Investment Funding for New Urbanists

Exerpts From New Urban News

Since the late 1990s, a number of people have tried to form investment pools that would provide money for new urbanist developments. It has not been easy going.

The Traditional Neighborhood Development Fund, started in 1997 by new urbanist developers Robert Chapman, Rob Dickson, and Lloyd Zuckerberg, obtained backing from the multi-billion-dollar Hillman Company and from a major shareholder in Goldman Sachs, but was never able to place any significant capital.

The Fund for New Urbanism, started in 2002 with Andres Duany, Sam Young, and businessman Wayne Huizenga as partners, hoped to finance several projects but is now limiting itself to just one — a 930-acre development near Edenton, North Carolina. Another pool, the Green Living Fund, which Kacey Fitzpatrick in the San Francisco Bay Area expected to have in operation by late 2006, has delayed its startup by at least several months.

Yet while some investment pools are being postponed or pared down, others are springing into existence. In January, the Denver-based Revival Fund Management of Dennis Fleming and Charlie Randall started its Urban Green Fund, which will invest in walkable, mixed-use developments within a half-mile of mass transit. Also importantly, philanthropies are coming forward. The New York-based FB Heron Foundation, for example, is investing in New Urbanism through funds such as the Bay Area Smart Growth Fund and the California Smart Growth Fund.

What seems to be under way is a sorting out of investment concepts and participants. In some instances, new urbanists tried to start funds before conditions were ripe. “We were way premature nine or 10 years ago,” says Chapman, who leads an established new urbanist development company, the North Carolina-based Traditional Neighborhood Development Partners. “I think the time is absolutely right now. We’ll make an announcement in midsummer about a new fund that will have a sustainability and green building aspect.”

Some funds have run into difficulty because they employed methods that diverged too much from the real estate field’s usual ways of doing business. DPZ’s Fund for New Urbanism, whose research and organizing were carried out primarily by Young and Demetri Baches, had what seemed an ingenious idea: The Fund would identify eight sites “ideally located for smart growth,” design plans and codes for them, secure entitlements so that construction could occur as-of-right, and transfer the approved plans to developers prepared to follow the plans.

There turned out to be at least two flaws in the Fund’s premise, according to sources consulted by New Urban News. First, developers resisted paying to obtain planned, entitled projects. “A developer doesn’t want to pay retail,” Chapman says. “He wants to pay wholesale.” Second, the Fund suffered from being seen as more a planning operation than a development organization. Baches acknowledges that DPZ did not want to devote time and energy to becoming a full-fledged developer itself. With a busy international planning practice, DPZ would have had a hard time managing several development projects. Thus the Fund settled upon carrying out the one project it had pushed the furthest — Sandy Point.


THE NEED FOR PATIENT CAPITAL
Analysts agree that there is clearly a need for pools of “patient capital.” Mainstream real estate financiers mostly have “a time horizon that is so compressed that you have to make [undesirable] compromises,” Chapman observes. A new urbanist development will surpass a conventional subdivision in value in the long run, he says, but first a great deal of money and time must be invested. It’s not uncommon for 15 years to be needed.

“We need to understand real estate as a 40-year asset class again,” says Fleming. Fleming expects to put money into a project for eight to nine years and to have a provision allowing the investment to be renewed twice. By comparison, conventional real estate funds usually “have a time horizon of five [years] plus two [extensions] or seven [years] plus two [extensions].”

Revival Fund Management expects its Urban Green Fund to amass $250 million and will invest it in approximately 20 to 30 projects in “progressive real estate markets” such as Denver, Seattle, Dallas-Fort Worth, Boston, Washington, and the Bay Area (except the purportedly overpriced city of San Francisco). Each project will get $7 million to $12 million from the Fund, says Fleming, the managing director. Properties will typically be “within a half-mile radius of frequent transit service” and will feature energy-efficient technologies, a fund statement says.

Once the first Urban Green Fund is established, a second fund would be started, and so on. Eventually Revival would like to establish a real estate investment trust (REIT) for properties that are new urbanist and “green.”

Criteria similar to Revival’s are already being used by the $100 million Rose Smart Growth Fund, which developer Jonathan Rose established about a year ago. After buying two buildings in downtown Seattle for $23 million last April, the Rose fund announced its second investment in November: half of the $38 million needed to convert the historic Clipper Mill buildings in northern Baltimore to 51,000 sq. ft. of arts and crafts studios, 62,000 sq. ft. of offices, 36 loft apartments, and other uses. The Rose Fund became a 50-50 partner with Struever Bros. Eccles & Rouse, which is developing the project, with Cho Benn Holback + Associates as architects. The property adjoins a light-rail stop in Jones Falls Valley.

A new urbanist investment of more limited duration is “mezzanine capital,” which Philip Blumberg’s American Ventures Realty in Coral Gables, Florida, supplied to projects such as market-based, moderate-income housing in the Little Havana section of Miami and the luxury-class Gold Avenue Lofts in downtown Albuquerque. Mezzanine financing — so called because it occupies a level between loans and long-term equity— generally is paid off after about 18 months. Blumberg says the investments made through his company’s South Florida Urban Initiatives Fund and New Mexico Urban Initiatives Fund, both of which are near being closed out, have performed well, delivering operating returns of 15 percent or better.

Blumberg says plans for a third urban initiatives fund, in New Jersey, fell through when Governor Jim McGreevey, with whom the fund organizers were working, unexpectedly resigned in November 2004 (after the governor admitted having an extramarital affair with a male state employee). “Given the current down cycle in residential real estate, we’re evaluating what would be the next form for a fund,” Blumberg says, noting that he remains “bullish” on this kind of investment.Chapman views better financial structures as a key to improving the quality of community development in America. When he rolls out a new fund later this year, many of his investors are expected to be “foundations, endowments, and other socially conscious organizations” comfortable with a long timeline.

A growing number of foundations are putting money from their endowments into environmentally and socially responsible real estate development. The Heron Foundation has placed $11 million (3.5 percent of its endowment) into the Bay Area and California Smart Growth Funds and the Canyon-Johnson Urban Fund, Genesis Workforce Housing Fund, and UrbanAmerica funds.

California has become a hotbed for smart growth funds, which often favor energy-efficient buildings along with urban locations near mass transit. The California Public Employees’ Retirement System (CalPERS) has invested in funds such as the Green Development Fund — which was begun with the Houston-based real estate firm Hines, for construction of LEED pre-certified office buildings — and the $676 million CIM Urban Real Estate Fund. Two of the fund management companies most active in California are Pacific Coast Capital Partners and Pacific Realty Group. Among the sponsors of such funds is the Bay Area Council, which in 2002 started the $66 million Bay Area Smart Growth Fund I for projects in or near neighborhoods of below-median income and which has since launched a second fund.

Baches is now managing partner of DPZ Pacific, a firm licensed by DPZ to produce plans, designs, and codes in Australia, New Zealand, China, and other parts of East Asia. “ He expects to start funds in that part of the world, where he thinks the prospects for New Urbanism are bright.

UniverCity's Flex Units

From : Smart Bylaws Guide – Secondary Suites – Multi-Family Flex Units

New zoning for the mixed-use development called UniverCity in Burnaby at Simon Fraser University allows suites in strata townhouses or apartments. These “multi-family flex units” are minimum 74 square metre (796.5 square feet) dwellings containing a defined area for potential rental accommodation. The potential rental must be at least 24 square metres (258.3 square feet) and not more than 35 percent of the gross floor area of the dwelling.

The Flexsuite must:

• Contain a secondary kitchen area with a compact range or microwave oven and built-in cook top, compact refrigerator, sink, counter, cabinets and venting
• Have at least one closet and bathroom with a toilet, sink and bathtub or shower
• Be wired for an independent telephone connection prior to occupancy
• Have a separate lockable entrance door providing direct access to the exterior of the dwelling unit.

Not less than ten and not more than 50 percent of units in a multi-family dwelling shall be flex units, and the dwelling must provide a common washing machine and dryer for every 20, or part thereof, multi-family flex units. If the unit is available for rent it must be registered with the student housing registry at the University.

Burnaby Zoning Bylaw No. 4742 (Consolidated to May 12, 2003) – see Section 3 Definitions and Schedule VIII – Off-Street Parking

Mixed-Use Neighborhoods Decrease Risk of Obesity

Confirming last year's study by University of Maryland's National Center for Smart Growth researcher Reid Ewing, who found higher obesity rates in counties with sprawling rather than compact development, a new Georgia Institute of Technology in-depth study of links between weight and the built environment in metro Atlanta, led by University of British Columbia Associate Professor Lawrence D. Frank, shows the relative risk of obesity increases 35 percent from the most to the least mixed-use areas.

Municipalities Adopting TOD Policy

By Amy Gardner and Bill Turque
Washington Post,March 13, 2007

Fairfax County embraced a new policy yesterday encouraging dense, pedestrian-friendly development near current and future transit stations, continuing the transformation of car-friendly suburban neighborhoods.

The policy, approved unanimously by the county Board of Supervisors, will promote "compact" development with a mix of housing, office space and retail stores within a half-mile of rail stations. The most intensive development would lie within a quarter-mile of stations. Fairfax is home to 10 transit stations, five for Metro and five for Virginia Railway Express.

The point, supervisors and the new policy say, is to create communities that encourage walking, biking and transit use to reduce sprawl and automobile travel.

Another purpose is to create a clear definition of so-called transit-oriented development -- a term that means different things to different people.

Last June, for example, the county approved MetroWest, a development of 2,250 homes as well as office and retail space at the Vienna Metro station, over the objections of residents who said the proposal lacked the mix of uses and neighborhood input needed for successful transit-oriented development. Previously, the county blocked a nearby neighborhood from selling to a developer who planned to build a high-rise project, on the grounds that the community was too far from the Metro station to qualify for the label.

New Urbanism & ‘low-impact’ infrastructure

by Philip Langdon
Courtesy New Urban News

Natural drainage systems and other ecologically advanced technologies are coming to walkable communities.

A new urbanist-led charrette in November 2006 recommended that New Orleans be redeveloped with “natural drainage systems” — techniques allowing stormwater to soak into the ground rather than be piped, sometimes full of pollutants, to bodies of water like Lake Pontchartrain.The recommendation, intended for the Gentilly section of the flood-ravaged city, is a sign of new urbanists’ emerging interest in engineering and landscape systems based on processes found in nature.

In recent years, environmental activists have argued that rain should be handled in a more natural fashion — through “rain gardens,” bioswales, and other ecological features — instead of relying heavily on underground pipes and other conventional engineering mechanisms. A growing number of new urbanists are moving toward this ecological approach.Inquiries by New Urban News found nature-based environmental techniques being incorporated into projects and plans ranging from Traditional Neighborhood Developments (TNDs) in North Carolina and Pennsylvania to urban neighborhoods and HOPE VI public housing redevelopments in Portland, Oregon, and Seattle. (An article on using stormwater management to enhance civic spaces is on page 5 of the December 2006 issue.)

The approach is known by many names, including high-performance infrastructure, natural drainage systems, bioretention, low-impact development, and sustainable stormwater management. “’Laying lightly on the land’ is perhaps the best term we have,” says Tom Low, the Charlotte, North Carolina-based director of town planning for Duany Plater-Zyberk & Company (DPZ). “It basically means using less pipe. The water sheets across the surface. The amount of surface pavement per dwelling unit is reduced.”

Low led a group that last month completed a study of a TND called Griffin Park, to be built in Greenville County, South Carolina. The study looks at building Griffin Park as a TND with conventional engineering versus building it as a TND with a more nature-based system. The natural approach envisions less pavement, fewer curbs and gutters, less storm sewer pipe, and fewer storm sewer inlets, thereby reducing some of the development’s costs. The study is expected to be used to promote natural drainage options among new urbanists.

THE NATURAL APPROACH

For Woodsong, a 22-acre TND in Shallotte, North Carolina, developer Buddy Milliken insisted on natural methods of handling rainwater. In front of a series of cottages on narrow lots is a concrete street 300 feet long and 10 feet (one lane) wide. The center of the street consists of a three-foot-wide strip of pervious concrete. Rain seeps through the porous pavement and a rock subbase and enters the ground, rather than being concentrated in storm drains and pipes. The narrow, curbless street, passing within about seven feet of the houses, helps replenish an aquifer. At the same time, it helps create a more relaxed and intimate setting, making the properties more valuable.

A ditch that cut across the mostly wooded property prior to development has been modified by installing “small check dams or gabions to slow the water down,” Milliken says. Advocates of natural drainage often sum up the basic principles in these words: “Slow the water down, spread it around, and get it into the ground.” Rain from roofs may be captured in cisterns or directed into rain gardens — mild depressions filled with natural material that absorbs the water and gives it time to percolate into the soil. “These are very, very simple things,” says Milliken.

Low devised Woodsong’s neighborhood plan, which includes a man-made wetland in one area and a pond in another. Milliken says that in a conventional development the pond might have been dug in an out-of-the-way spot and then ringed by a chain-link fence. The detention and retention ponds that have proliferated in recent decades are often unsightly and hard to maintain — a waste of valuable real estate. Milliken chose instead to place the pond in a prominent location, in front of a group of houses, forming a neighborhood centerpiece which helps to control rainwater and let it soak into the ground.

At the edges of the pond are four small constructed wetland bays that slow and filter the water before it enters the pond. Mary Vogel, principal in PlanGreen in Washington DC advises against ponds because, among other things, their water may heat up, harming fish life. However, Peg Staeheli, principal in SvR Design Company in Seattle, says a detention pond is needed in some situations to control the water flow. Woodsong’s pond is apparently an aesthetic plus, which has translated into stronger real estate values.“Everything we’ve done has been with the intent to get a financial return —not necessarily the next day,” Milliken says of Woodsong, which he has been building since 1999. “New Urbanism and the environment are mutually reinforcing.”The Oct. 29-Nov. 3 Gentilly charrette, led by Andres Duany and covering 17 New Orleans neighborhoods, recommended using natural drainage systems to absorb water, decrease flooding, and lessen pollution in the runoff, much of which goes into Lake Pontchartrain untreated. Vogel says one instrument is “roadside bioswales — concave gardens planted with native perennial plants and trees — [which] increase absorption and add beauty and resiliency to the environment.” These can be placed between streets and sidewalks.

New Orleans contains many road medians (New Orleanians call them “neutral ground”) that were damaged by last year’s flooding. The intention is to dig into some of these medians and install a mix of soil conditioners, organic mulches, and rock, capable of holding and gradually dispersing a large quantity of water. The economics are favorable, says Vogel. “Whereas conventional street and storm drain maintenance costs increase over time as the result of aging materials, pipes, and drains, natural drainage systems actually become more effective over time, as plants and trees mature.”

One city that is a leader in combining natural drainage with walkable streets and neighborhoods is Seattle, where sustainable stormwater management has been advocated by the Puget Sound Action Team and has been put into practice by firms such as SvR Design. SvR designed High Point, a mixed-income, 34-block, 1,600-unit Hope VI project that features vegetated and grassy swales, porous concrete sidewalks, and front-yard rain gardens. South Lake Union, a large mixed-use development to be built north of downtown Seattle, may also employ natural drainage. (For techniques at High Point, see www.thehighpoint.com or www.svrdesign.com.)

Monroe center... emerging BOHO Center?

One of the most desirable locations for BOHO centers is at or near transit hubs such as light rail stations. The new Monroe Center in New Jersey is a perfect example of this new trend.

"A culturally friendly transit village"
An example of the opportunities provide by transit-oriented development is the 123-unit Monroe Center in New Jersy, described by the Hudson Reporter (24 January 2006) as a "high-rise condominium tower" which "will ultimately be part of a 435-unit development on a 5.5-acre site just steps from the Ninth Street stop of the Hudson Bergen Light Rail....[it] will include four high-rise residential buildings of between 10 and 13 stories, with ground floor retail, commercial arts space, and mezzanine space." It's intended to be "a culturally friendly transit village", according to the paper.

This ideal location has been attracting an eclectic mix of artists, entrepreneurs, and small businesses. The paper goes on to note:

"Already underway is the renovation of the interior of the existing Monroe Center for the Arts at 720 Monroe St. Since opening in 1990, the converted Levelor Blinds Factory has maintained an eclectic mixture of businesses that now include ad agencies, interior designers, cake bakers, architects, toy makers, dance instructors, and yoga studios. "

Accesible Urban Transit Hub

Another selling point, said the developer, is the project's location. He said that because of the property's proximity to the light rail, this project will be a good example of the "smart growth" principle of a "transit friendly community."

A transit village is a state-promoted planning initiative to redevelop and revitalize communities around transit facilities, making them appealing choices for people to live in, while lessening their reliance on cars.

More than required parking
In Hoboken, parking is always an issue, and this is one of the few projects that will provide more parking spaces than the zoning requires. When fully built out, the project will have 1,120 garage parking spaces to complement the surrounding off-street parking.

Outdoor Plaza
According to the developers, outdoor areas at Monroe Center will include one large plaza with stylistic fountains, seating decks and a "hammock park." Each new building at the community will also feature rooftop gardens. "Monroe Center's appeal as a destination will be enhanced by its substantial outdoor public areas," points out Gerard Saddel, a partner of Monroe Center Development, LLC. "A series of public parks and a plaza will be scattered throughout the entire development."

The BOHO Philosophy

BOHO Developments seek to offer a compelling alternative for those who are dissatisfied with the choices provided by conventional development. Conventional development emphasizes the private realm, auto dependency, single use pods, privacy, exclusivity, and bigger and bigger private residences. BOHO Developments emphasize the public realm, walkability, mixed uses, community, diversity, and quality over quantity.

A Walkable Community
BOHO Developments pragmatically accommodates cars, but are be designed for people. They are to be very walkable. Cars travel slowly, and sidewalk and street designs emphasize pedestrian comfort and safety. There are plenty of interesting things to walk to, because of the fine-grained mix of uses. Walks won’t be too long, because the development is relatively compact. And the walks are safe, because there are plenty of eyes on the street at all times.

Environmental Considerations
BOHO Developments site plan, as well as construction and management procedures, emphasize resource efficiency, environmental protection and restoration. Developments incorporate elements of nature in the neighborhood and make them part of people’s daily experience. Street trees are especially important.

A Place for Commerce
The commercial center of a BOHO Development have retail stores that serve the practical everyday needs of the BOHO Development residents and its surrounding neighborhoods – needs that are currently not well served. And because of its unique character, rare good urbanism, and easy access, they also attract businesses that are a destination for citizens of the entire metro areas and beyond.

A Place to Live
The residential elements of A BOHO center cover the entire spectrum from small loft apartments above shops to larger live/work condominiums. Developments aspire to keep the scale of individual buildings rather small, which will enhance the ability to have an attractive mix of housing types throughout the neighborhood.

A Place to Work
BOHO Developments feature a traditional fine-grained mix of different residential types as well as retail stores, office space, civic buildings, people-friendly streets, squares, and recreational facilities. Live-workloftsandtraditionaloffices are pivitol the neighborhood, as the daytime occupants and visitors they draw to the neighborhood will be very helpful in maintaining a vibrant, active, daytime environment.

A Place to Gather
BOHO Developments incorporate civic gathering places, which include public green spaces, pedestrian-oriented streets, recreational facilities, shops and restaurants. These civic places reinforce a sense of neighborhood and help provide the glue that holds the people of the community together.

New Urbanism (one view)

by VirtualCity

New urbanism occasionally encompasses other city planning systems such as smart growth, and is occasionally recognized as a separate entity. The idea claims to originate in the early twentieth century with the development of the neighborhoods it uses as models, though as a movement, it is responding to the perceived weaknesses in suburban development.

Whether or not smart growth is an offshoot of new urbanism, the two share a number of concepts. Both emphasize the important of a compact, walkable community center, and the assimilation of different types of housing and commercial buildings. An emphasis on environmentally-conscious building, the renovation of brown- or greyfield land, and historic preservation are other similarities.

However, because new urbanism was created as a specific theory for urban design rather than simply being based on a looser set of ideals, its definition is more concrete than that of smart growth. Andres Duany and Elizabeth Plater-Zyberk founded the Congress for the New Urbanism, inspired by the time the husband-and-wife team spent at Yale. Their guidelines for a ‘new urban’ neighborhood suggest the inclusion of most of these elements:

• A recognizable center for the town/city/community, such as a green square or distinctive intersection, in which the transit stop is also situated.
• Buildings in the neighborhood center placed close to the street, to form a well-defined space.
• A walk of not much more than 5 minutes from any home to the community center, or approximately 2,000 feet.
• Mixed housing types, including apartments, rowhouses and detached homes, to provide a suitable dwelling for people of all ages and all economic means.
• An auxiliary building for workspace or a garage apartment is allowed in the backyard of each home.
• Parking lots or garages in the back of homes and businesses, rather than fronting the streets.
• Shops and offices to sufficiently serve the weekly needs of residents on the edge of the community.
• An elementary school close enough for most children to walk from home.
• Small parks or playgrounds near every home, not more than a tenth of a mile away.
• Streets that create a linked network to disperse traffic.
• Relatively narrow streets, suitable for pedestrians and bicycles, preferably lined with trees.
• Some major spots in the neighborhood center reserved for buildings to facilitate community meetings and activities, or for religious, cultural, or educational purposes.
• A self-governing community, guided by a council that makes decisions on maintenance and change.

There are a number of complaints lodged against new urbanism—the first, a semantics issue, that the scheme is not actually ‘new,’ as it derives its inspiration from American towns of the pre-automobile era. Some argue, conversely, that this halcyon design is based upon a system that exists only in nostalgia. Either way, it has drawn criticism chiefly for emphasizing aesthetic values over practical design, especially as a new urban community might relate to the surrounding region. The delineation of design elements irks those who feel the plan undermines American property rights and civil liberties, while on the opposite side of the spectrum, some accuse it of being a gentrification plan that would force lower-income families from their neighborhoods. Though the transportation habits of new urban residents may improve, the communities tend to remain socially homogenous ones.