A Holdouts Last Stand AGENDA Barriers to Land Assembly Innovative - - PowerPoint PPT Presentation

Prepared by Basile Baumann Prost & Associates 177 Defense Highway, Suite 10 Annapolis, Maryland 21401

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A S S O C I A T E S

“Innovative Approaches to Land Assembly”

A Holdout’s Last Stand

AGENDA Barriers to Land Assembly Innovative Land Assembly / Financing Techniques New Model for Land Assembly Case Studies Questions?

Barriers to Land Assembly Private property owners uninterested/unwilling to sell

• Understanding objectives
• Money vs. other

Finding capital: financing land assembly challenging because of no demonstrable short-term revenue stream

• Need for patient money
• Land Banking

Speculative rush pushes up land values

• Clandestine approach (straw men) to land assembly (e.g.

Disney World)

• Plans of area tend to raise land value expectations
• Land value ratchet

Barriers to Land Assembly Acquisition Costs – property owner expectations of the value of their land

• Price of individual parcel v. the value of all of parcels assembled
• Existing value v. reuse value

Ownership

• Fractured
• Absentee owners
• Title issues

Structural government barriers

• Particularly for government owned property
• City and County having jurisdiction over same property (taxation handled

by one and redevelopment by another)

Barriers to Land Assembly Inflexible zoning / regulatory environment

• Time period to get site assembled, entitled, zoned, platted and approved

Legal issues: takings, due process and the use of eminent domain (e.g. Kelo v. City of New London) Not planning for infrastructure concurrently with land assembly process (NIMBYism reaction)

Innovative Land Assembly / Financing Techniques State housing finance agency funds have shown to be effective sources of capital and leverage money for land assembly (e.g. affordable housing) Brownfield funding offers model for funding of land assembly (e.g. EPA pilot grants, clean-up funds, etc.) California cities use TIFs to assemble land Corporate and family foundations (patient money)

Innovative Land Assembly / Financing Techniques Corporate and family foundations (patient money) Private sector incentives (density bonuses, rezoning, taxes, etc.) Most innovative land assembly financing techniques built

• n public/private partnerships

Incentives for owners

• Tax issues
• Value expectations

Like Kind Exchanges (1031)

New Model for Land Assembly Turning the landowners into pro rata shareholders in a development entity that would acquire unified ownership and the development project New development entity could be LLC or special purpose development corporation Landowners could receive shares based on the proportional “value” of their property/improvement Shares would reflect market value of the entire development project, not just their parcel Market-based strategy would allow landowners to participate in upside of development project

Skyland Redevelopment, Washington, DC (Anacostia Metro Station Area)

FINANCING LAND ACQUISITION / ASSEMBLY

• Redevelopment of rundown strip

mall and adjacent vacant property

• 18.5 acre site which includes

1940s-era Skyland Shopping Center (11 acres) and vacant residentially zoned land (7.5 acres)

• Project Co-Developer: National

Capital Revitalization Corporation

• Goal is to implement City and

community’s vision for the site and improve the neighborhood

Skyland Redevelopment, Washington, DC

FINANCING LAND ACQUISITION / ASSEMBLY 17 different parcels controlled by 15 property owners, 30 different tenants Previous attempts to assemble land have failed Community & government support Government financed study shows retail sales leakage

FINANCING LAND ACQUISITION / ASSEMBLY NCRC (local government development corp.) purchasing property and will act as the landowner NCRC selects developer to undertake vertical development; will pay ground lease Project build out includes:

• Total of 915,000 sq. ft.
• 315,000 sq. ft. of retail
• 600 residential units
• $125 million project

Skyland Redevelopment

FINANCING LAND ACQUISITION / ASSEMBLY

FINANCING LAND ACQUISITION / ASSEMBLY NCRC forms $150 million strategic equity partnership with Morgan Stanley to provide investment capital for its projects in DC, including Skyland project

• Translating totality of real estate assets into LLC

Received additional $40 million in TIF financing

• Assist with land acquisition
• Attract new tenants to site
• Infrastructure upgrades

FINANCING LAND ACQUISITION / ASSEMBLY Property acquired by NCRC through negotiation and potential condemnation Relocation company assisting business owners at Skyland Selected property owners looking at potential participation in project (equity investment approach)

Equity Investment Approach to Land Assembly Landowners contribute their land (and improvements) as “shares” and receive a portion of the distribution from cash flow generated Value of the asset

• LLC shares
• Cash & LLC shares
• Cash

Vertical developer pays long term ground lease to NCRC Opportunity for all parties to participate in project’s upside LLC business entity minimizes landowners and NCRC risk exposure

Equity Investment Approach to Land Assembly

New Town at Capital City Market, Washington, DC

FINANCING LAND ACQUISITION / ASSEMBLY Redevelopment of 24- acre underutilized site into mixed use Town Center Creation of a “New Town at Capital City Market Revitalization Development and Public/Private Partnership Act of 2006”

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

• Adjacent to rail line
• Former freight rail utilization / wholesale produce / meat market
• Formally along WMATA (Metro) transit line with no station
• Creation of infill transit station through small area plan / Benefit

Assessment District (developer / property owner driven)

• Market area quadrant not seen as development site but retained

wholesale market

• New Plan provides for retention, upgrading, consolidation of

market places

• Development maximized next to transit station

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

Existing major property owner / operator / small developer Familiar with market, operations, owners, tenants Undertakes Predevelopment Activities

• Planning
• Market Evaluations
• Community Liaison

Introduces / passes special legislation Attracts major developer / money (Apollo)

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

City Council approved legislation designates

• ne of the property
• wners as developer

(joint venture) District model for developing large tracts

• f underutilized land to

create workforce housing, needed community facilities / services, jobs, and increase tax base

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

Site will be rezoned from low-density, light industrial uses to mixed use commercial Authorizes use of tax incentives, economic and

• ther development

initiatives

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

Financial toolbox includes tax abatement, TIF, PILOT Once developer obtains control of 50% of land then remaining land can be acquired through condemnation

• 45+ property owners
• Other participating land owners include DC, Gallaudet

University (these owners control > 50%)

• Eminent domain still requires Council approval

(Bill however unanimously passed by Council)

• Creates incentive to participate under potential

eminent domain threat

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

Address Objectives / Concerns of Owners

• Low Value Basis
• Relatively Significant Cash Flows
• Increasing Property Tax Burdens
• Management / Administrative Issues
• Code Violation Issues
• Value Expectations
• Historic Attachment to Market

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

Plan allows for existing property owners and/or lessees to:

• Invest in the project and become equity owners
• Become fee simple owners in the new retail and

warehouse facility

• Participate in like-kind 1031 property exchanges

Plan allows existing retailers and wholesalers to continue their businesses in new revitalized market Plan addresses project phasing

FINANCING LAND ACQUISITION / ASSEMBLY

New Town at Capital City Market

Plan addresses needs of existing tenants

• Upgraded new space
• Replaces physically/functionally obsolete space
• Addresses code/health violations
• Condominium creates ownership opportunities
• District incentives maintains relatively modest
• ccupancy costs

MODELS FOR LAND ASSEMBLY Public Model – Skyland Private Model – New Town at Capital City Market Requires Predevelopment Packaging Addresses Multiple Stakeholders

• Tenants
• Property Owners
• Community
• Public Sector
• Future Private Developer

Addresses Financing Issues

Questions? Jim Prost and David Starnes Basile Baumann Prost & Associates 177 Defense Highway, Suite 10 Annapolis, MD 21401 410-299-7800 jprost@bbpa.com / dstarnes@bbpa.com www.bbpa.com