This document summarizes a presentation on transit-oriented development (TOD). It discusses the history and definitions of TOD, current market trends, and perspectives from key players like developers, lenders, and retailers. It identifies that high residential density is essential for viable TOD and transit ridership. Public subsidies are also needed to reduce development costs and barriers. The presentation concludes with a discussion and Q&A section.

1. TOD
Market
Dreams
+
Reali1es
Rail-­‐Volu1on
2014
Minneapolis,
MN
September
22,
2014

2. 2
Discussion
Agenda
§ TOD
in
(my
version
of)
context
§ Current
trends
in
the
marketplace
§ Key
Actor
PerspecHves
on
TOD
§ Lessons
Learned
§ Discussion
/
Q&A

3. 3
TOD:
A
Brief
(revisionist)
History
Development Pattern Technology Time Frame Example
Steam-powered
commuter rail
mid-1800s New York, San Francisco
Electric streetcar and
horse-drawn carriage
late 1800’s to early 1900s
Pacific Electric Railway in
southern CA, Chicago “L”)
Auto-oriented
Development
Auto dominance Post WWII
Suburbs spurred by Federal
Interstate Highway System
Transit-Related
Development
Rail and bus transit
Post Urban Mass Transit
Act of 1964
Lease-revenue focused joint
ventures with transit
agencies
Transit-Supportive
Development
Rail and bus transit 1980s - present
Lease-revenue and
ridership focused joint
ventures
Development-oriented
Transit
Source: Institute of Urban and Regional Development Working Paper 2009-02

4. 4
Which
One
is
It?
Development-oriented Transit
(transit-lead high density development)

5. 5
Which
One
is
It?
Right:
Santa
Clara
Valley
Light
Rail
Authority
Top
LeQ:
Phoenix
Metro
(Tempe)
BoSom
LeQ:
Dallas
Area
Rapid
Transit
(DART)
Transit-related Development
(auto-lead low density development)

6. Right:
Norfolk,
VA
Top
LeQ:
Capital
Metro
proposed
Leader
StaHon
BoSom
LeQ:
Murray,
UT
proposed
Fireclay
StaHon
6
Which
One
is
It?
Transit-supportive Development
(high density mixed use development)

7. 7
It’s
about
the
residen1al
density,
darn
it!!

8. 8
Market
Demand:
The
Two
Key
Demographic
Cohorts
Want
TOD

9. 9
But
This
TOD
Stuff
is
Expensive
Development
Costs
§ Higher
density
building
costs
–
elevators,
building
codes
for
safety
and
energy
efficiency
§ Upgrade
exisHng
infrastructure
if
urban
infill
§ Need
structured
parking
Market
Rental
Rates
§ First
project
must
“prove
up” the
market
§ Retail
si1ng
requirements
rule
regardless!
§ Dictated
by
space
supply
and
demand
Entry
Costs
§ Regulatory
“brain
death”
factor
(by-­‐right
density?)
§ Land
cost
and
ability
to
assemble
§ Few
developers
can
successfully
carry
this
off

10. 10
Developer
Perspec1ve
on
TOD
§ Intense
compeHHon
for
expanding
development
§ Debt
is
scarce,
Equity
is
expensive
and
Costs
are
substanHal
When:
Costs
>
Debt
+
Equity
§ “Finance,
finance,
finance
is
the
new
locaHon,
locaHon,
locaHon.”
(Kirk
Williams,
Cypress
EquiHes)
“market
share”
requires
product
differenHaHon:
sense
of
place
§ City
Policy
through
comprehensive
planning
and
zoning
regulaHons
(ease
of
obtaining
density?)
§ LiSle
to
no
appeHte
to
construct
speculaHve
commercial
development
-­‐
established
markets
with
demonstrable
(not
proforma)
demand

11. 11
Lender’s
Perspec1ve
on
TOD
–
RISK!!
§ Banks
have
liSle
to
no
appeHte
to
finance
specula1ve
development
§ Bank
regulaHons
limit
the
amount
of
construcHon
financing
§ Small
pool
of
seasoned
developers
&
contactors
§ Underwrite
on
the
separate
parts
and
as
a
whole:
Can
the
other
piece
carry
the
retail
porHon?
§ Credit
quality
important
for
commiSed
tenants
on
the
commercial
piece
§ RelaHvely
long
financing
and
en1tlement
lag
-­‐
higher
carry
costs
and
higher
risk

12. 12
Retailers
Perspec1ve
on
TOD
§ Banks
have
liSle
to
no
appeHte
to
finance
specula1ve
development
§ Main
focus
=
successful
business
operaHons
=
WORKING
CAPITAL
§ Banks
have
liSle
to
no
appeHte
to
finance
specula1ve
development
§ Main
focus
=
successful
business
operaHons
=
WORKING
CAPITAL
§ Rent
and
tenant
improvements
take
away
from
working
capital
§ If
making
a
profit
requires
walk-­‐in
customers,
needs
to
be
criHcal
mass
of
walk-­‐in
customers
in
the
near
term
(density
and
access)
§ Does
more
retail
make
sense?
Synergy
or
starva1on

13. 13
Lesson
#1:
Public
Subsidy
is
Essen1al
Reducing
Development
Costs
§ Federal
tax
credits
for
housing
and/or
energy
efficiency
§ By-­‐right
higher
density
zoning
§ Expedited
permigng
and
review
§ Fee
waivers
§ City
CIP
investment
in
infrastructure
§ Tax
Increment
Financing
(TIF)
and
tax
abatements
§ Federal/Regional/State
grants
Removing
Barriers
to
Entry
§ Land
assemblage/swaps
§ Below
market
land
lease
§ ROW/street
abandonment

14. 14
Lesson
#2:
Residen1al
Density
Leads
Transit Type DU/Acre
Persons/
Sq. Mile
Bus - minimum service 4 6,192
Bus - Intermediate Service 7 12,096
Bus - Frequent Service 15 25,920
Light Rail 9 15,552
Rapid Transit 12 20,736
Source: Mineta Transportation Institute
§ Need
high
residen1al
density
(approximately
15,000
persons/
sq.
mile)
to
sustain
light
rail
§ Synergy
between
housing,
retail
and
transit
only
if
easily
walkable
§ People
only
willing
to
walk
2,300
feet
for
general
purposes
§ Commuter
support
of
transit
needs
residen1al
density
at
both
ends

15. 15
Lesson
#3:
Retail
Follows
§ Retail
is
a
business
opera1on
–
rent
subtracts
from
service
§ Retail
site
loca1on
science:
(cluster,
scale,
access,
visibility,
zoning,
consumer
preferences,
compeHHon
and
capture)
§ Free
rent
won’t
change
bad
fundamentals
§ A
vacant
development
is
worse
than
no
development
§ MANAGE
EXPECTATIONS

16. 16
Discussion
and
Q&A
“If
you
ask
me
a
ques1ons
I
don't
know,
I'm
not
going
to
answer.”
-­‐-­‐-­‐
The
Immortal
Yogi
Berra
Chris1ne
Maguire,
AICP,
EDFP
Senior
Manger
◊
DPFG
609
Castle
Ridge,
Suite
310
AusHn,
TX78746
ChrisHne.Maguire@dpfg.com
512-­‐732-­‐0295