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RV 2014: TOD Market Dreams + Realities by Anne Ricker

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TOD Market Dreams + Realities

The station is in, the riders are coming and the development has been proposed. Now everybody wants retail. But is there a market for it? Will it be supported? Or would other uses be more appropriate and generate additional riders? Everyone expects TOD to generate a mix of uses -- to create a 24/7 environment at every station. How do market realities change that equation? Learn what it takes to support that mixed-use environment that everyone expects; how to assess the market and what residents really want; and how to manage expectations if the market doesn't deliver.

Moderator: William M. Velasco, Chair of Board TOD Committee, DART, Dallas, Texas
Christine Maguire, AICP, EDFP, Senior Manager, Development Planning and Finance Group, Austin, Texas
Anne B. Ricker, Principal/Owner, Ricker Cunningham, Centennial, Colorado
John Breitinger, Vice President, Investment and Development, United Properties, Bloomington, Minnesota
Michael Horsting, AICP, Principal Analyst, Regional Transportation Authority, Chicago, Illinois

Published in: Real Estate
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RV 2014: TOD Market Dreams + Realities by Anne Ricker

  1. 1. “Where’s the Beef?” Managing Investment Expectations Rail Volution Conference 2014 Monday, September 22
  2. 2. Redevelopment Truths Feasibility extends beyond the market The first one in can’t get it done Never do what’s easy, always do what’s right A long memory can be the death-nail of any project Development at the station must work in spite of transit Ditch the pot roast recipe Save the best for last Partnerships are 5 parts therapy to 1 part real estate Even ugly babies have cute feet
  3. 3. Feasibility extends beyond the market Market Physical Financial Regulatory Political Organizational Barriers to investment …
  4. 4. The first one in can’t get it done Examples …
  5. 5. Never do what’s easy, always do what’s right
  6. 6. Development @ Buildout Development Program: Transit-­‐ Accessible Conventional Project Indicator Project Land Area (Acres) 100 100 Developable Area (Acres) 75 75 Overall Density/FAR XX 6.0 3.0 Total Project Population 1,080 675 Residential Units: Single Family Detached 150 225 Single Family Attached 150 0 Apartments 150 0 Total Units 450 225 Non-­‐Residential Sq Ft: Retail/Restaurant/Service 0 0 Office 0 0 Total Sq Ft 0 0 Estimated Annual Revenues by Type: Property Tax $605,208 $395,066 Sales Tax (see below) $45,360 $29,700 Other Revenues* $61,932 $38,708 Supportable Retail Space/Sales Tax Revenue: Average Home Value $180,000 $235,000 Required Household Income** 42,000 55,000 Estimated % of Income Spent on Local Retail Purchases 24% 24% Potential Local Retail Sales $10,080 $13,200 Supportable Retail Space @ $200/sf 50 66 Potential Sales Tax Revenue per Household $101 $132 Total Annual Sales Tax Revenue $45,360 $29,700 Total New Annual Revenues to City: $712,500 $463,474 Estimated General Fund Expenditures by Department: Pubic Safety $78,220 $48,888 Culture and Recreation $331,232 $207,020 Development Services $27,427 $17,142 Neighborhoods and Development $86,400 $54,000 General Government $69,569 $43,481 Non-­‐Departmental $49,681 $31,051 Total New Annual Service Costs to City: $642,530 $401,581 Total Net Annual City Surplus (Deficit): $69,970 $61,892 * Includes Franchise Fees, Licenses/Permits, Charges for Services, Fines & Misc. Revenues. **Assumes 90%, 30-­‐yr, 6% mortgage and 28% of income. Land Area 100 Developable Area 75 Overall Density / FAR 6.0 / 3.0 Project Population 1,080 / 675 Municipal Revenues: Property Tax $605K / $395K Sales Tax $45.5K / $29.7K Other Revenues $61.9K / $38.7K General Fund Expenditures: Public Safety $78.2K / $48.9K Culture / Recreation $331.2K / $207.0K Develop Services $27.4K / 17.1K Neighborhoods $86.4K / 54.0K General Gov’t $69.9K / 43.5K Non-Department $49.7K / 31.0K
  7. 7. A long memory can be the death-nail of any project “This is never going to work.” “I lived under the L growing up and we never slept!” “Government shouldn’t be the developer – remember when …?” “Hasn’t Donald Trump gone bankrupt like three times?” “Bobby Ewing never sold a piece of property in his life and he isn’t about to now.”
  8. 8. Development at the station must work in spite of transit Of office workers, about 15 percent used rail to get to work with the majority of employees arriving by automobile. On average, the first retail tenant moves in (to ground floor retail) nine months after the first residential tenant moved in (and the tenant probably signed their lease at least six months prior).
  9. 9. Ditch the pot roast recipe
  10. 10. Save the best for last Develop the soft sites first – the economics are more forgiving. Prove up the market in phases. Be patient and take a patient position. Rest assured … the stars are aligning!
  11. 11. Partnerships are 5 parts therapy to 1 part real estate “In redevelopment … the pioneers get the arrows and the se8lers get the land!” Gov. John Hickenlooper Lots of critics! Lots of “friends!” Higher costs (building and infrastructure) - lower revenue (initially). Perceived higher risk.
  12. 12. Even ugly babies have cute feet Don’t be afraid to say “no!” Screw personal property rights – just kidding! Give City Council more information with which to make decisions. Avoid the obvious market. Minimize risk in creative ways.

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