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2
Maryland Fund Targeted Goals
Affordable housing for workforce populations, closer to jobs
Mixed-use, mixed-income transit-oriented development
Inclusionary and balanced community policies Regeneration of low-mod and urban communities
Housing Job places Commercial services
3
Address Market Imperfections
Risk bias in markets Geographic areas Price points Transaction size Land use/development types
High transaction costs for return and volume Lack of market knowledge Redevelopment Brownfields/greyfields Tenant/buyer financial sophistication Inexperienced, undercapitalized developers
4
What Are Investors’ Financial Goals?
Rate of return hurdles Exit strategy for capital Double-bottom line returns Sufficient deal flow
5
Market Fundamentals
Economic base and growing industry clusters Job generation by location and wage
“Economic shed” Household formation by income, type & tenure Commercial buying power Development trends & performance Quality of existing stock
6
Market Analysis Framework: Start with Region
Jobs
Supportable Households by Type
Employment Land Demand
Buying Power
Commercial Demand
Housing Demand
Migration
Changing Demographics
8
Maryland Economies
Baltimore City Anne Arundel County Baltimore County Howard County Montgomery County Prince George’s County Balance of State
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Capture Rate Factors
Regional growth patterns Product segmentation Existing share of total demand vs. share of recent
growth Competition & their future capacity Comparables performance Infrastructure, services, and amenities Location, location, location
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Lower Average Incomes
Economics Research Associates
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
Neighborhood Community Region
2000
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But Comparable Middle-Incomes
Economics Research Associates
0%
10%
20%
30%
40%
50%
60%
70%
Low Middle High
Target AreaRegion
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Translates Into Sizeable Buying Power
Economics Research Associates
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
Neighborhood Community Total
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Market Influences –Policy Environment
Does planning policy direct growth to core areas? Are regional transportation plans linking jobs to
workforce? Is government investment supportive? Does land use policy support desired
development? Are communities supportive?
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Market Influences –Development Capacity
Are there capable developers? Are there other equity and debt financing
sources to leverage? Is land available and at a feasible cost? Is fund’s cost of capital competitive?
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Tale of Two Markets
Growth Region Job growth Strong household
formation Regional supply shortage Growing aggregate
buying power Public capital for
facilities and services
Stable or Declining Region Limited or negative job
growth Few net new households Regional supply surplus Stable or declining buying
power Lack of public capital for
facilities and services
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Tale of Two Markets
Growth Region Direct growth Serve emerging niches Add & improve stock
Re-cycled housing supported
Demand supports new supply absorption and appreciation
Stable or Declining Region Abate dis-investment Serve unmet preferences Replace & improve stock
Limits to re-cycling housing New supply redirects
demand winners and losers