At a recent Urban Land Institute conference, the head of global developer Tishman Speyer shared his thoughts on where value is being created in the modern real estate market:

        - Rob Speyer, President and CEO, Tishman Speyer

It's nice to see an outspoken industry leader speak so highly of buses!

Full disclosure, I'm a longtime member of ULI's Transit-Oriented Development product council and we speak highly of transit quite often.

If you can build a $6B Australian subway project, you'll win the right to build some downtown towers and make a few bucks. So goes the transit value capture logic of a recent tender for a Melbourne Metro project according to The Age.

At this time, the city's central loop, where a half-dozen lines coalesce (think about it like the Chicago loop, but underground), is a major transit service bottleneck. The Metro Tunnel project promises to provide an alternate route for some of the lines to pass through the central city. With only five stations, two of which are essentially expansions of existing stations, the project's main impact on regionally accessibility will be increased throughput on the existing suburban lines.

All this could mean higher frequencies to the suburbs and marginal overall connectivity increases in the CBD. Based on urban economic fundamentals and U.S. empirical experience, this investment could lead to suburbanization of some land uses, like housing, and further clustering of land uses that benefit from agglomeration, like office, entertainment, and retail. Thus, one might expect that those valuable development sites offered as part of this tender will eventually be developed as high-rise office towers, perhaps with a smattering of retail and entertainment uses at the bottom and top.

Notably, this is a little different from how it's usually done in the U.S. context. Typically, you'd see a project like this put out to bid without the land development rights. Contractors would compete to build the tunnel and that's all. A few years after all the construction equipment was carted away and internal transit agency politics coalesced, the agency would get around to putting out an RFP for development on the "remnant" sites it owned in the CBD. We call this particular transit value capture mechanism joint development. On the other hand, there's an implicit assumption in the Australian mode of thinking that the tunnel builder will value the future development rights in the near term at a magnitude that is preferable for the transit agency to retaining temporary control of the sites and selling the development rights to a specialized real estate developer at a future date. It's an interesting comparison in approaches to a very similar value capture strategy.

By the way, you have until 2:00PM on June 9th to respond to this solicitation. When timing your trip to your local FedEX office, keep in mind that Australia is a day ahead of the U.S.!

News is bouncing around the interwebs that there may be a new transit value capture mechanism enabled in Illinois. Well, it's not exactly new for Chicago to establish TIFs! TIF districts are a common tool and much maligned in Chicago. This time, the TIFs will be transit specific.

The Chicago-focused Metropolitan Planning Council is lobbying for SB277, a bill in the Illinois General Assembly. As they explain it, the bill would allow the City of Chicago to justify the establishment of a TIF district specifically because it's near transit. The accumulated incremental tax revenues would help fund transit capital improvements in the districts. Let's see how it plays out!

Jarrett Walker produced yet another compelling post on the transit investment planning process that is well worth a read. He muses about what level of sophistication plans should achieve at various points in the planning process and it led me to think about what level of sophistication value capture plans should be at various stages of the transit planning process.

Jarrett uses New York's recently announced BQX project to illustrate his points (see route diagram above). He notes that there are plenty of questions that still remain regarding fares, frequencies, connections, reliability, and other important transit matters. However, the plan is being put forward at this level of completion to see if it has legs and if it can go forward. The mayor is seeking fellow backers and gathering the support the project will need to proceed and flourish. According to Jarrett, now is not the time to spend millions on design.

Further, as Walker argues, putting out too much information too early suggests a level of specificity that doesn't yet exist. And, perhaps, the specificity shouldn't exist for a freshly announced publicly funded project. Too many specifics is cause for great concern on the part of citizens and advocates who may perceive that they were inadequately consulted.

In the case of BQX, I expect that the plan is being presented in a napkin sketch format partly to illustrate the amount of fine tuning and dialogue still to take place (those curves on the illustrative map don't correlate to exact rights of way). The project is conceived thoroughly enough to be thrown against the wall without morphing into something completely different and De Blasio can now see if the idea sticks.

In fact, we now know that a diverse HDR team spent approximately five weeks to develop high level plans for the project before it was announced. It shouldn't surprise anyone that there are factors still under consideration and that important details continue to emerge, including the number of bridges that will need to be built for the optimal alignment.

As part of HDR's five week planning process, high-level value capture estimates were also developed. The mayor considered the value capture funding opportunity important enough and solid enough to include it in his introduction of the project (likely to ameliorate concerns that he'd be dipping into transit funds that had already been allocated to other projects). The expectation has now been set that some portion of the project's cost will be covered through real estate value capture.