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Project Financing Land T

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Project Financing Land T Powered By Docstoc
					“Innovative Approaches to Land Assembly”


 Prepared by

 bbp
 ASSOCIATES




 Basile Baumann Prost & Associates
 177 Defense Highway, Suite 10
 Annapolis, Maryland 21401
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
   on 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
FINANCING LAND ACQUISITION / ASSEMBLY
Skyland Redevelopment, Washington, DC
(Anacostia Metro Station Area)

   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
FINANCING LAND ACQUISITION / ASSEMBLY
Skyland Redevelopment, Washington, DC


   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
Skyland Redevelopment

  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
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
 FINANCING LAND ACQUISITION / ASSEMBLY
New Town at Capital City
Market, Washington, DC

   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
    one of the property
    owners as developer
    (joint venture)
    District model for
    developing large tracts
    of 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
    other 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
       occupancy 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

				
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