Value Capture in the Context of Transit Oriented Development: Looking Beyond Price ... ·...

Value Capture in the Context of Transit Oriented Development:

Looking Beyond Price Effects to Value Creation

January 12, 2016

W.H. Corbett, 1913 Transbay Center, Pelli Clarke Pelli, 2015



January 12, 2016

MOTIVATION: §  Many factors (market, public policy, and consumer preference) suggest growing demand

for the economic and real estate Development aspects of TOD.

§  Rail transit ridership continues to expand in the United States.

§  Many TOD projects have underperformed expectations.

§  Transit infrastructure investment is increasingly challenging.

§  Transit agencies increasingly look toward value capture as a potential funding source, but realized VC revenues have been modest (in the U.S.)

§  Reliance on perceived real estate transaction price premiums as reflective of economic opportunity may reinforce an inappropriate sense that “if we build it – they will come.”



January 12, 2016

Value capture strategies can create opportunities to:

§  Induce virtuous cycles of value creation and capture §  Focus on value creation as a primary infrastructure investment objective §  To engage public and private sectors more broadly in support of investment

Effective value capture strategies require deeper understanding of value creation

§  VC strategies can create market incentives rather than disincentives §  VC strategies can mitigate adverse impacts where they arise §  TOD value creation is a function of velocity and intensity as well as price §  Value premiums are a function of factors in addition to unit transaction price

Bill Bishop [email protected] 919-619-4169



January 12, 2016

Bill Bishop Non-Traditional Stakeholder Bishop & Buttrey Mining, embankment fill material

Master-planned community development Infrastructure Investment-Induced Value Creation, Requisite for Effective Value Capture Strategies

GoTriangle - DOLRT LRT

§  station development potential §  value creation and value capture potential

Consideration of Economic Development Potential: Light Rail Transit in Durham and Orange Counties

TCRP guidebook: Value-Capture Financing

for Public Transportation Projects

§  Planning and financing solutions for horizontal and vertical infrastructure §  Real estate market analysis and fiscal and economic impact analyses §  2,100 land secured public financings

§  $15 Billion bonds to construct public infrastructure §  100 redevelopment projects

§  600 project cash flow, valuation and feasibility analyses

§  100 development impact fee reviews and project entitlements

Orange County, CA - Sacramento, CA - Phoenix, AZ - Boise, ID Las Vegas, NV - Denver, CO - Austin, TX - Dallas, TX Tampa, FL - Orlando, FL - Research Triangle, NC



January 12, 2016

Bill Bishop Non-Traditional Stakeholder Bishop & Buttrey Mining, embankment fill material

Master-planned community development Infrastructure Investment-Induced Value Creation, Requisite for Effective Value Capture Strategies

GoTriangle - DOLRT LRT

§  station development potential §  value creation and value capture potential

Consideration of Economic Development Potential: Light Rail Transit in Durham and Orange Counties

TCRP guidebook: Value-Capture Financing

for Public Transportation Projects



January 12, 2016

Value capture in the context of transit-oriented development The value proposition regarding transportation infrastructure investment

Transit Development

Capital, funding, financing challenges Expanding market opportunity

Infrastructure under-investment Economic development opportunities as well as challenges

Evolution of transit-relevant technologies, consumer preferences, market responses

Shifts in demographics, workforce requirements, and consumer preferences

Ambiguous political environment Compelling public policy objectives

transit-oriented development

development-oriented transit



January 12, 2016

From a development-oriented transit perspective: Value CREATION:

§  Can become a principal factor motivating infrastructure investment decision

§  Has significant implications for how value capture strategies

and opportunities are conceived, priced, and implemented Value CAPTURE strategies (dependent on value creation):

§  Need not be merely another capital-stack component used to close funding gaps

§  Can be structured to induce virtuous cycles of value creation

§  Can drive community and political support

TRANSITAGENCY

LOCALGOV’T

LOCALGOV’T

ValueCapture

ValueCrea7on

Transit Accessibility

Transit Demand

Transit Capacity

++

++

++

++

++++

++

++

++

Virtuous Cycles of Value Creation Feedback Loop Diagram

TRANSIT AGENCY

TRANSIT AGENCY

DirectInvestment

TransitInfrastructure

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

CaptureValue

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

CaptureValue

ValueCapture

LOCAL GOV’T

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

CaptureValue

ValueCapture

LOCAL GOV’T

OTHERPUBLICSECTOR

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

CaptureValue

ValueCapture

LOCAL GOV’T

OTHERPUBLICSECTOR

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

CaptureValue

ValueCapture

ValueTransfer



January 12, 2016

A focus on value creation requires us to look beyond transaction price Where “value” is proxy for opportunity, price ≠ value Price alone is insufficient to inform optimal value capture strategy Hedonic Price Models:

§  Estimate consumers’ willingness to pay §  Estimate/predict transaction prices, irrespective of cost to deliver

§  Assume that individuals have the opportunity to choose specific/alternative combinations of desirable attributes they prefer

(that these are not inflexibly bundled)



January 12, 2016

Many cross-sectional hedonic price models reveal significant TOD price premiums.

“Premium” prices may be driven by higher development costs associated with:

§  Pre-development land speculation §  Building height/density §  Intensity of development regulation §  Increased construction, market, financial risk/complexity

“Premium” prices may:

§  Suppress velocity and market share §  Reflect greater risk as well as opportunity

We require greater understanding of the value creation impacts and opportunities of TOD (or DOT). This includes adverse impacts and opportunities to mitigate them.

LOCAL GOV’T

OTHERPUBLICSECTOR

DEVELOPER

TRANSIT AGENCY

DirectInvestment


TODValueCrea7on

TODValuePremium

CaptureValue

ValueCapture

ValueTransfer



January 12, 2016

Value capture strategies can create opportunities to:

§  Induce virtuous cycles of value creation and capture §  Focus on value creation as a primary infrastructure investment objective §  To engage public and private sectors more broadly in support of investment

Effective value capture strategies require deeper understanding of value creation

§  VC strategies can create market incentives rather than disincentives §  VC strategies can mitigate adverse impacts where they arise §  TOD value creation is a function of velocity and intensity as well as price §  Value premiums are a function of factors in addition to unit transaction price

THANK YOU…. Bill Bishop [email protected] 919-619-4169

PrivateDeveloper

TransitAgency

LocalGovernment

TOD

Land Owner

Other PRIVATE SECTOR

Other PUBLIC SECTOR

Engagement

Partnership

Value Exchange

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