Public-Private Partnerships for Real Estate & Economic Development Principles of Public-Private Partnerships for Real Estate & Economic Development PREPARED FOR PREPARED BY LELAND CONSULTING GROUP Urban Strategists

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

Leland Consulting Group: What we do 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

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

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

Real Estate Development: Principles and Process

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

DEVELOPMENT IS AN ITERATIVE PROCESS Backwards Design Feasibility Implementation A Bit Better Feasibility Design Implementation Best – Iterative, Holistic, and Multidisciplinary Preliminary Feasibility Market Assessment Design Preliminary Financial Analysis Political Evaluation Implementation Financial Feasibility Design Outreach

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

MARKETS CHANGE

21st 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

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.

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

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

ENGAGING BOTH SIDES 20th Century: Left brain thinking 21st Century: Whole brain thinking For individuals and organizations Communication is essential

Public-Private Partnerships: Why and How

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

WHY PUBLIC-PRIVATE PARTNERSHIPS? 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? 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

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

PUBLIC-PRIVATE PARTNERSHIPS DEALS 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)

RESPONSIBILITIES ARE SHARED TASK

TYPICAL PUBLIC SECTOR PARTICIPATION Expedited permitting Master planning Regulatory assistance Tax abatements Land assembly Investment in infrastructure Streets Sidewalks Parks Parking Tualatin Common

TYPICAL PUBLIC SECTOR PARTICIPATION Joint marketing Loans, financing Tax increment financing Commitment of SDCs Community relations Many, many more…

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

WHAT THE PUBLIC SECTOR SEEKS 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 PRIVATE SECTOR SEEKS 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

TYPICAL DEAL PROCESS RFQ – find your partner 2. MOU – establish the deal outline 3. DDA – create the plan, hammer out the details 4. Ongoing management agreements

MEMORANDUM OF UNDERSTANDING (MOU) Less complex Early stage Outline deal points Due diligence stage May/may not be legally binding …but politically committing

DEVELOPMENT & DISPOSITION AGREEMENT 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…

DDA DEAL POINTS 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

OTHER AGREEMENTS Land leases Parking leases Easements Building leases Maintenance agreements Marketing agreements Tualatin Commons

COMMUNICATE EARLY AND OFTEN 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

Case Studies: Otay Mesa, Riverplace, Tualatin Commons

OTAY MESA: THE SETTING High volume border crossing Huge potential, low investment 4.9 jobs per acre New economy Growth pressures Otay Mesa

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

OTAY MESA: PROCESS Strategic Framework Stakeholder workshops and coordination Economic and physical research Case studies Otay Mesa Community Plan Update

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

OTAY MESA: IMPLEMENTATION Celebrate success! Cultivate champions Establish partnerships Prioritize decisions Pursue multiple projects and activities Brand the Mesa

OTAY MESA: OTHER MODELS Hillsboro, OR Emeryville, CA Irvine Business Complex, CA Brownsville, TX Las Colinas, Irving, TX Santa Theresa, NM

RIVERPLACE 12-acre riverfront urban resort in Downtown Portland

RIVERPLACE OWNERSHIP STRUCTURE Weyerhaeuser Portland General Corp. 100% 100% 50% 50% WRECO CWDC Cornerstone Columbia Development Company

RIVERPLACE PRODUCT MIX Luxury boutique hotel Condominiums Apartments Athletic club Office building and retail Multiple restaurants Entertainment retail Parking Marina Esplanade

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

RIVERPLACE Lessons Learned Market issues Retail issues Noise issues between uses No back door Triangular site constraints Inadequate parking Construction complexity

TUALATIN COMMONS Redevelopment of 19-acre former dog food factory: Tualatin Sherwood Road

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.

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

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”

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

LELAND CONSULTING GROUP Urban Strategists Portland • Denver • San Angelo • Mexico