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Transportation Systems PDF

266 Pages·1997·12.93 MB·English
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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 (202) 822-8320 ). 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 : ' r v :>i • V . 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. 11 0 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 iii 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 v 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 vi

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