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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
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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
Principles of Public-Private Partnerships 5
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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
Principles of Public-Private Partnerships 7
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
Principles of Public-Private Partnerships 8
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
Principles of Public-Private Partnerships 9
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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
Principles of Public-Private Partnerships 10
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
Principles of Public-Private Partnerships 12
.
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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.
Principles of Public-Private Partnerships 14
.
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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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WHY PUBLIC-PRIVATE PARTNERSHIPS?
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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WHY PUBLIC-PRIVATE PARTNERSHIPS?
Create investment
momentum:
Trigger additionalprivate investment
future projects
residents
Strengthen tax
base Create a sense
Principles of Public-Private Partnerships 19
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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TYPICAL PUBLIC SECTOR PARTICIPATION
J oint marketing
Loans, financin
Tax incrementfinancing
Commitment of SDCs
Communit relations Many, many more
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TYPICAL PUBLIC SECTOR PARTICIPATION
Financial Incentives
TIF
Tax Credits Tax Abatement
Zero/Low-Interest Loans
Public-private partnerships Grants
Faade
Energy/Green
Principles of Public-Private Partnerships 25
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
Principles of Public-Private Partnerships 27
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
Principles of Public-Private Partnerships 28
.
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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
Principles of Public-Private Partnerships 39
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,
Principles of Public-Private Partnerships 40
RIVERPLACE
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-
RIVERPLACE
Principles of Public-Private Partnerships 41
RIVERPLACE OWNERSHIP STRUCTURE
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RIVERPLACE OWNERSHIP STRUCTURE
Weyerhaeuser Portland General Corp.
100% 100%
WRECO CWDC50% 50%
Cornerstone
Columbia
DevelopmentCompany
Principles of Public-Private Partnerships 42
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
Principles of Public-Private Partnerships 43
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
Principles of Public-Private Partnerships 44
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
Principles of Public-Private Partnerships 45
TUALATIN COMMONS
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TUALATIN COMMONS
-
Principles of Public-Private Partnerships 46
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
Principles of Public-Private Partnerships 47
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
Principles of Public-Private Partnerships 48
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
Principles of Public-Private Partnerships 49
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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