Friday, May 4, 2012

Reader Response: Structuring the Financial Agreements Post-TearOut

Reader Cullen and I have been having a convo on email that might be worth posting.  He asked whether I had given much thought to the structure of the land sale/deals given the hypothetical scenario of a political or financial leader jumping on board and taking the reigns for the IH-345 tear-out.

I responded that I had, but figured the plan first needed to generate support with the vision and those are details that would need to be figured out by the interested and relevant stakeholders, including the city and state (or even feds if they want to kick in cash-money like they are for NOLA).  Cullen offered the following idea:

Have you given any thought to the feasibility of an auction-driven long-term ground lease program for the land freed up by tear-down?  
1)      City retains ownership of all acreage not already privately held2)      Sealed-bid auction process for rights to 99-year lease.  NO reserve lease rate.  All auctioned parcels will be leased.3)      Lease features real estate equivalent of oil & gas “held by production” provisions.  Leaseholders required to invest, and complete,  $X in improvements by a certain date to retain lease.  Improvements fully taxable.4)      99-year lease to include purchase options granting leasehold right to acquire the property outright. What does this accomplish? 
1)      Prevents ‘inventorying’ of real estate by developers2)      All private money to go directly to improvements.  Not dirt.3)      Sets a definitive timeline for development.4)      Auction provides for market determined valuation of unlocked land.

What does everyone think?  Keep in mind that we wouldn't solve it today, but ideas, critiques, etc. are all welcome as long as they're focused on generating the highest quality urbanism for the area.  We want Win-Win-Wins, for the city (predictability and tax base), the citizenry (high quality living options), and the investors (profit).