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Finding the Value, Capturing it, and Putting it to Work
The document outlines strategies for value capture in transit improvements, highlighting the necessity of creating value to capture it effectively. It discusses various mechanisms such as negotiated exactions, tax increment financing, and public-private partnerships, using examples like Washington Metro's NOMA station and New Jersey's Hudson-Bergen Light Rail. Successful value capture relies on the feasibility of new developments and strong real estate and capital markets.
Finding the Value, Capturing it, and Putting it to Work
- 1. Finding the Value,Capturing it, and Putting it to Work Stan Wall Partner HR&A Advisors, Inc. October 2015
- 2. Value Capture: StanWall Transit must create value in order to capture value. Transit Improvement Increased Accessibility, Lower Travel Time Higher Land Values Value Capture
- 3. Value Capture: StanWall Value Capture Strategy Development Ownership Joint Development New Transit Agency Negotiated Exactions Existing/New Private Special Assessment Districts Existing/New Private Development Bonus New Private Air Rights New Transit Agency/Private Tax Increment Financing Existing/New Private Development Impact Fees New Private Transportation Utility Fees Existing Private Land Value Tax Existing/New Private Value capture typically requires new development to succeed.
- 4. Value Capture: StanWall Value capture works where new development is feasible, with positive land value. FEASIBLEINFEASIBLE COST REVENUE LOSS COST REVENUE PROFIT
- 5. Value Capture: StanWall Value capture requires real estate, capital markets and PPP capacity to craft and execute strategies. Healthy Real Estate Markets Capital Markets Public-Private Partnership Capacity
- 6. Value Capture: StanWall Washington Metro 2004 NOMA Station Value Capture • Finance/Value Capture: – DC Government Investment: $53.7 Million – Federal Contribution: $25 Million – Special Taxing District: $25 Million – Total Investment: $103.7 Million • Value Creation: – $3 Billion Private Investment – 8 Million sq ft of Mixed-Use (6 Million sq ft Office, 200,000 sq ft Retail, 1,700 Housing Units, 400 Hotel Rooms)
- 7. Value Capture: StanWall Washington Metro NOMA Station - Value Capture Today New Pedestrian Tunnel & Plaza Tax Increment Financing Special Tax Assessment Direct Contribution Infrastructure that enhances value & development Potential east of NOMA
- 8. Value Capture: StanWall Washington DC Streetcar - Value Generation No Build Build - Moderate Build - High Extended System $484 $585 $771 Priority System $2,105 $2,607 $3,097 $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 NetPresentValue($millions) $2.6 billion $3.2 billion $3.9 billion
- 9. Value Capture: StanWall Washington DC Streetcar - Value Capture T – Transit policy goals H – Affordable housing policy goals
- 10. Value Capture: StanWall NJ Transit – Hudson-Bergen Light Rail West Side Extension Bayfront Redevelopment Area West Side Ave StationPotential Bayfront Station • Cost (2011): – Capital cost: $214 million – Operating cost: $1.9 million/year • Value Creation (2011): – $160 million in value – 6 million SF residential – 640,000 SF office • Value Capture Proposed: – Negotiated Exaction
- 11. Value Capture: StanWall First office towers under construction; subway opened September 13, 2015 Aggressive rezoning for commercial and residential sites, up to 33 FAR Extension of #7 subway line and creation of new boulevard through synthetic TIF Uniform Tax Exemption Policy - property tax abatements of up to 40% for “first-move” office towers 10 Hudson Yards New York City – Hudson Yards
- 12. Thank You Stan Wall Partner,HR&A Advisors, Inc. swall@hraadvisors.com http://www.hraadvisors.com
Editor's Notes
- #3 In addition to the riders of the system and society-at-large, property owners and developers benefit from new transit investment. Direct, reliable, and quick connectivity to major employment centers, in particular, improves accessibility and values This premium increment from transit is supported by a number of studies attributing increased land prices and rents to transit investments. Many early 20th Century Streetcar systems, including in Los Angeles, were funded by real estate developers to create “Streetcar Suburbs”
- #6 Value capture only works if investors achieve investor-required returns after accounting for the costs of value capture into account Transit-related value creation materializes after investment decision, often requiring some form of credit support Successful value capture requires real estate development and finance capacity, which is not a core capacity at most transit agencies
- #7 Notes: At full build-out: 32 Million sq ft of mixed use anticipated