“Innovative Approaches to Land Assembly” Assembly presentation.pdf · Innovative Land Assembly / Financing Techniques ¾State housing finance agency funds have shown to be effective

Prepared by

Basile Baumann Prost & Associates177 Defense Highway, Suite 10Annapolis, Maryland 21401

bbp A S S O C I A T E S

“Innovative Approaches to Land Assembly”

A Holdout’s Last Stand

AGENDA

Barriers to Land Assembly

Innovative Land Assembly / Financing Techniques

New Model for Land Assembly

Case Studies

Questions?


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


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)


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)


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)


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

Skyland Redevelopment, Washington, DC (Anacostia Metro Station Area)

FINANCING LAND ACQUISITION / ASSEMBLY

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

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


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

Skyland Redevelopment


FINANCING LAND ACQUISITION / ASSEMBLYNCRC 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


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

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 / ASSEMBLYNew 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


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)


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


Site will be rezoned from low-density, light industrial uses to mixed use commercial

Authorizes use of tax incentives, economic and other development initiatives


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


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



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



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 StarnesBasile Baumann Prost & Associates177 Defense Highway, Suite 10Annapolis, MD [email protected] / [email protected]

Documents

“Innovative Approaches to Land Assembly” Assembly presentation.pdf · Innovative Land Assembly / Financing Techniques ¾State housing finance agency funds have shown to be effective