May/ June 2009
VOL. 2 
On Track for Growth: Transit projects offer investment opportunities
The American Recovery and Reinvestment Act (ARRA) has given local and state governments across the country millions of dollars for infrastructure projects of all kinds. These projects will create investment opportunities for the commercial real estate industry, particularly developers and investors interested in transit-oriented development (TOD).
“Now is the time to buy and hold land, and to begin the permitting and design process for transit-oriented development,” says Gary Hunter, an investment associate with Colliers Puget Sound. The Puget Sound region, particularly Seattle and the Rainier Valley, has embraced public transportation and has a fast-growing light rail network. The regional transit authority, Sound Transit, has received $44 million in ARRA funds to extend its University Link light rail system, according to the Department of Transportation.
Sound Transit is just one of several regional transportation agencies that have already received ARRA funds. In Denver, for example, the Regional Transportation District (RTD) has been awarded $40 million for creation and expansion of its West Corridor light rail system.
Over the past several years as Denver’s light rail system has expanded, TODs have sprung up across the Mile High City. This new ARRA financing will give rise to even more TODs in Denver, as well as other cities, according to Ala Hasan, a master planner in Gensler’s Denver office who is working on TODs in Denver.
Creating public-private partnerships
Infrastructure, particularly public transportation, is a major focus of ARRA, which was signed into law earlier this year by President Obama. More than $150 billion has been allocated for infrastructure projects, and of that total, $8.4 billion is set aside specifically for public transportation.
Additionally, ARRA established the Build America Bond program, which will provide much-needed funding for state and local governments at lower borrowing costs. The Build America Bond program offers a federal subsidy so states and municipalities can move forward on capital projects such public buildings, courthouses, schools, roads, transportation infrastructure, government hospitals, public safety facilities and equipment, water and sewer projects, environmental projects, energy projects, governmental housing projects and public utilities.
Millions of ARRA dollars have already been granted to transit projects across the country including light rail projects in Arizona, California, Colorado, New York, Oregon, Texas, Utah, Virginia and Washington. With these funds, local transit agencies will be able to expand their transit networks by building new stations and new lines.
Now that cities and states, along with regional transit agencies, have more funds for infrastructure investment, they’re in a better position to partner with private developers, experts note. These public-private partnerships are critical for successful TODs, says Ralph Zucker, president of Somerset Development.
The Lakewood, N.J.-based firm partnered with the New Jersey Transit Authority to create a TOD in Woodridge, N.J. The project, Wesmont Station, is situated on the former 70-acre Curtiss-Wright factory site and will include a mix of rental and for-sale housing, along with retail and office space.
“The federal government wants to invest in the best transit projects in the U.S., and it requires local transit agencies to show how cities will encourage density and maximize land use around transit stations,” says Elizabeth Rao, national transit development director of HNTB Corporation, a Kansas City-based planning firm. “There is definitely a link between local transit agencies and the private development community.”
In suburban Denver, for example, Hasan’s Gensler team is currently working on a vision plan for the City of Brighton that is a strong example of a public-private partnership. The City of Brighton, the RTD and Brighton Urban Development Company LLC have come together to create a master plan for the land around a transit station.
The first phase of Brighton Vision is a new anchor development located on the southern side of downtown. The development, Brighton Pavilions, will be situated on a formerly vacant 14-acre property on the western edge of downtown and is designed to re-energize the city center and serve as a catalyst for downtown revitalization.
This new mixed-use entertainment district combines a 260-car RTD Park-n-Ride facility, restaurants, retail and a 12-screen movie theater to provide local residents with an urban destination close to their neighborhood. Brighton Pavilions connects with Brighton’s downtown pedestrian system and extends the city center to include this cluster of entertainment options.
Obtaining financial incentives
Denver is certainly not the only city to benefit from ARRA funds. In
the Lone Star State, for example, Dallas Area Rapid Transit (DART) is
on track to receive more than $61 million to design and construct the
first two sections of its 14-mile Orange Line light rail system to
Irving, a Dallas suburb, and to the Dallas-Fort Worth International
Airport.DART is working closely with the City of Irving, the Greater Irving-Las Colinas Chamber of Commerce and private developers to increase density along the Orange Line. Today, there are 24 projects along the Orange Line that have been recently completed or are under construction/in planning.
Those projects account for $3.8 billion in construction activity and total 4.6 million square feet of commercial and residential space, according to Chris Wallace, president of the Greater Irving-Las Colinas Chamber of Commerce.
Wallace says the City of Irving is pursuing the development of transit-oriented communities as one of its top priorities, so it can offer “live, work, play” options and reduce the number of employees who need to commute to their jobs. “TODs are vital to Irving’s future, and we’re doing everything we can to encourage density around these transit nodes,” he notes.
Over the past several years, the City of Irving has aggressively courted developers and offered a variety of financial incentives for TODs, according to Rick Stopfer, an Irving City Councilman and Irving Mayor Pro Tem. Along with tax increment financing, the city has the ability to offer job credits and tax abatements.
The city of Irving’s efforts have been successful, Stopfer says, pointing to Las Colinas Station, a five-block TOD project that will be located along the DART Rail Orange Line in Las Colinas Urban Center, a 12,000-acre master-planned community in the heart of the city.
Developed by Dallas-based ICON Partners, Las Colinas Station will feature two 335,000-square- foot office towers, two 260-unit luxury high-rise apartment towers and a 200-room urban hotel. The project will be developed in two phases, and the developer is actively searching for construction financing as well as a lead office tenant, according to Marc Sullivan, a senior vice president with ICON Partners.
Sullivan says the City of Irving “stepped up” and offered financial incentives for the development of Las Colinas Station, including cash incentives and tax abatements. “Transit-oriented projects are a challenge, and the only way to make them work is to get public participation and bring city staff and elected officials on board,” he says.
Sullivan adds: “The city has given us a good foundation to make the project financially viable. Without the city’s financial encouragement, we’d have to scale back and do something less dense and probably limit it to single-use.”
While ICON Partners continues to work on Las Colinas Station, Sullivan says the firm is interested in acquiring more land near transit hubs. “You can look at the transit plans and see the land that will have the best value five to 10 years from now,” he points out. “Banking land is what developers do when times are slow, and we’re out looking for opportunities.”