Martin Melaver: Three Game Changers in Rebuilding America

Posted on Thursday, October 21st, 2010 at 9:00 am by admin

Martin Melaver is the author of Living Above The Store: Building a Business That Creates Value, Inspires Change, and Restores Land and Community. His book challenges business owners and managers to move beyond business as usual and create real change; to take care of the communities and environments in which they operate as well as their bottom line. Martin has spent the better part of his professional career working on sustainable urban development, and the following blog comes from his newest venture, development consulting firm Melaver-McIntosh.

I had the opportunity recently to participate in a 3-day workshop in Washington, DC, sponsored by the American Architectural Foundation, on the design of sustainable cities. The workshop, put on three times during the year, focuses on three case studies particular cities are currently focusing on.

In the event I participated in, the projects showcased were: Brattleboro, VT and its efforts to redevelop a sliver of brownfield land on the edge of Main Street, fronting the Connecticut River; Prince George’s County, MD and its efforts to create a multi-modal corridor in what is currently an asphalt speedway; and the Lower Ninth Ward in New Orleans, LA and its efforts to prioritize a monumental list of revitalization projects and create a clearly-defined implementation program. Brownfield mixed-use development, multi-modal transportation, restoration of community through restoring affordable housing and catalyzing economic development: it’s a heady mix of issues most cities looking to restore their urban core areas are all facing today.

In one respect, the challenges each of these three municipalities are facing seem quite distinct. Brattleboro’s big challenge is to persuade town leadership into playing an active role as at least a quasi-developer of the site. Prince George’s County’s key issue is to have its planning commission and the state’s transit authority working collaboratively from the get-go so that a shared vision and shared strategies facilitate ease of planning, financing, and implementation. The Lower Ninth Ward’s daunting challenge is to tunnel its way out of mounds of planning efforts from the five years following Hurricane Katrina, execute on some low-hanging fruit projects, and start the monumental work of rebuilding a community that once housed 18,000 residents (now about 2500).

But the differences among the three projects and locales mask a few larger, shared challenges or opportunities that reflect a common landscape throughout the country. Each project underscores market forces highlighting 1) the growing in-fill of neglected urban areas, 2) the need to shape development projects through systemic thinking (transportation, housing, economic development, etc.), and 3) the need for innovative financing structures through various public/private partnerships. And the intersection of these three market forces brings us to three game changes in American life today. These changes are in some ways subtle, in other ways obvious. But they are revolutionizing the way we will be thinking about rebuilding our cities in the decades to come.

Game-changer #1: The shift back to urbanization. We are not only an urban culture for the first time in US, history, but we are in the early stages of seeing a rebound from over a half century of suburbanization. A ULI study back in 2004 noted that over the next 20 years, 50 million Americans—or about 40% of the current non-urban dwelling public—will be moving into cities with dynamic work/live/play environments. A more recent study (May, 2010) by the Brookings Institute on the status of metropolitan America (http://www.brookings.edu/reports/2010/0509_metro_america.aspx) provides a more thorough-going analysis of the same phenomenon: basically, greater growth within urban core areas, although with the caveat that a significant portion of that growth is happening on the fringes of these urban areas. The significance for anyone concerned about the future viability of his or her town could not sharper: There are going to be winners and losers in this migration back to urban environments. Get it right—like Portland or Austin—and you are likely to ride a wave of livability for decades to come. Get it wrong—maybe Detroit is the whipping boy here—and you’ll find yourself having to downsize your extensive environs significantly.

Game-changer #2: Shaping urban development systemically. This past year has seen an unprecedented level of collaboration among three of the most important federal agencies around: DOT, HUD, and EPA. The three agencies, forming a Partnership for Sustainable Communities, has basically come to the right-headed conclusions 1) that housing, transportation, and environmental issues are all interrelated, and 2) that their respective funding of projects really ought to leverage each other. And so out of such basic, obvious, and desperately needed collaborative thinking came the decision to agree upon Six Livability Principles (more transportation options; economic competitiveness, equitable, affordable housing, supporting existing communities, value communities and neighborhoods, leverage policies and investment) which would then be the basis upon which the three agencies would allocate federal grant monies. Again, the message could not be clearer to any municipality looking for largesse: Following the money means planning systemically. As the August 23 deadline looms for community and regional planning grants under the Sustainable Communities Partnership, every city in the country is scrambling to figure out how to tell its own story of how it is working collaboratively across historically-siloed lines to plan for systemic urban revitalization. It’s creating a sea-change in how governments are suddenly having to function.

Game-Changer #3: The vacuum created by the collapse of the conventional capital marketplace. Most anyone involved in real estate development these days is painfully aware that the conventional capital marketplace has dried up. There’s virtually nowhere to go for either debt or equity. Dead. Kaput. So if you are involved in development today, one of a handful of things is happening: you are trying to dig yourself out of negatively-leveraged holdings; you are sitting on a boatload of cash and hoping to cash in on hugely discounted sales and foreclosures; you are devoting your time to planning until the next up-cycle occurs. OR, you are looking at creative financing schemes to help move projects forward. And those creative schemes invariably involve some form of public/private partnership. These various PPPs come in a whole slew of shapes and guises, but they invariably involve the following paradigm shifts:

¨      The public is weighing in with its own interests, as the price of admission for helping source the capital (on either debt or equity side or both). Which means that most development occurring these days has a strong social/public component.

¨      There is a strong push not only to develop projects with a public interest, but to structure these deals in ways that extend the time-frame of investment. Instead of having private capital invest with a typical short-term exit strategy (money enters then exits a community), public/private ventures mean that the length of investment in a community is likely to be extended.

¨      There is also a strong push for deals to result in a type of revolving loan structure. Typically, private investment capital exits the community after a short period of time. Private/public ventures can result in a tendency to have at least a portion of investment returns re-invested in future community projects.

So: paradigm shifts in population demographics, in governance, and in capital structure are all happening simultaneously, a perfect storm for shaping long-term investment in projects that integrate housing, transportation, economic development, and environmental stewardship within urban core areas. This perfect storm could not have happened at a more opportune moment, just when we need to design cities that are more livable while also being more benign on our larger natural habitat.

Read the original post at Melaver-McIntosh.com.

Martin Melaver is author of Living Above The Store.

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