The Urban Land Institute has a reputation of being an organization in which enlightened developers get together with the occasional savvy planner and designer. So with a real estate downturn in full swing, it's not surprising that the main topic at ULI's Fall Meeting in San Francisco last week was ... planning, not development.
In particular, the topic seemed to be how developers can participate in the planning game – or, at the very least, work for the government during the downturn. For example, one panel of dealmaking experts focused exclusively on how to become a development advisor to local governments until the market turns again. "Developers understand the value of time and money," said Frank Baltz, of Maryland-based Edgemoor Real Estate Services. Governments don't understand the value of either, he added, but savvy government folks do understand that they can build necessary public projects at a low cost during an economic downturn.
It's also possible to use a variety of government financing techniques to drive down the cost of development during a downturn. David Madway, an experienced real estate development lawyer with Sheppard Mullin in San Francisco, pointed to the possibility of combining tax-increment financing and Mello-Roos bonds. The trick, he said, is simply to use the tax increment revenue to make the bond payments – essentially, using tax revenue to pay off tax-exempt bonds. Madway noted that this technique can take advantage of California's little-used "infrastructure finance district" law, which essentially permits creation of a tax increment financing district without going through the blight finding required by redevelopment law.
Perhaps the best lesson for underemployed developers at ULI was simply the example of savvy folks who've made their way back to the public sector during the downturn. The best example I ran into was provided by Dan Rosenfeld, who was a fellow panelist in a session about Los Angeles transit.
Rosenfeld has had more lives than a cat. A longtime developer, he spent the last real estate downturn safely nestled in the public sector, managing real estate assets for the State of California and the City of Los Angeles. When the market boomed, he jumped to Urban Partners in Los Angeles, working on a lot of large urban development projects.
And so where's Rosenfeld now? He's working for L.A. County Supervisor Mark Ridley-Thomas, who's the swing vote on the Metropolitan Transportation Authority board. After all, Metro's got $30 billion to spend on transit construction that will, inevitably, stimulate the next round of transit-oriented development in L.A. And good developers are smart enough to go where the money is.
– Bill Fulton