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Principles of Public-Private Partnerships for Real Estate & Economic Development PREPARED FOR L ELAND C ONSULTING G ROUP Urban Strategists PREPARED BY.

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Presentation on theme: "Principles of Public-Private Partnerships for Real Estate & Economic Development PREPARED FOR L ELAND C ONSULTING G ROUP Urban Strategists PREPARED BY."— Presentation transcript:

1 Principles of Public-Private Partnerships for Real Estate & Economic Development PREPARED FOR L ELAND C ONSULTING G ROUP Urban Strategists PREPARED BY

2 Principles of Public-Private Partnerships 2 Introduction Real Estate Development: Principles and Process Public-Private Partnerships: How and Why? Public-Private Partnership Case Studies: Otay Mesa Riverplace Tualatin Commons PRESENTATION OUTLINE

3 Principles of Public-Private Partnerships 3 INTRODUCTION Leland Consulting Group: What we do Work with public & private sector real estate executives to solve tough problems and:  Stimulate economic success  Make great urban places  Enhance the human experience

4 Principles of Public-Private Partnerships 4 INTRODUCTION Professional Services  Strategic Planning  Market Research/Analysis  Economic and Demographic Forecasting  Land Use Strategies  Development Programming  Negotiations and Deal Structuring  Public-Private Partnerships  Financial Analysis  Regulatory Approvals  Litigation Support  Project Management

5 Principles of Public-Private Partnerships 5 DAVE LELAND  40 years industry experience as Developer Consultant Advisor Owner  Blend of public and private clients  Geographic focus: west coast, national, international  Counselor of Real Estate (CRE)  Frequent ULI panelist and speaker  Mixed-Use, Smart Growth leader

6 Real Estate Development: Principles and Process

7 Principles of Public-Private Partnerships 7 Developer Experience Financial Capability Design Excellence Community Goals Success Public-Private Partnership SUCCESSFUL PROJECTS Successful public-private development projects require a holistic and balanced approach

8 Principles of Public-Private Partnerships 8 Design FeasibilityImplementation Feasibility DesignImplementation Backwards A Bit Better Best – Iterative, Holistic, and Multidisciplinary Preliminary Feasibility Design Preliminary Financial Analysis Outreach Market Assessment Political Evaluation Design Financial Feasibility Implementation DEVELOPMENT IS AN ITERATIVE PROCESS

9 Principles of Public-Private Partnerships 9 MARKETS ARE UNFORGIVING  Markets are people & their Needs Desires Ability to pay Willingness to pay  With choice, positive price – value is essential  People reject places and products that are not responsive to their needs, desires, or budget

10 Principles of Public-Private Partnerships 10 MARKETS CHANGE

11 Principles of Public-Private Partnerships st CENTURY MARKET “WAVES”  Megaregions and Urbanization  Asia, Abundance, Automation  Energy: Carbon Scarcity, Renewal Emergence  Infrastructure Upgrades  Aging population  Public focus: Human Capital, Education, Amenities  Pacific NW Clusters: High Tech and Clean Tech Natural Resources Manufacturing and Trade

12 Principles of Public-Private Partnerships 12 RISK MANAGEMENT Development involves risk:  Market, capital, and operating risks  Risk is determined by project type, developer experience and local conditions  Experience is essential  Each component must be successful and complement the others  Exceed the market’s expectations  Public-private partnerships help to mitigate risk Two thirds of mixed-use developments by inexperienced developers fail.

13 Principles of Public-Private Partnerships 13 Psychiatrist Politician Financial Analyst Real Estate Market Analyst Urban Planner Architect & Designer Public Relations Specialist Manager Engineer Lawyer Visionary SUCCESSFUL DEVELOPERS WEAR MANY HATS

14 Principles of Public-Private Partnerships 14  Silos – A Modern Problem  Too many specialists, not enough generalists  Planners should understand how investors think.  Lenders should understand the built environment.  Real estate should be part of the planning DNA. Design Planning Transportation Finance AVOID THE SILOS

15 Principles of Public-Private Partnerships 15 ENGAGING BOTH SIDES  20th Century: Left brain thinking  21st Century: Whole brain thinking For individuals and organizations Communication is essential

16 Public-Private Partnerships: Why and How

17 Principles of Public-Private Partnerships 17 WHY PUBLIC-PRIVATE PARTNERSHIPS?  Enhance feasibility – projects that otherwise wouldn’t happen  Accelerate investment timeline  Provide greater public benefits  Achieve significant policy goals  Improve quality, scale, or location  Overcome barriers Financial Market Regulatory Physical Political

18 Principles of Public-Private Partnerships 18 Leverage:  Strategic management of public money  Link public projects to private investment  “Build it and they will come” is not always true…  Spend limited public $$$ where you know it will leverage private investment  Private to public investment ratio of 4:1 or 5:1 WHY PUBLIC-PRIVATE PARTNERSHIPS?

19 Principles of Public-Private Partnerships 19 Create investment momentum:  Trigger additional private investment  Create an anchor for future projects  Provide an amenity for residents  Strengthen tax base  Create a sense of place WHY PUBLIC-PRIVATE PARTNERSHIPS?

20 Principles of Public-Private Partnerships 20 Many parts must simultaneously fit together … The whole is greater than the sum of its parts. Design FinanceMarket Successful Project The Market Location, Visibility, and Access Leadership & Communication Financial Capability Developer Experience & Capability Public Policy & Regulation Design Timing SUCCESSFUL PROJECTS

21 Principles of Public-Private Partnerships 21 Every deal is different!  Financial and non- financial participation  Formal and informal agreements  Use all the tools in your toolbox  One or more public agencies (not just the City) PUBLIC-PRIVATE PARTNERSHIPS DEALS

22 Principles of Public-Private Partnerships 22 RESPONSIBILITIES ARE SHARED TASK

23 Principles of Public-Private Partnerships 23  Expedited permitting  Master planning  Regulatory assistance  Tax abatements  Land assembly  Investment in infrastructure Streets Sidewalks Parks Parking Tualatin Common TYPICAL PUBLIC SECTOR PARTICIPATION

24 Principles of Public-Private Partnerships 24  Joint marketing  Loans, financing  Tax increment financing  Commitment of SDCs  Community relations  Many, many more… TYPICAL PUBLIC SECTOR PARTICIPATION

25 Principles of Public-Private Partnerships 25 TYPICAL PUBLIC SECTOR PARTICIPATION Financial Incentives  TIF  Tax Credits  Tax Abatement  Zero/Low-Interest Loans  Public-private partnerships  Grants Façade TOD Energy/Green  Density bonuses

26 Principles of Public-Private Partnerships 26 What the Public Sector Seeks from the Private Developer:  Developers who know Mixed-use and Place Making Know the public scrutiny and won’t back out Understand public process Have experience in the type of project desired Successful track record  Developers Who are Financially Strong Equity or an equity source in place Debt sources as well  An open book process WHAT THE PUBLIC SECTOR SEEKS

27 Principles of Public-Private Partnerships 27 What the Developer Seeks from the Public Sector:  Strong Political Will Stable City Council/Planning Commission Community Support Community and Business Alignment Favorable (or at least neutral) media  Public Financial Means Urban Renewal Bonding Capacity Land Control Other Needed Incentives and Mechanisms WHAT THE PRIVATE SECTOR SEEKS

28 Principles of Public-Private Partnerships RFQ – find your partner 2.MOU – establish the deal outline 3.DDA – create the plan, hammer out the details 4.Ongoing management agreements TYPICAL DEAL PROCESS

29 Principles of Public-Private Partnerships 29 MOU  Less complex  Early stage  Outline deal points  Due diligence stage  May/may not be legally binding …but politically committing MEMORANDUM OF UNDERSTANDING (MOU)

30 Principles of Public-Private Partnerships 30 DDA or DA  Next step after the MOU  Master legal document to structure partnership  Legally binding  Extremely detailed  Roles & responsibilities  Recourse  Many, many deal points… DEVELOPMENT & DISPOSITION AGREEMENT

31 Principles of Public-Private Partnerships 31  Public contributions  Development and land purchase phasing  Purchase price  Upside participation  Ability to resell property  Design standards  Timeline  Roles and responsibilities  Offsite plan  Development obligations  Performance requirements  Remedies for non- performance DDA DEAL POINTS

32 Principles of Public-Private Partnerships 32  Land leases  Parking leases  Easements  Building leases  Maintenance agreements  Marketing agreements Tualatin Commons OTHER AGREEMENTS

33 Principles of Public-Private Partnerships 33  Understand your partners and key players  Develop a communication strategy  Build public trust through involvement  Be responsive to each other’s needs  Have a common vision COMMUNICATE EARLY AND OFTEN

34 Case Studies: Otay Mesa, Riverplace, Tualatin Commons

35 Principles of Public-Private Partnerships 35 OTAY MESA: THE SETTING  High volume border crossing  Huge potential, low investment  4.9 jobs per acre  New economy  Growth pressures Otay Mesa

36 Principles of Public-Private Partnerships 36 OTAY MESA: GOALS  “A moment of opportunity: Looking Back from 2025”  Strengthen the economic base  Diversify employment and investment  Balance land uses  Improve access and mobility  Plan for harmonious relationships between uses  Meet the need for housing  Create complete places

37 Principles of Public-Private Partnerships 37 OTAY MESA: PROCESS  Strategic Framework  Stakeholder workshops and coordination  Economic and physical research  Case studies  Otay Mesa Community Plan Update

38 Principles of Public-Private Partnerships 38 OTAY MESA: IMPLEMENTATION  Fund SR-11, SR-125, and I-905 projects  Provide additional industrial land, sanctuary in East County  New border crossing  Establish urban office campuses  Develop underutilized land  Attract educational institutions  Expand workforce housing options  Define future role of Brown Field

39 Principles of Public-Private Partnerships 39 OTAY MESA: IMPLEMENTATION  Celebrate success!  Cultivate champions  Establish partnerships  Prioritize decisions  Pursue multiple projects and activities  Brand the Mesa

40 Principles of Public-Private Partnerships 40 OTAY MESA: OTHER MODELS  Hillsboro, OR  Emeryville, CA  Irvine Business Complex, CA  Brownsville, TX  Las Colinas, Irving, TX  Santa Theresa, NM

41 Principles of Public-Private Partnerships acre riverfront urban resort in Downtown Portland RIVERPLACE

42 Principles of Public-Private Partnerships 42 WeyerhaeuserPortland General Corp. WRECO CWDC 100% Cornerstone Columbia Development Company 50% RIVERPLACE OWNERSHIP STRUCTURE

43 Principles of Public-Private Partnerships 43  Luxury boutique hotel  Condominiums  Apartments  Athletic club  Office building and retail  Multiple restaurants  Entertainment retail  Parking  Marina  Esplanade RIVERPLACE PRODUCT MIX

44 Principles of Public-Private Partnerships 44 RIVERPLACE DETAILS  Goal: Create a residential neighborhood and destination on the waterfront  Deal Structure: PDC: Site cleanup, land write down, build marina Cornerstone: Development, Columbia successful bidder

45 Principles of Public-Private Partnerships 45 RIVERPLACE Lessons Learned  Market issues  Retail issues  Noise issues between uses  No back door  Triangular site constraints  Inadequate parking  Construction complexity

46 Principles of Public-Private Partnerships 46 Redevelopment of 19-acre former dog food factory: Tualatin Sherwood Road TUALATIN COMMONS

47 Principles of Public-Private Partnerships 47 TUALATIN COMMONS  Goals based on citizen input:  Strong civic focus;  Pedestrian and vehicular circulation;  Day and night uses;  Strong visual presence at major entrances;  Improved economic climate for downtown businesses;  Convenient and adequate parking;  Links to nearby retail, civic, and recreation uses;  Downtown built for the long term (50+ years); and  Retention of downtown's retail market share.

48 Principles of Public-Private Partnerships 48 TUALATIN COMMONS  Located in a floodplain, built a 3.1 acre lake $5 million public, $35 million private  Hotel  Multiple restaurants, limited retail  Condominiums and apartments  Office buildings  Public open space

49 Principles of Public-Private Partnerships 49 TUALATIN COMMONS  The “Heart of the City”  Not one developer but many  City responsible for maintenance and planning events for public areas  Emphasis on public art  Marketing  Citizen group “Tualatin Futures”

50 Principles of Public-Private Partnerships 50 CASE STUDY CONCLUSIONS  Flexibility and diversity with multiple developers versus one developer  Community support and ownership  Political support  Important to ensure quality on all levels  Understand the market for ALL uses  Anticipate problems before they arise

51 L ELAND C ONSULTING G ROUP Urban Strategists Portland Denver San Angelo Mexico


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