Metro Proceeds with Plans for Quality Transit-Oriented Developments Along Rail Corridors

What factors drive Metro's interest in TOD? What is the mission you've been given as the point person for joint-development projects along Metro's rail corridors?

First and foremost is the encouragement of development that supports a general transit-oriented connection to whatever we have in the area. We want a good land form and a good quality development that complements the transit options that are in the area. The second issue is to generate revenue that offsets operational cost. So, how much money people pay us is important. How we receive that payment is important as well; almost always it is a long-term lease.

We're charged with doing high quality projects that demonstrate good, appropriate density and appropriate uses. Mixed use tends to be better since it limits some of the trips that people need to take. Whether that's a restaurant, store, or the laundry, it's one fewer trip you have to take by automobile or bus. In a larger sense, the land use plan for L.A. is really to look at ways to intensify development.

Accommodating new populations takes a lot of development-what we call infrastructure with capacity. So, if the Red Line or the Gold Line has capacity, any new population living near a station is able to use that capacity and not enter into systems that are already over capacity. Building along, for instance, the 101 Freeway creates more of a problem than it solves. Encouraging development near a rail line with capacity allows us to absorb new populations without creating more regional congestion.

Bring us up to date on Metro's joint-development projects. What is the current status of your requests for projects (RFPs) showing interest in TOD?

The resolution of the RFP is about 30 days away [as of July 27]. Of that, approximately five properties have received development proposals-all of them good. Most are mixed use of some form; they range from small, mixed-use housing projects, to larger, mixed-use housing and office-type projects.

We have three on the Eastside along the Gold Line: First and Boyle, First and Soto, and First and Lorena. On the Eastside we have already awarded Caesar Chavez and Soto, which is a mixed-use commercial project. We have one project at Temple and Beaudry, which looks good so far. It's an affordable housing-type project with some mixed use, across from the proposed high school in that area.

When write and issue these RFPs for your stations, what, if anything, of integrating Metro's plans with other jurisdictions's plans? Do cities have input into what happens with Metro land?

The approach is to look at all the plans that have been discussed in that area, consider the MTA's objectives, and try to work all of them together. In the case of East L.A. there may have been five or ten different studies or plans. There are community plans, business plans, chamber plans, general land-use plans, and there are what I call ideal plans-plans that we'd like to see that aren't as institutionalized as some of the others.

Whatever jurisdiction you are in, is a city planning director, transportation director, or CRA administrator involved? Who is at the table collaborating with the MTA to realize and make decisions about joint use goals?

The goals are, in a simple sense, established by the MTA for its purposes: increased ridership, better integration, and revenue. The rest of issues are really politically and community driven, which is, what is it that the community will accept in this area? DOT and City Planning don't sit there and say, "it must be this."

Virtually everything that we are building at a station is outside of the traditional planning and general development analysis that is done at a non-rail, non-transit site. Everything is on the table, and cities have been very cooperative. I'll use Pasadena as an example; they have been both cooperative and aggressive in saying to developers, "don't give us what we traditionally have expected. Give us something that is better for us, even if it doesn't conform to our previous plans."

TPR and MIR have been carrying interviews with L.A. city officials, including Gail Goldberg, Gloria Jeff, council members, and staff from the mayor's office, all of whom are advocating elegant density. Who do you believe should have the authority to coordinate the siting, programming and designing TOD projects? Is Metro the natural lead?

The sites that we own along transit corridors are by definition already highly active areas: they tend to be higher density, they already have some level of congestion, and they already have some limitations in infrastructure. There isn't an agency that says, "it must be this," because there are so many crowded, vested interests involved in any of these sites.

Everybody has a reason to look at these sites for their own agenda. It has to be a collaborative effort, with all players at the table; it has to be hard decisions, and it has to be the finesse-and I use the mayor's term of elegant density-of something that people can agree to as beneficial, even though it is impactful. It's coming to a compromise that allows everyone to feel that they are getting something beneficial from the project while still recognizing that you are putting up a development in an area that's already built up.

Councilman Bernard Parks recently told the Metro Investment Report that he was optimistic about the Expo Line because he hoped the land use planning would proceed nearly concurrently with the construction of that line. Is he too optimistic?

If you go back 15 years, credibility surrounding transit oriented development had to be established. There was a reason to intensify development in anticipation of the train coming to it. The most aggressive example was in Pasadena, where the city was willing to look at a much different development form, in this case five or six years ahead of the Gold Line. Long Beach had another plan and said, "We'll consider this even though the Blue Line is not there yet."

Today, most cities are anticipating what they want before the new train or transit system arrives. So the councilman's approach of saying that we should build in anticipation has a lot of good models and is very good community planning. Del Mar and the Holly Street Project in Pasadena are two projects that were built or started well in advance of the Gold Line.

The city of Claremont is even building in anticipation of the Gold Line extension that may be five or seven years out. Some of the smaller cities along the Metrolink are beginning to change their form because they are willing to look at the station locations as an appropriate place to be more aggressive with different forms of development.

I think the councilman is right that if you build in anticipation and you encourage a land form that is acceptable to the community, that form gains credibility. When the discussions first started 12 to 14 years ago people said, "I don't want that. I don't think it is going to work." Now you have examples where it does work and works well.

Let's turn to the Westlake MacArthur Park TOD opportunity. What is the promise of joint development there?

That is actually very good. The difficulty is trying to achieve a particular goal there, which is affordable housing and small-bay retail. There is money for the Westlake project. The uses have been laid out pretty well; so I think it will happen in less than three years. The difficulty there, or anywhere now, is, how do you build housing, and what type of housing?

Recently there was a ground breaking for Wilshire Western, but that is a high-end 22-story condominium project. That's different from what you are going to build Westlake/MacArthur Park. The issue is, who is creating affordability and whose money are you using to create it? It's not a matter of whether we can build there, it's really can we build what is desirable based upon political and community interest, as well as the MTA's interest?

Hasn't a TOD agreement with the developer been delayed for a long time? What's the promise of this joint-use development being built in our lifetimes?

I have the paperwork in front of me right now. It goes back with revisions to the board and into the state affordable housing process within about three months. So, if the developer gets the affordable housing approval, phase one will start relatively soon-I would say next year.

TPR interviewed L.A. Councilman Jose Huizar last month about the extensive opportunities and investments being made in Boyle Heights' schools, rail, and housing. What promise does all this public investment hold for the community?

For Caeser Chavez and Soto the first documents have been signed. The issue now is scheduling. Completing the Gold Line will take two-and-a-half to three years. We are trying to schedule these proposed developments within six months to a year of completing work on the Gold Line so that as we leave each site for Gold Line construction staging we literally have a new development project being constructed.

The financials are very good. These proposed developments don't require much, if any, subsidy. The issue now is how we can coordinate to have as much of these proposed developments built within a relatively short time, and in at least one case we're trying to make sure that it is actually constructed as the system opens up-that would be a great accomplishment. We're using most of the sites for the construction of the line itself, so we can't just run away from our staging requirements. But there is no doubt in my mind, based upon a reasonable economy and the conditions that we have today, that these will all be built.

Who are Metro's partners in the Boyle Heights' joint-development projects? What's the expected return to Metro?

If you are looking at who is coming in with what kind of money and what kind of market studies and projections, they're coming in with very healthy projects, with eight or nine percent yields. The equity position runs anywhere from 20 to 40 percent, so people are willing to put a lot of equity into these projects, it's not just a leverage type of project. The market studies show healthy returns for grocery stores, commercial operations, and restaurants.

I always tell people that a rail station adds about 10 to 15 percent more value to a project. If it was healthy by itself, it gets a kick up in value of 10 to 15 percent. If it wasn't healthy, if it was an 80 percent project, a rail station may still not get you to a 100 percent finance-able project.

You have to have some market there before rail comes, and rail takes you that much further. As far as the projects being proposed, they could be built today and be sustainable without the rail, they are just that much better because of the rail.

The return to Metro is probably $1.5 million annually among all the Eastside projects. That's pretty healthy stuff.

When Metro's massive regional rail projects were first advanced, there wasn't much support for or investment in buying up surrounding properties adjacent to the planned stations. Voters didn't yet believe in TOD. What has changed?

We have some good studies about what happens around real estate prices and purchasing when you announce a rail project. Within the first six months of an announcement of an alignment, values jump between 6 and 10 percent. That stays relatively flat until the second or third year before completion, and then it tends to jump again.

Hollywood Boulevard remained relatively flat after the announcement of the Red Line, but within six months of it opening it had already seen some very significant purchasing and prices. Now six years later, Hollywood Boulevard is one of the hottest locations for real estate in L.A. We would suggest that that happened largely because of the rail.

We see the same thing in East L.A. Some transactions occurred as we were planning. After the announcement, those transactions solidified at a rate that was measurably higher than the rest of the market. Right now we are seeing that a lot people are trying to buy up the adjacent property, so it's fairly aggressive now.

As it opens I think another round of people will try to acquire and assemble larger parcels. A real estate analyst named Robert Fejaring has done probably a 15-year study on this in L.A. He has very good evidence as to what happens in direct correlation to the announcement, to the actual construction, and to the year of completion. We've seen better than market-rate gains in every case.

Web EXTRA

Transit-oriented development is often discussed in policy and land-use circles, but it's relatively new in Los Angeles. How have the local developers adapted to Metro's TOD RFP's?

The simple answer is, very well. There are a lot of good models.