Transportation Systems

266 Pages·1997·12.93 MB·English

Minority Business
Participation in
Public/ Private Partnerships:
A
Manual on Joint Development
February 1986
DESCRIPTION OF DOCUMENT COVER PHOTOGRAPHS
The photographs on this Document Cover are a graphic design
presentation of the proposed FAR EAST TRADE CENTER joint
development project at the Gallery Place North Metro Station in
Washington, D.C. These graphic designs were developed by Alfred
H. Liu, A. I.A. and AEPA (Architects Engineers, a Profesisonal
Corporation) and are copyrighted materials. Mr. Liu has
authorized the reproduction of these graphic designs in this
document. Any inquiries about further use or reproduction of
these materials must be directed to the copyright holder (i.e.
Alfred H. Lui [phone] ).
Minority Business
Participation in Public/
Private Partnerships:
A
Manual on Joint Development
Prepared by
Celestsno M. Beltran, Peter M. Theobald,
Fernando Milan, and Anthony Gomes
Comprehensive Technologies International, Inc.
4260B Chain Bridge Rd.
Fairfax, Virginia 22030
Prepared for
Office of Grants Management
Urban Mass Transportation Administration
U.S. Department of Transportation
Washington, D.C. 20590
Distributed in Cooperation with
Technology Sharing Program
Office of the Secretary of Transportation
DOT-l-86-14
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ACKNOWLEDGEMENTS
The design, development and production of this manual
required the assistance of both public and private sector
resources and individuals. In particular, CTI would like to
recognize the contributions of several individuals to this
effort
First, Mr. Wallace Katz of UMTA's Office of Grants
Management was assigned to monitor this project. His
participation was essential. His guidance and review of all
drafts of this document proved most beneficial in assisting CTI
narrow the focus and emphasis of the manual.
Second, special thanks are in order for Mr. John Green and
Mr. Lee Sillman from the Office of Planning at the Washington
Metropolitan Area Transportation Authority (WMATA). Both
gentlemen graciously provided CTI staff with extensive
information on the problems and issues underlying the evolution
of WMATA's joint development program. They spent hours
explaining the complexities of transit planning and the role of
transit agencies in joint development ventures. Their technical
review of the final drafts helped to clarify public/private
development issues.
Third, as part of the research for this project, CTI
interviewed several entrepreneurs and developers who have
attempted to participate as equity owners in joint development
projects throughout the country. Their willingness to share
their positive and negative experiences in joint development
provided an invaluable source of data for the project. Their
"lessons learned" were incorporated throughout the manual.
In closing, CTI would like to give due recognition to its
own staff for their untiring efforts to produce a document which
will "make a difference". Too often, major socio-economic issues
are studied and re-studied without practical applicaton. CTI has
strived to make this manual a practical approach to evaluating
participation in transit-related real estate investments. The
following CTI staff contributed to the design and production of
this manual.
Celestin© M. Beltran
Project Manager/Writer
Peter M. Theobald
Senior Researcher
Fernando Milan
Senior Researcher/Writer
1
Anthony Gomes
Researcher
Mary Cary
Production Typist
Ava Flores
Production Typist
Marta L. Valldejuli
Production Supervisor
DISCLAIMER
The information provided in this document is the sole
responsibility of CTI and does not necessarily represent the
policies of UMTA. CTI takes all responsibility for errors and
omissions pertaining to this document.
This document is disseminated under the sponsorship of the
Department of Transportation in the interest of information
exchange. The United States government assumes no liability for
the contents or use thereof.
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TABLE OF CONTENTS
PAGE
..........................
PREFACE
1
CHAPTER ONE; LAND DEVELOPMENT AND OWNERSHIP
OPPORTUNITIES IN TRANSIT-RELATED
......
REAL ESTATE DEVELOPMENT PROJECTS
4
..... .............
OVERVIEW
4
...........
I. WHAT IS JOINT DEVELOPMENT? 5
II. EXAMPLES OF DBE EQUI.TY..PA.RT.IC.IP.AT.IO.N .IN.....
JOINT DEVELOPMENT 6
........
III. FRAMEWORK FOR JOINT DEVELOPMENT 9
IV. BENEFITS OF DBE EQUITY PARTI.CI.PA.T.IO.N .IN.....
JOINT DEVELOPMENT PROJECTS
1
.......
A. Financial Benefits ........ 12
B. Redaction in Financial Risk 13
......
C. Management Participation/Control 14
V. BARRIERS TO DBE "OUITY PARTICIPATION IN
JOINT DEVELOPMENT 15
............
1. Lack of Risk Capital ........... 15
2. Lack of Equity Capital 16
3. Lack of Experience in Real Estat.e......
Development 16
. .
4. Lack of Knowledge in the Technical and
Legal Aspects of Real Estate Development 16
. .
5. Lack of Knowledge About How the Political
Process Underlying Joint Develop.me.n.t .Wo.rk.s.. 17
6. Lack of Minority Organizations 17
CHAPTER TWO: JOINT DEVELOPMENT AS A
..........
DECISION-MAKING PROCESS 18
............ .....
OVERVIEW 18
I. JOINT DEVELOPM.EN.T.A.S .A.P.ROCESS LEADING T.O....
DEAL-MAKING 19
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PAGE
II. ISSUES, PARTICIPANTS, ROLES AND OBJECTIVES
...
OF THE PUBLIC SECTOR IN JOINT DEVELOPMENT 21
A. Public Sector Transit Issues 22
. .
B. Public Sector Participants, Roles and Goals 23
.
C. Public Sector Joint Development Objectives 24
.
III. ISSUES, PARTICIPANTS, ROLES AND OBJECTIVES
...
OF THE PRIVATE SECTOR IN JOINT DEVELOPMENT 25
A. Private Sector Development Issues 25
B. Private Sector Participants, Roles
and Goals 26
.....
1. Developer 27
2. Equity Investors 27
3. Conventional Financial Lenders 28
C. Private Sector Joint Development Objectives 28
.
IV. FACTORS IN ESTABLISHING A SUCCESSFUL
PLANNING AND DEVELOPMENT FRAMEWORK 29
A. Issues in the Design of Contract
Bidding Procedures and Policies 30
B. DBE Equity Participation as Part of
Contract Bidding Procedures and Policy .31
. .
V. LOCAL TRANSIT AGEN.CY.J.OI.N.T .DE.VE.LO.PM.EN.T.....
SITE PREPARATION 33
A. The Offering Prospectus 34
B. The Joint Development "Packaged"
......
Opportunity 35
VI. PRIVATE SECTOR RESPONSE TO REQUEST FOR
JOINT DEVELOPMENT PROPOSAL 35
...
VII. SELECTION OF DEVELOPER/JOINT VENTURE TEAM 36
VIII. PARAMETERS OF DEAL-MAKING 38
IX. DBE STRATEGIES FOR PARTICIPATING IN THE
JOINT DEVELOPMENT PROCESS 39
A. Local Transit Agency DBE Goals 40
B. Integrate DBE Equity Part icipation into the
Private Sector Joint Development Objectives 41
.
C. Competitive Bidding Procedures Whic.h.....
Require DBE Equity Participation 41
D. Transit Agency Land Acquisition as a Means
to DBE Equity Participation 41
IV
PAGE
E. DBE Equity Participation in Weak and
Uncertain Joint Development Market Areas 42
. .
F. New Opportunities for Passive Equity
Participation in Joint Development 42
CHAPTER THREE: JOINT DEVELOPMENT EQUITY OWNERSHIP AS
AN INVESTMENT DECISION 45
OVERVIEW 45
I. EQUITY OWNERSHIP IN JOINT DEVELOPMENT IS
AN INVESTMENT DECISION 46
...
II. CHARACTERISTICS OF REAL ESTATE INVESTMENTS 46
III. BENEFITS OF INVESTING IN REAL ESTATE 48
IV. RISKS OF INVESTING IN REAL ESTATE 50
V. SPECIAL CONSIDERATIONS IN INVESTING IN
JOINT DEVELOPMENT PROJECTS 53
VI. DETERMINING YOUR FINANCIAL OBJECTIVES 56
A. The Investor Life Cycle 57
...
B. The Real Estate Investment Life Cycle 61
C. The Ownership Life Cycle 63
...
VII. CHOOSING THE RIGHT TYPE OF EQUITY OWNERSHIP 65
A. Selected Real Estate Investment
Ownership Forms 65
B. Syndications .67
CHAPTER FOUR: HOW TO GET YOUR PROJECT TO THE DEAL-
MAKING STAGE AND BEYOND 70
OVERVIEW 70
I. HOW A REAL ESTATE DEVELOPMENT PROJECT IS
PUT TOGETHER 72
A. Concept Phase 74
1. Role of the Local Transit Agency 74
2. Role of the Private Sector 76
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PAGE
B. Feasibility Phase 76
1. Role of the Local Transit Agency 77
2. Role of the Private Sector 77
a. Selection of the Development Entity 78
. .
b. Commitment of Risk Capital 80
c. Conduct the Prelimilnary Economic
Feasibility Analysis 80
d. Organization of the Development Team 81
.
e. Preparation of Feasibility
Analysis/Development Proposal 82
C. Final Design and Financing Phases 84
1. Role of the Local Transit Agency 85
2. Role of the Selected Private Sector
Development Entity 85
a. Coordination and Scheduling Overall
Project Management Plan 86
b. Supervision and Preparation of All
....
Architectural/Engineering Plans 88
c. Reassessment of Feasibility Analysis
and Complete Leasing Strategy 90
d. Identification and Negotiation of
Additional Equity Capital 90
e. Identification and Commitment of
Debt Financing 92
i. Permanent Loan Commitment 92
ii. Construction Loan Closing 95
D. Construction Phase 98
1. Role of the Local Transit Agency 99
2. Role of the Development Entity 99
E. Operation Phase 103
II. HOW TO UNDERTAKE A PRELIMINARY ANALYSIS 104
A. Initiate A Detailed Review of the Joint
Development Prospectus 107
B. Prepare a Building Program 107
C. Conduct An Initial Market Study 107
D. Estimate Future Operating Cost 109
E. Calculate the Economic Value of Your
Building Program Ill
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