Maria 2 Central 1 Central 2 Central 3 Hermilio

Valdizán 1

Hermilio

Valdizán 2

Financing Years Project Tail

8

10

5

7

6

10 10

49

As can be seen in Table 9, in most cases the amount of land discount was similar or less than

the investment commitment, suggesting the financial feasibility of the projects under market conditions. The case of Central Phase 2 is a particular since there are building limitations that would limit the profitability of the Project, given its nature as a monumental urban area.

Table 9: Land Discount vs Investment Commitment (In USD million)

Project

Discounted Land Cost (a=b-c)

Market

Value of the Land

(b)

Discount Investment

Commitment

Amount

% / Land

Market Value

Amount % / Land

Market Value

Tingo Maria Phase 1 29 35 6 16.7% 16 46.3%

Tingo Maria Phase 2 191 238 48 20.0% 93 39.0%

Central Phase 1 14 17 3 18.8% 3 19.5%

Central Phase 2 33 49 16 32.8% 7 14.8%

Central Phase 3 22 24 2 9.6% 4 18.4%

H. Valdizán Phase 1 159 250 91 36.5% 87 34.6%

H. Valdizán Phase 2 117 194 77 39.6% 76 39.3% Own production

50

3.3.1 Summary of financial pre-feasibility results

Financial Prefactibility (USD millions)

Station L2 Tingo María Estación Central Hermilio Valdizán

Proposal-Phase TM-Phase 1 TM-Phase 2 Central-Phase 1 Central-Phase 2 Central-Phase 3 HV-Phase 1 HV-Phase 2

Sales 222 1,443 92 204 122 1,552 1,239

Land -29 -191 -14 -33 -22 -159 -117

Building -157 -1,019 -66 -144 -86 -1,154 -935

Investment

commitment-16 -93 -3 -7 -5 -87 -76

Utility 36 233 13 27 9 153 111

IRR 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%

Utility / Sales 16.3% 16.2% 14.2% 13.1% 7.6% 9.8% 9.0%

Utility / Land 1.24x 1.22x 0.96x 0.81x 0.42x 0.96x 0.95x

Own production

51

4 Main Conclusions and Recommendations

Aspect Conclusions Recommendations

TOD in urban, mobility and transport planning

There are no TOD guidelines and/or incentives to promote developments of these characteristics.

Incorporate the TOD concept into the guidelines of urban, mobility and transport planning rules (for example, the RATDUS and other standards).

- In the short term, this could be led by the MVCS since it is working on an update of the National Housing and Urban Planning Policy.

- In the long term, and specifically, the Study of Institutional Arrangements proposes the creation of a Program for the Urban Development Promotion associated to the Lima Metro and other mass transport systems. This program would be managed by the MVCS, and would define the TOD guidelines and the complementary LVC mechanisms associated to the development of the metro network and of the mass transport.

There is no effective coordination between the many actors involved in TOD Projects (MVCS, MTC, MML, MPC, PGSU, AATE, IMP, Proinversion and district municipalities).

As stated in the Study of Institutional Arrangements, urban and mobility planning processes must be articulated with the transport planning (Metro, BRT, etc.) through the creation of a Multisector Committee composed by the Ministries and Municipalities involved in the development of the metro network.

Current regulation includes urban planning instruments that can be applied to formulate TOD Projects:

- In the short term, the Master Plan of Lima Historic Center to 2035 (which is a PE) for interventions in that area.

- In the medium to long term, the PE for specific interventions or PLAM 2035 to include several interventions as this plan is pending on an update.

52

TOD via PPP It is not possible to execute TOD urban operations, which are mainly real estate interventions, via PPP schemes according to the current Peruvian legislation. However, it is possible to use the Project on Assets scheme to develop TOD Projects on freely available public land where no risk is transferred to the Public Sector.

In the long term, the use of PPPs requires the modification of the PPP Law and its related regulations to incorporate TOD Projects.

LVC Mechanisms The Peruvian regulation does not include any LVC mechanism. The concept of Air Rights is not defined either. However, among the existing instruments, the DAET could be applied as a LVC mechanism, but its application is limited because the potential building right and its benefits correspond to the owner of the property.

Define, implement and regulate the Air Rights in the RATDUS and the procedures for their issuance and collection in order to be applied as a LVC mechanism. From an extensive interpretation of the rule, this Study has evaluated the possibility that the State captures capital gains through the DAET to finance TOD Projects, similar to the case of Porto Maravilha in Rio de Janeiro (Brazil) with the CEPAC. To that end:

- DAET should be generated in State or Municipal properties previously declared as Generating Zones (ZR);

- the areas of influence of the metro stations must be declared as Receptor Zones;

- designate an entity or create a new one responsible of centralizing the process of issuance and collection of the CDAETs, as well as their use in the financing of TOD Projects; and

- define the procedures and mechanisms for the issuance and collection of CDAETs.

Schematic proposals

Through the 3V Approach analysis, we prioritized and selected Tingo Maria, Central and Hermilio Valdizan Stations as those with the greatest TOD potential.

The proposals have a comprehensive planning approach, with mixed uses which purpose is to densify these areas, as well as to create / recover new spaces and public facilities to cover these deficits in the area of intervention, and the expansion and improvement of road and services infrastructures.

Public entity as land agent and TOD Projects Promoter

A public promoter will have greater incentives and tools to design TOD Projects. However, there is no public entity with the capacity to be execute this role.

Designate an existing public entity or create a new one (preferably at a National Government level) as a land agent, project sponsor and fund manager, with administrative and financial capacities to expropriate land, and to issue and collect LVC instruments to finance TOD Projects. This public entity could be:

53

- MVCS, through PGSU or another existing or new program.

The TOD Projects are urban in nature and this Ministry has departments that may lead this type of projects. The PGSU does not have all the required competences, so it could be only the promoter, but not the executor of the TOD Projects.

- MTC, through AATE or another new entity. AATE requires a change in its

statutes to be able to perform as real estate-urban promoter inside or outside the Lima Metro Network. However, AATE faces its ability to intervene outside the perimeter of the infrastructure project, in a pure urban development. We understand that, like other public subway managers, AATE can be granted with competences to develop real estate, commercial, equipment or simply urban developments around the stations. In this sense, AATE could acquire new lands, next to the stations, to develop these projects.

- MML, through EMILIMA or another new entity. Although EMILIMA has competences to act as real estate developer in TOD Projects, its scope of action is limited because: (i) it depends on the MML, (ii) it does not have a budget or incentives to carry out urban developments; and (iii) it does not interact with the transport system manager (MTC-AATE). For interventions in Lima Historic Center, the entity on charge could be PROLIMA, within the competences assigned to it.

Business model and financial prefeasibility

In the Peruvian context, there are no incentives to promote TOD from Private Initiatives, therefore, TOD Projects must be formulated as a Public Initiative, and entrusted to a private real estate developer.

Formulate the TOD Projects under the Project on Assets scheme, through the scheme of purchase-sale with investment commitment.

Given the complexity of the proposals, the three schematic proposals were divided into different phases, depending on the ownership of the land

(public-private) and the site location (district), defining 7 TOD Projects: Tingo Maria phases 1 and 2; Central phases 1, 2 and 3; and Hermilio Valdizan phases 1 and 2.

To make viable these proposals requires a discount in the sale value of the lands, allowing the private developer to obtain the minimum

profitability to make the projects bankable. That discount is comparable, to one degree or another, to the investment commitment amount.

In addition, the project can be financially improved by granting or facilitating options on:

- State guarantees to improve the financing conditions of the projects,

- the procurement of construction permits and licenses, in coordination with the Municipalities,

- credit facilities to the new residents of the projects.

54

TOD within the perimeter of Contract Line 2

Within the perimeter of the Concession It is slightly viable to propose TOD interventions in the Concession area. In the case of Line 2, there is no incentive for the Concessionaire to carry out developments of TOD characteristics inside or outside the stations.

For the State, to be able to carry out developments that affect the station areas, it would be necessary to make changes to the Line 2 Contract in order to give that power to the State and to remove the right of exploitation of the Concessionaire.

TOD in future metro and mass transport lines

From the experience with Metro Lines 1 and 2, there is evidence of the need to incorporate the TOD concept in the initial stages of the formulation of the metro projects. It is very important that this result in a significant improvement in the concession contracts design, allowing the development of complementary businesses, as including real estate developments in the area of the stations; the greater and better use of these lands would generate additional land value that will help finance the infrastructure works or complementary works to the metro.

In the case of future lines (3 and 4), a TOD intervention scheme based on an extension of the AATE competencies can be prepared to carry out urban developments, complementary to the project in the stations and their surroundings. In this sense, the AATE would undertake, in parallel to the infrastructure project, new lines of business based on urban operations on the stations or attached to them. Alternatively, this public TOD entity could be the MVCS, another entity of the MTC, MML or a new one. However, if it were not AATE, TOD should be outside the perimeter of the infrastructure project. A change of the PPP Law or the enactment of a new one, would allow adopting different figures to that of the Project on Assets and address, for example, commercial, real estate and equipment developments in stations under PPP scheme, as has been happening in other countries of the region.

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