“Where’s the Beef?” Managing Investment Expectations

Rail Volution Conference 2014

Monday, September 22

                 

Redevelopment Truths

Feasibility extends beyond the market

The first one in can’t get it done

Never do what’s easy, always do what’s right

A long memory can be the death-nail of any project

Development at the station must work in spite of transit

Ditch the pot roast recipe

Save the best for last

Partnerships are 5 parts therapy to 1 part real estate

Even ugly babies have cute feet

Market

Physical

Financial

Regulatory

Political

Organizational

Feasibility extends beyond

the market

Barriers  to  investment  …  

The first one in can’t get it

done

Examples  …  

Never do what’s easy,

always do what’s right

XX

Project  IndicatorProject  Land  Area  (Acres) 100 100Developable  Area  (Acres) 75 75Overall  Density/FAR   6.0 3.0Total  Project  Population 1,080 675Residential  Units:

   Single  Family  Detached   150 225    Single  Family  Attached 150 0    Apartments 150 0    Total  Units 450 225

Non-­‐Residential  Sq  Ft:    Retail/Restaurant/Service 0 0    Office 0 0    Total  Sq  Ft 0 0

Estimated  Annual  Revenues  by  Type:Property  Tax $605,208 $395,066Sales  Tax  (see  below) $45,360 $29,700Other  Revenues* $61,932 $38,708

Supportable  Retail  Space/Sales  Tax  Revenue:Average  Home  Value $180,000 $235,000Required  Household  Income** 42,000 55,000Estimated  %  of  Income  Spent  on  Local  Retail  Purchases 24% 24%Potential  Local  Retail  Sales $10,080 $13,200Supportable  Retail  Space  @  $200/sf 50 66Potential  Sales  Tax  Revenue  per  Household $101 $132Total  Annual  Sales  Tax  Revenue $45,360 $29,700

Total  New  Annual  Revenues  to  City: $712,500 $463,474Estimated  General  Fund  Expenditures  by  Department:

Pubic  Safety $78,220 $48,888Culture  and  Recreation $331,232 $207,020Development  Services $27,427 $17,142Neighborhoods  and  Development $86,400 $54,000General  Government $69,569 $43,481Non-­‐Departmental $49,681 $31,051

Total  New  Annual  Service  Costs  to  City: $642,530 $401,581Total  Net  Annual  City  Surplus  (Deficit): $69,970 $61,892*  Includes  Franchise  Fees,  Licenses/Permits,  Charges  for  Services,  Fines  &  Misc.  Revenues.**Assumes  90%,  30-­‐yr,  6%  mortgage  and  28%  of  income.

Transit-­‐Accessible Conventional

Development  @  BuildoutDevelopment Program: Land Area 100 Developable Area 75 Overall Density / FAR 6.0 / 3.0 Project Population 1,080 / 675

Municipal Revenues: Property Tax $605K / $395K Sales Tax $45.5K / $29.7K Other Revenues $61.9K / $38.7K

General Fund Expenditures: Public Safety $78.2K / $48.9K Culture / Recreation $331.2K / $207.0K Develop Services $27.4K / 17.1K Neighborhoods $86.4K / 54.0K General Gov’t $69.9K / 43.5K Non-Department $49.7K / 31.0K

“This is never going to work.”

“I lived under the L growing up and we never slept!”

“Government shouldn’t be the developer – remember when …?”

“Hasn’t Donald Trump gone bankrupt like three times?”

“Bobby Ewing never sold a piece of property in his life and he isn’t about to now.”

A long memory can be the

death-nail of any project

Of office workers, about 15 percent used rail to get to work with the majority of employees arriving by automobile. On average, the first retail tenant moves in (to ground floor retail) nine months after the first residential tenant moved in (and the tenant probably signed their lease at least six months prior).

Development at the station must work in spite of

transit

Ditch the pot roast recipe

Save the best for last

Develop the soft sites first – the economics are more forgiving.

Prove up the market in phases.

Be patient and take a patient position.

Rest assured … the stars are aligning!

Partnerships are 5 parts therapy to

1 part real estate

Lots of critics!

Lots of “friends!”

Higher costs (building and infrastructure) - lower revenue (initially).

Perceived higher risk.

“In  redevelopment  …  the  pioneers  get  the  arrows  and  the  se8lers  get  the  land!”    Gov.  John  Hickenlooper    

Even ugly babies have cute feet

Don’t be afraid to say “no!”

Screw personal property rights – just kidding!

Give City Council more information with which to make decisions.

Avoid the obvious market.

Minimize risk in creative ways.