Roundtable/ Urban 2
Publish Date: 04/26/2004
California Real Estate Journal
Continued from Roundtable/ Urban 1
Publilc Investment
CREJ: Melani, how is L.A. doing with regard to visions for the big picture?
MELANI SMITH: We talked about creating a sense of place. And it is really important that we are doing this within these projects that are coming online. The question is, what happens when these folks step out their doors. And so we have really got to think –
WEINSTEIN: Can they walk their dog?
SMITH: Can they walk their dog? Can they have a dog in their unit? Where are they going to park their car? And what is it going to look like on the street when they walk out their doors?
We have got to solve the functional level of safety. We have got a Business Improvement District that is trying to do that here in the downtown area. We have to raise it up another notch, to get to that level of delight in the urban environment.
TOSTA: One of the nice things, though, is when you start to get people in, it self-propels the answers. Once you get a couple good projects in, the community will start to carry a lot of your agenda for you.
LINDSAY: But I don’t think public investment directly in housing is going to solve anything.
Public investment in infrastructure, to attract Jay, or to make Mark do his deal – Mark is creating a sense of place because the market requires him to do that, so he can attract people to pay him to do that, so he can attract people to pay money. The private sector will dwarf the public sector in capital investment if it is attractive.
It’s the transportation issues. Can I get people from where I am housing them to where I want them to work? Will there be jobs downtown? Is downtown an attractive place? Generally, the government can solve that.
Putting money directly into housing an public/private partnerships on particular transactions – that is such a drop in the bucket compared to what the private sector can do. When everybody who is an investor at this table consistently makes money downtown, the multiplier factor is fabulous. Because if you make money then the market opens up and more people come in. And more investment [comes in]. And then it is really off and running.
STARK: But the public investment in infrastructure is just one component of what the public sector can do. The renaissance in housing in downtown L.A. is 100 percent due to the Adaptive Reuse Ordinance, which is probably the most successful, powerful urban planning tool in Los Angeles in the last 20 years.
The Adaptive Reuse Ordinance creates almost zero entitlement risks. Developers can go in and make investors very comfortable that there is not only demand there, but an ability, as opposed to West Los Angeles, or Pasadena, or someplace else, to buy an un-entitled building and go build it.
My previous company [The Lee Group]’ when we built the Flower Street Lofts, it was the first major for-sale project downtown in 20 years. We bought it without any entitlement, without any parking. And we put new construction on top of it so we were able to reduce our land cost, because we were building off an existing building.
To be able to do that, and to create the things that Mark is doing with Santee Court – none of this would be possible without that type of policy. The public sector set the table through the Adaptive Reuse Ordinance. That is going to be the major piece to solve the housing crisis in Southern California.
WEINSTEIN: there is a lot of transportation infrastructure that is just not being accessed, but there needs to be a lot more.
The utitlities for housing were not planned. The structure that is just not being accessed, but there needs to be a lot more.
The utilities for housing were not planned. The DWP completely under wired the whole area. In fact, the vaults for half the power in the city are across the street from my project. I didn’t believe them. So I went downstairs and I saw it.
The thing is, we are not prepared infrastructure-wise for all this renaissance. All of us are being required to put in vaults. And to pay for the power. And it adds to the cost of the project. And it makes it difficult.
The infrastructure cost, if there isn’t more public investment, the housing thing is going to reach a point where they are not going to be able to go forward because they are not going to be able to afford it.
TOSTA: That is actually the problem we are seeing in the Bay Area with the government’s new fiscal constraints. The last few entitlements I worked on saw public entities lay formerly public costs onto private developers – parks and other extras – just because they are finding themselves short fiscally at this time.
CREJ: Katherine, how adequate is L.A.’s transportation system?
PEREZ: We have an expanding light-rail system. We have a subway system. We have a very extensive bus rapid-transit system.
It’s in the nature of Los Angeles’ psychology to think “auto first,” and for everybody who has no car, “well, you guys can deal with the leftovers.”
But the roads can’t go double-decked, and we can’t make them any wider. So we have to start thinking about different ways of getting around. The challenge in Southern California is getting people to leave the car in the garage and take the train or the bus to work. In the Bay Area, it’s ingrained.
The good news on transportation is we have a lot of investments that are still in the pipeline, including from the federal government. So now we have to get the private sector to realize these opportunities, because the public sector is almost out of the game financially.
Continue Roundtable/ Urban 3
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