David Leland

7/29/2019 David Leland

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Principles o

Public-Private Partnerships fo

Real Estate & Economic Development

PREPARED FOR

LELAND

CONSULTING

GROUP

PREPARED BY

Urban Strategists


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PRESENTATION OUTLINE

Introduction

Principles and Process

u c- r va e ar ners ps: ow an y

Public-Private Partnership Case Studies:

Otay Mesa

Tualatin Commons

Principles of Public-Private Partnerships 2


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INTRODUCTION

Leland Consulting Group: What we do

sector real estate executives tosolve tough problems and:

Stimulate economic success

Enhance the humanexperience



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INTRODUCTION

Professional Services

Strategic Planning

Economic and DemographicForecasting

Development Programming

Negotiations and Deal Structuring

Public-Private Partnerships

Financial Analysis

Re ulator A rovals

Litigation Support

Project Management



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DAVE LELAND

40 years industry experience as

Developer

onsutan

Advisor

Blend of public and private clients

Geo ra hic focus: west coastnational, international

Counselor of Real Estate (CRE)

Frequent ULI panelist and speake Mixed-Use, Smart Growth leader



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Real Estate Development:

rnc pes an rocess


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SUCCESSFUL PROJ ECTS

-holistic and balanced approach

DeveloperExperience

Community Public-Privateoa s ar ners p

nanc aCapability

DesignExcellence


Success


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DEVELOPMENT IS AN ITERATIVE PROCESS

Backwardses gn Feasibility Implementation

Feasibility Design Implementation

Best Iterative, Holistic, and Multidisciplinary

Feasibility

PreliminaryFinancial

MarketAssessment

Political

Design

Implementation


DesignAnalysis Outreach nanc aFeasibility


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MARKETS ARE UNFORGIVING

Markets are people & their

Needs

Desires Ability to pay

ngness o pay

With choice, positive price value is essential

People reject places andproducts that are not

respons ve o e r nee s,desires, or budget



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MARKETS CHANGE

Phase II - Expansion Phase III Hypersupp ly

Supply/DemandInf lect ion Po int

Increasing Vacancy

New Construction

Declining Vacancy

New Construction 10

9

1112

13

Long-Term Average Vacancy

Increasing VacancyDeclining Vacancy

14

5

7

6

15

Cost FeasibleNew Con struct ion Rents

Ph ase IV - Recess io nPhase I - Recover

More CompletionsNo New Construction

12

3

116

Positive ButTight

Construction

NegativeRentalGrowth

BelowInflationRentalGrowth

RentsRapidlyToward New

High RentGrowth In

Market

Rent Growth

Declining

BelowInflation &NegativeRent


Legg Mason Wood Walker, Inc. and Leland Consulting Group

eve s row


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21st CENTURY MARKET WAVES

Megaregions and Urbanization

Asia, Abundance, Automation

nergy: ar on carc ty,

Renewal Emergence

Aging population

Public focus:Human Capital, Education, Amenities

Pacific NW Clusters:

g ec an ean ec Natural Resources



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RISK MANAGEMENT

Development involves risk:

Market, capital, and operating risks

s s etermne y pro ect type,

developer experience and local

conditions

Experience is essential

Each component must be

successful and complement the

others

Exceed the markets expectations

-

mitigate risk Two thirds of mixed-use

developments by inexperienced


.


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SUCCESSFUL DEVELOPERS WEAR MANY HATS

FinancialAnalyst Lawyer

Psychiatrist Real EstateMarketAnalyst

PoliticianUrban

Planner

Architect &Desi ne En inee

Visionary

PublicRelationsSpecialist

Manager



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AVOID THE SILOS

Silos AModern Problem

Too manyspecialists, not

DeDe

ransrans

enoughgeneralists

sig

n

sig

n

lanni

lanni

or

tat

or

tat

Fin

an

Fin

an

gg ononee

. Lenders should understand the built environment.


.


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ENGAGING BOTH SIDES

20th Century:Left brain thinking

21st Century:Whole brain thinking

For individuals and

organizations Communication is

essential



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Public-Private Partnerships:

y an ow


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WHY PUBLIC-PRIVATE PARTNERSHIPS?

Enhance feasibility projectsthat otherwise wouldnt happen

Accelerate investment timeline

Provide greater public benefits Achieve significant policy goals

Improve qua ty, scae, orlocation

Overcome barriers Financial

Market

Physical

Political



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Strategic management of publicmoney

Link public projects to privateinvestment

not always true

Spend limited public $$$ where

investment

Private to public investment

ratio of 4:1 or 5:1



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Create investment

momentum:

Trigger additionalprivate investment

future projects

residents

Strengthen tax

base Create a sense


o pace


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SUCCESSFUL PROJ ECTS

Many parts must

simultaneously fitThe Market Location,

Visibility,Timing

together and Access

e w o e s

greater than theFinance Market

Successful

ProjectLeadership &

Design

FinancialCapability

Experience& Capability

& Regulation



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PUBLIC-PRIVATE PARTNERSHIPS DEALS

Every deal is different!

Financial and non-nanc a partc paton

Formal and informal

Use all the tools in your

toolbox One or more public

agencies (not just the



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RESPONSIBILITIES ARE SHARED

ResponsibilityDowntown Development Principles Publ ic Private Joint

Maximize pedestrian access

TASK

Promote development densities

Define areas where development will be concentrated

Develop a strong commercial core

Plan and manage parking effectively

Promote commercial land use intensities

Promote residential development near transit/shopping Promote and provide incentives for infill

Promote residential units above grade level retail

Provide an adequate amount of retail

Establish a wide range of land use activities Encourage a mix of different housing types



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TYPICAL PUBLIC SECTOR PARTICIPATION

Expedited permitting

Master planning

Regulatory assistance

Tax abatements

an assem y

Investment in

infrastructure

Streets

Sidewalks Tualatin Common

Parks

Parking



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J oint marketing

Loans, financin

Tax incrementfinancing

Commitment of SDCs

Communit relations Many, many more



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Financial Incentives

TIF

Tax Credits Tax Abatement

Zero/Low-Interest Loans

Public-private partnerships Grants

Faade

Energy/Green


ens y onuses


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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 wont back out

Understand public process

Successful track record

Developers Who are Financially Strong Equity or an equity source in place

Debt sources as well



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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 u c nanc a eans

Urban Renewal

Bonding Capacity Land Control


Ot er Nee e Incentves an Mec ansms


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TYPICAL DEAL PROCESS

.

2. MOU establish the deal outline

3. DDA create the plan, hammer out the details


.


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MEMORANDUM OF UNDERSTANDING (MOU)

MOU

Less complex

Early stage Outline deal points

Due diligence stage

May/may not be legallybinding

but politically



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DEVELOPMENT & DISPOSITION AGREEMENT

DDA or DA

Next step after the MOU

as er ega ocumen o

structure partnership Legally binding

Extremely detailed

Roles & responsibilities ecourse

Many, many deal points



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DDA DEAL POINTS

Public contributions

Development and land

Purchase price Upside participation

y o rese proper y

Design standards

Timeline Roles and responsibilities

Offsite plan

Develo ment obli ations

Performance requirements

Remedies for non-



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OTHER AGREEMENTS

Land leases

Parking leases

Easements Building leases

Maintenance

agreements Marketing agreements

Tualatin Commons



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COMMUNICATE EARLY AND OFTEN

Understand yourpartners and keyplayers

Develop a

strategy

Build public trustthrough involvement

Be responsive to each

Have a commonvision



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Case Studies:

, ,


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OTAY MESA: THE SETTING

High volumeborder

Hugeotential, low

investment

4.9 jobs per

New economy

Otay

Mesa

pressures



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OTAY MESA: GOALS

A moment of opportunity:Looking Back from 2025

Diversify employment andinvestment

Balance land uses

Improve access and mobility Plan for harmonious

relationships between uses

Create complete places



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OTAY MESA: PROCESS

Strategic Framework

Stakeholderworkshops andcoordination

Economic andphysical research

ase stu es

Otay Mesa

ommun y anUpdate



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OTAY MESA: IMPLEMENTATION

Fund SR-11, SR-125,and I-905 projects

rov e a tona n ustr a an ,

sanctuary in East County

Establish urban office campuses

Develop underutilized land Attract educational institutions

Expand workforce housing options

Define future role of Brown Field



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OTAY MESA: IMPLEMENTATION

Celebrate success!

Cultivate cham ions

Establish partnerships

Pursue multiple projects

and activities Brand the Mesa


OTAY MESA OTHER MODELS


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OTAY MESA: OTHER MODELS

Hillsboro, OR

Emeryville, CA

Brownsville, TX

Las Colinas, Irving, TX

rvne us nessComplex, CA

an a eresa,


RIVERPLACE


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-

RIVERPLACE


RIVERPLACE OWNERSHIP STRUCTURE


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RIVERPLACE OWNERSHIP STRUCTURE

Weyerhaeuser Portland General Corp.

100% 100%

WRECO CWDC50% 50%

Cornerstone

Columbia

DevelopmentCompany


RIVERPLACE PRODUCT MIX


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RIVERPLACE PRODUCT MIX

Luxury boutique hotel

Condominiums

Program Element

Number Units /

Rooms / Stores Square Feet

Residential 190 235,000

Apartments

Athletic club

Retail 13 23,220

Office 4 41,600

Hotel 74 76,600

Athletic Club 1 47,000

Office building andretail

Total 423,420

u pe res auran s

Entertainment retail

ar ng Marina


RIVERPLACE DETAILS


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RIVERPLACE DETAILS

Goal: Create aresidential

destination on thewaterfront

Deal Structure:

PDC: Site cleanup,,

build marina

Cornerstone:

Development,Columbia successfulbidde


RIVERPLACE


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RIVERPLACE

Lessons Learned

Market issues

Retail issues

Noise issues between

No back door

Trian ular siteconstraints

Inadequate parking

Construction complexity


TUALATIN COMMONS


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TUALATIN COMMONS

-


Tualatin Sherwood Road

TUALATIN COMMONS


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TUALATIN COMMONS

Goals based on citizen input:

Strong civic focus;

Day and night uses; Strong visual presence at major

en rances;

Improved economic climate for downtown

businesses; Convenient and adequate parking;

Links to nearby retail, civic, and recreationuses;

Downtown built for the long term (50+years); and

Retention of downtown's retail market


share.

TUALATIN COMMONS


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TUALATIN COMMONS

Program Element

Number Units /

Rooms / Stores

Square

Feet

Residential 69

Located in a floodplain,built a 3.1 acre lake $5

Live-Work 7

Retail 4 restaurants 13,000

Office 4 87,000

Hotel 60

,

private Hotel

Public Plaza 20,000

Lake 3.1 acres Multiple restaurants,limited retail

Condominiums andapartments

Public open space


TUALATIN COMMONS


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TUALATIN COMMONS

The Heart of the City

Not one developer butmany

City responsible for

planning events for publicareas

Emphasis on public art

Marketing

Futures


CASE STUDY CONCLUSIONS


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CASE STUDY CONCLUSIONS

Flexibility and diversity withmultiple developers versus

Community support andownershi

Political support

Important to ensure qualityon all levels

Understand the market for

Anticipate problems beforethey arise



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Urban Strategists

Portland Denver San Angelo Mexico

David Leland

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