PA REGIONAL AND COLOMBIAURBAN SUSTAINABLE …...The Bogota mass transit network is centered around...

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TECHNICAL ASSISTANCE NOTE – TRANSIT ORIENTED DEVELOPMENT

(TOD) IN BOGOTA

PA REGIONAL AND URBAN SUSTAINABLE DEVELOPMENT IN COLOMBIA

P156821

EXECUTIVE DOCUMENT

Methodology to Implement an Urban Transit Oriented Development (TOD)

Approach to the Establishment Of Bus Depots/Terminals for the Bogota Integrated

Public Transport System (IPTS)

November 2018

The World Bank Group

Global Practice of Social Urban Rural and Resilience (GSURR)

Acronyms

World Bank Team: Vanessa Velasco (Urban Specialist BM, GSU10), Alexandra Ortiz (Lead Urban

Specialist, GSU10), and Felipe Targa (Senior Transport Specialist, GTR04). Contributions from Ming

Zhang (Practice Manager GSURR, GSU 10), Camila Rodriguez (Senior Infrastructure Specialist

GTR04), and Mauricio Cuellar (Senior Transport Specialist GTR04).

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Contents

1. INTRODUCTION ............................................................................................................................ 3

2. ELEGIBILITY CRITERIA FOR SUITABLE LAND PARCELS ................................................... 4

3. APPLICATION OF ELEGIBILITY CRITERIA ............................................................................. 6

4. IDENTIFICATION OF TOD TYPOLOGIES .................................................................................. 7

5. DEVELOPMENT OF FINANCIAL MODELING .......................................................................... 9

5.1. COST OF DEVELOPMENT OF TOD – FOCUSED DEPOTS .......................................... 9

5.1.1. Transport Infrastructure (Depots) ......................................................................................... 9

5.1.2. Complementary Urban Developments ................................................................................ 10

5.1.3. Dedicated Areas and Public Space with potential for TOD ................................................ 12

5.1.4. Social Management ............................................................................................................. 13

5.1.5. Land Use Management ....................................................................................................... 14

5.2. SOURCES OF FUNDING FOR TOD PROJECTS........................................................................ 14

5.2.1. Sources of Non-Reimbursable Financing ........................................................................... 14

5.2.2. Private Funding Sources ..................................................................................................... 15

5.2.3. Sources of Bank Financing ................................................................................................. 15

6. APPLICATION OF THE METHODOLOGY BY TYPOLOGY................................................... 16

6.1. Description of Typologies by Variables ......................................................................................... 16

6.2. Valuation Methodology .................................................................................................................. 17

7. RECOMMENDATIONS FOR USE ............................................................................................... 18

8. ANNEX........................................................................................................................................... 20

8.1. ANNEX1- POSSIBLE TOD LAND PARCELS ............................................................... 20

8.2. ANNEX 2 – METHODOLOGY OF APPLICATION FOR ELEGIBILITY CRITERIA .. 21

8.3. ANNEX 3- METHODOLOGY APPLIED TO LAND PARCELS, BY TYPOLOGY ...... 22

9. REFERENCES ............................................................................................................................... 27

Acronyms

CAF. Development Bank of Latin America

CAI. Local Police Station

CAMACOL. Chamber of Commerce of Colombia

IDU. Urban development Inistitute of Bogota

IPTS. Integrated Public Transport System of Bogota

VIS. Social Affordable Housing

VIP. Proritized Affrodable Housing

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1. INTRODUCTION

The Bogota mass transit network is centered around the Transmilenio system (BRT), which has

reached maximum capacity, given that infrastructure investments have not kept pace with demand. The

system was complemented by a transit reform of the bus system through the Integrated Public Transport

System (SITP) that covers the areas of the city that are not serviced by the BRT backbone network. One of

the challenges faced by the municipal government is finding appropriate locations for the bus

depots/terminals for SITP buses, given the scarcity of land, environmental and land use regulations, and the

social impacts associated with the scale of the infrastructure.

In 2010, the Bogota Government implemented an SITP zonal bus concession model to boost the level

of service of the city’s transit system and assigned operation in specific areas to the private sector.

While fare integration and renewal of the bus fleet have taken place gradually, the bus depot facilities

necessary for the functioning of the system have not yet been constructed. Consequently, the infrastructure

required such as service stations, bus maintenance facilities, and administrative offices were temporarily

set up in dispersed, open, and informal spaces. These sites are not equipped to meet the needs of the transit

system and their dispersed locations prevent linkage with the city’s structured model.

A transit-oriented development (TOD) approach can help address the problems mentioned above,

with a dual objective of: (i) leveraging revenue from the real estate market to cover a portion of the

construction costs of the bus depots/terminals, and (ii) creating opportunities for urban (re)development,

which will pave the way to close the gaps in the provision of housing accessible to the transit system and

provide high quality public spaces.

Redevelopment of central areas has already taken place in Bogota, with some degree of success,

through integrated urban interventions. Redevelopment in outlying areas in order to create new centers

by leveraging investments in public infrastructure (BRT) is yet to take place. Using urban planning

instruments, along with real estate market demand for rental/purchase/investment in the city, the conditions

for unblocking land value capture (LVC) mechanisms were identified, with a view to financing some of the

public infrastructure in central areas. By contrast, the consolidation of non-central areas and the realization

of their real estate market potential continue to pose a challenge. In the case of SITP bus depots/terminals,

the number of variables to be considered in the viability analysis of the areas is enormous, and the possible

combinations resulting from TOD characteristics, based on transit operation requirements, and potential

urban development, are complex.

Meeting the objective of selecting those land parcels [polígonos] that may be suited to TOD and

identifying their urban and real estate potential, require an approach that incorporates variables

related to the operation of the transit system and urban development. The proposed methodological

approach covers five phases: (i) identify eligibility criteria for suitable land parcels; (ii) application of

elegibility criteria; (iii) identification of TOD typologies; (iv) development of financial guidelines including

costs and financiary aspects; (v) application of financial modeling to TOD typologies and, (vi) possible

uses of the approach

The TOD financial modeling guidelines include aspects related to financing, urban management, and

recommendations related to the institutional arrangements to meet the objective, namely: (i) the

methodology for calculating the costs associated with TOD typologies; (ii) the possible sources of project

financing, including land value capture mechanisms; (iii) the recommended procedures with respect to

property ownership; and (iv) the institutional arrangements for TOD implementation.

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This document provides advice on the application of guidelines for financial modeling in possible

pilot projects and offers lessons learned and best practices to reduce the complexity of urban transit-

oriented development. This approach is aimed at providing options to develop the appropriate projects

that may be financially sustainable. The hope is that these recommendations will prove to be extremely

useful to the urban planners and local authorities in Latin America that are seeking to move forward with

TOD strategies. From a technical standpoint, this document draws on the consultancy deliverable

“Definición de las guías financieras para la valoración de la implementación de los Patios logísticos del

Sistema Integrado de Transporte (SITP) para la ciudad de Bogotá” [Definition of the financial guidelines

for assessing the implementation of the logistics bus depots of the Integrated Public Transport System

(IPTS) for the city of Bogota], prepared by the Trígono firm, SAS (2017), under a World Bank contract

(7179701).

2. ELEGIBILITY CRITERIA FOR SUITABLE LAND PARCELS

The aim of the eligibility criteria is to determine whether land parcels are viable and, if they are, to

be able to rate them relative to other parks within the same IPTS zone, using: (i) approval criterion:

mandatory characteristics that the park must have in order to meet project needs; and (ii) rating criterion:

characteristics of the park in order to establish a performance criterion and prioritize its eligibility based on

the different variables. The methodology establishes three groups of criteria that will be used in the park

eligibility process.

TIER I - Operational design component: this component determines the viability of the land parcels

and its rating, taking into account the operational needs of each zone and the construction design of

the bus depot. An analysis is done of its location, parking capacity, bus depot services, access, routes and

number of buses, area, topography, and type of construction (underground, above ground, ground level).

The operational component matrix, which facilitates the rating of each park, is provided below:

Table No. 1. Operational Design Component - TOD Operational Component Matrix

Component

Criterion Type Definition

Capacity Approval –

Rating

Analysis and determination of weight distribution (buses

and sizes) for each land parcel analyzed, based on the

analysis by IPTS zone and its need for zonal bus depots

and terminals

Influence - routes Rating Analysis of all IPTS routes operating in the area of

influence of the land parcel and measurement of the

distance from the beginning of the routes to the park.

Accessibility Rating Analysis and assessment of the condition of the access

roads to each land parcel in terms of profile, road

condition, slope of the terrain, etc.

Future use in the city’s mobility

plan

Rating Analysis of the possible operational changes that may

occur in theland parcel based on demand and expected

changes in the operational design of the system (for

example, trunking).

Area Approval Analysis of the land parcel area, including identification

and description of the distribution and shape of the land.

Topography Rating Analysis of the land parcel area, including the

topographic characteristics of the land involved.

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Component

Criterion Type Definition

Type of construction Rating Analysis of the possible development of bus depots in

each land parcel (above ground, underground, and

ground level).

Services Rating Analysis of the possible services that the bus depots may

provide.

Source: Trígono, 2017 for the World Bank

TIER II - Regulatory and legal component: This component defines the viability of the land parcel

from a legal standpoint and in terms of land ownership and urban regulations. It should be pointed

out that an analysis needs to be done of the types of urban regulatory instruments that permit park

development in each city that will apply this methodology.

.

Table No. 2. TOD - Regulatory and Legal Component

Component Criterion

Type

Definition

Land condition Rating Analysis of theland parcel in terms of useful area, net area, and

gross area availability.

Legal status of the

property

Approval-rating Analysis of each land lot that comprises the parks, based on such

legal restrictions as forfeiture and expropriation.

Environmental use Approval Analysis of the possible environmental use to which the land

comprising the parks may be subject, such as a nature reserve or

river beltway.

Land use Approval-rating Analysis of the current use of the land comprising the parks and

their viability vis-à-vis the project.

Partial plans Approval-rating Analysis of the partial plans to which the land comprising the

parks is subject and their impact from a viability standpoint for

project development.


TIER III - Urban component: This component defines the urban characteristics as well as those

pertaining to application of instruments related to the surrounding area in which the land parcel is

located. Part of this component includes the urban and management analysis.

Table No. 3. TOD - Urban Component

Component Criterion

Type

Definition

Greater usage potential Rating Analysis of the land parcel with respect to the area available for

additional and revenue-generating use unrelated to the bus depot

and possible changes in regulations and use.

Location -surrounding

area

Rating Analysis of the land parcel in terms of its surrounding area, with a

description of its level of development and use.

Impact on the

surrounding area

Rating Analysis of the land parcel in terms of the m2 of public

space/residents in the surrounding area and m2 of dedicated use and

recreational land/ residents in the surrounding area.

Urban capacity of the

surrounding area

Rating Analysis of the land parcel in terms of gross population density of

the surrounding area, mixed use, and gross construction density.

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Component Criterion

Type

Definition

Sustainable transit-

oriented development

Rating Analysis of the needs of the zone where the land parcel is located

and feasibility of TOD implementation.

Source: Trígono, 2017, for the World Bank

Management subcomponent: This subcomponent defines the characteristics related to the management

considerations for each park and thus involves the requirements to be met by the district for project

implementation.

Table No. 4. TOD - Urban/Management Component

Component Criterion

Type

Definition

Social management Rating Analysis of the land parcel in terms of the social management

responsibilities of the district or investors with respect to

project development and mitigation measures.

Market Rating Analysis of possible land development projects that may be

carried out in the land parcel, including land value. Study of the

impact of land development on project development and its

market potential.

Regulatory

management of the

park

Rating Analysis of the land parcel in terms of the need for regulatory

management in order to ensure the viability of additional usage.

Number of properties

and their occupation

by park

Rating Analysis of the number of owners and properties in each lad

parcel and identification of the properties constructed and their

owners.

Management tools Rating Analysis of the possible project financing tools for each land

parcel. This involves the participation of public and private

agents in project implementation.

Source: Trígono, 2017, for the World bank

3. APPLICATION OF ELEGIBILITY CRITERIA

Using the criteria (TIERS I, II, and III) described above, the best development option in each IPTS

zone is selected. Based on the process, a selection is made of the best option for the development of bus

depots for each IPTS zone, taking into account the relationship between operational need, cost, TOD

integration, and management and financing tools. Consideration is given to:

• Land parcels feasibility selection: Given the operational characteristics mentioned in TIER I and the

characteristics of the land associated with the land parcels in TIER II, the land parcels for each zone

are screened using these requirements, with the elimination of those that do not meet the minimum

operating or land requirements.

• Land parcels identification and prioritization: Once the list of feasible land parcels by zone has been

obtained, the matrix ranking them is prepared based on the rating criteria listed in TIERS I, II, and III.

Using the rating criteria, a decision is made on the best land parcels by zone and a list of the feasible

ones for each IPTS zone is generated, along with their ratings.

• TOD integration: An analysis is done, for each feasible land parcel obtained from the selection list, to

determine the use that will be made of each of them to ensure that its area of influence is TOD focused.

In conducting this usage analysis, projects that involve the land parcels must have the following

characteristics: (i) presence of new real estate development nearby, possibly led by public sector urban

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renewal projects or carried out by private real estate developers attracted by market opportunities; (ii)

availability of land suitable for development; (iii) existence of strong regional demand for new growth

or supportive government policies and measures, including tax incentives, infrastructure investments,

and community involvement through participatory planning; and (iv) ability of development of this

nature to help ensure that financial sustainability efforts can draw on land value capture instruments to

generate revenue through TOD.

4. IDENTIFICATION OF TOD TYPOLOGIES

Given that the number of eligible land parcles is very high (162), it was necessary to determine a set

of typologies to simplify the analysis. These typologies were stablished using the following variables: (i)

“Type of Depot” describes whether the depot is underground, at ground level, or above ground/terrace level;

(ii) “Function of the Depot” denotes whether the depot is a terminal, terminal and depot, or depot only;

(iii) “Ownership and Management”: this refers to the ownership of the parks and the management

methodology for the project (purchase, lease, management by owner); (iv) “Urban Development”: this

refers to the types of development that may be carried out on the land parcels in its current layout or the

possible changes that may be made in the future; and (v)” Land Use”: this refers to whether or not there is

currently a construction on the land parcels. These variables were analyzed in detail using diffrenet criteria

as shown in charts 1 and 2 below.

Chart N1. Analysis of variables used to establish typologies


After selecting and classifying the variables, each one is disaggregated to facilitate an analysis of its legal,

operational and transit, urban and land components.

Cost Management Zonal Impact Type of Depot

(underground, ground level, above ground)

Ownership/Management (own land, lease, purchase)

Urban development (current development, future

development, no

development)

Function of the Depot (terminal, terminal/depot,

depot)

Operation and Transit

Urban

and Land

Different levels of investment are required

for each type of construction

Form of ownership and type of management

have an impact on investments, as well as

on the flow of such investments over time

Each type of development requires a

different level of

investment

Each type of construction requires different time periods for execution

and management

Form of ownership and type of management

determine, to a greater or lesser extent, efforts

made in the areas of negotiations and legal

management

Each type of development involves different levels of legal

and commercial management

Each type of construction generates a different

impact, in terms of land

use and other uses

Form of ownership determines the different

types of real-estate development or development for

dedicated use

Each type of development has a

different impact in terms of land use and other

uses

Land Use

(With or without construction)

Extent of land use has an impact on level of

investment needed

Level of land use implies differing levels of legal

management and different time periods for

execution

Implies possible changes in urban zonal layout and

could have significant impact on the community

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Chart N2. Classification of TOD Variables


As a result of this process, 162 possible combinations of variables were identified and five (5)

typologies that encapsulated these variables were selected. In selecting the typologies, consideration

was given to the scenarios most likely to occur, given the condition of the 40 temporary depots currently

operating and the parks being used as baselines. The criteria used (by Trígono and the operations and transit

consultant) for analyzing the function and type of depot were based on the current needs of the zone in

terms of demand and the proximity of the depots to the collection points.

The most likely scenarios were also selected for the project development analysis, while the scenarios

involving temporary depots and baselines were used as the basis for the property ownership and

tenure analysis. According to the consultants mentioned above, development projects should be

implemented on the basis of changes in standards, which should not involve partial plans or changes to the

TOD – land management plan, since the implementation of the plan involves a longer time period than that

required by the system.

Type of Depot (underground, ground level,

above ground)

Ownership/Management (own land, lease, purchase)

Urban Development (current development, future

development, no development)

Function of the Depot (terminal, terminal/park, park)

Land Use

(With or without construction)

Operation and Transit Urban and Land Legal

• Influence - Routes • PIR Influence • Accessibility • Services • Capacity • Future use in transit

plan

• Topography • Available area • Urban capacity

• Environmental impact

• Current and future land use

• Partial plans

• Environmental impact

• Current and future land use

• Partial plans • Market potential • Impact on

surrounding areas surrrounding areas

• Number of lots and owners in each park

• Limitations on ownership rights

Description of owners and immovable property in the park.

Op

erat

ion

an

d T

ran

sit

Urb

an a

nd

Lan

d

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Table N5. Definition of the 5 possible TOD Typologies Type Function Ownership Development Tenure

Underground Terminal/Depot Purchase Future Development Occupied

Underground Terminal/Depot Own Land Future Development Unoccupied

Underground Bus depot Own Land Current Development Unoccupied

Ground level Bus depot Lease Current Development Occupied

Ground level Bus depot Purchase Future Development Occupied


5. DEVELOPMENT OF FINANCIAL MODELING

5.1. COST OF DEVELOPMENT OF TOD – FOCUSED DEPOTS

5.1.1. Transport Infrastructure (Depots)

The project may be marked by different transport infrastructure or bus depot typologies, which may

reflect the kind of depot (underground, ground level and terrace-level), or its functions (Terminal,

Terminal/Depot or Depot alone). However, financial guidelines and mainly cost-income models for this

type of infrastructure development do not take account of the combination of these variables, as the

proposed projections can be modeled and adapted to each of the typologies.

With regard to projected outflows and costs for constructing transit infrastructure projects and given

that such projects do not generate income from commercial sales, outflow-cost modeling is based on

market reference data for the construction cost per square meter of each development project.

In the specific case of IPTS depots, 2017 average values were used: (i) cost of bus depot on a ground

level lot at US$250; (ii) cost of a terrace-level depot at US$ 300; and (iii) cost of terrace-level depot at

US$ 350. When employing this methodology, the specific cost of each bus depot and its proposed function

(terminal, terminal/depot, depot) in each related park must be included in the projections. Furthermore,

these cost estimates must be projected over time, in accordance with the specifications outlined by the

consultant team on operations and transport and the entity responsible for the construction of the Depot.

Chart N3. 2017 TOD Projection


PUBLIC DEPOTS

UNDERGROUND TERMINAL TERRACE LEVEL TERMINAL GROUND LEVEL DEPOT GROUND LEVEL TERMINAL

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5.1.2. Complementary Urban Developments

The development of urban structures is proposed as a complement to the construction of transit

infrastructure. Such structures should promote the use of mixed floors within the land parcels and

constitute a possible source of income through the building of saleable units as part of the financial

model of the project. Each of the elements proposed in the methodology is described below.

When planning the construction of saleable urban developments, such as housing, commercial or

industrial units, the valuation and financial modeling exercise for such projects should take account

of the elements that impact the value or the total investment to be made by the district. Such elements

may be divided into two groups and are described below:

• Projected outflows – Construction costs: In order to estimate the costs and outflows related to the

construction of urban developments, the following elements are useful by way of reference:

a. Fees: this refers to the costs incurred for the payment of fees and may vary depending on the type

of development being carried out. Such fees include payments for management and supervision,

engineering designs, feasibility studies, and construction drawings, among others, some of which

may be ongoing throughout the construction period.

b. Urban land development: This refers to the costs related to the process of urban land development

(where applicable), including such elements as roads, sidewalks, utility connections, and

construction of general loading areas, among others.

c. Budget for materials and labor. This element refers to the costs incurred for the construction

material required as well as for labor. It is calculated as a percentage (%) of the sales from each

stage of the project and should be distributed to take account of the construction timetable.

d. Contingencies: this element refers to the costs associated with any unforeseen costs that may arise

during the execution of the project. It is calculated as a percentage (%) of the material and labor

budget applicable to each stage of the project and is therefore proportionally the same for each

month.

e. Post-handover costs: This element refers to costs that may be incurred after the handover of the

project. It is calculated as a percentage (%) of the sales for each stage of the project. Cost

distribution in this area will depend on the number of buildings to be delivered, and the type of

units that make up the project. For example, in the case of a housing unit with different tower

blocks, the cost will be calculated against each tower.

f. Advertising and sales: This item refers to the costs associated with advertising, marketing and

project sales that must be incurred to drive and promote the sale of the project. It is calculated as

a monthly percentage (%) of project sales.

g. Legal and notarial: This item refers to the legal and notarial costs of the project. It is calculated as

a percentage (%) of the sales from each project stage and should be distributed in accordance with

the schedule of notarization for each project stage.

h. Fiduciary: This item refers to the costs identified in the trust agreement associated with the project.

It therefore varies depending on the negotiations and agreements between the project construction

management and the trustee.

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i. Sales Reimbursement: This item refers to costs associated with reimbursable payments form sales

executed and is calculated as a percentage (%) of monthly sales.

j. Financial expenditure: This refers to expenditure incurred as a result of financing the project

through a construction loan. Such expenditure should be modeled over time in accordance with

the project’s debt financing needs.

• Sales – Income Projections: Projections of this kind are made for each potential saleable urban

development, including for housing, commercial and industrial units.

a. VIS (Public) –VIP (Priority) Housing: Projections for this type of housing should be modeled on

the basis of market requirements and the housing policy pursued by the Government. In addition,

the housing sales period may be ascertained from construction industry studies, such as the 2016-

2017 study on building trends carried out by the Cámara de Construcción de Colombia (Colombian

Chamber of Construction) (CAMACOL) that provides information on average inventory turnover

(available supply/average sales) between 2010 and 2015 (5.61). Furthermore, sales projections

should incorporate any changes in price that might arise as sales are completed, while taking

account of the price limits applicable to special housing solutions such as VIP and VIS units.

b. Non-VIS Housing: The projections for this type of housing should be modeled in accordance with

the level of supply and demand applicable to the zone where the project is being developed.

Nevertheless, the CAMACOL study on building trends may be used for reference. It shows the

average rate of inventory turnover (available supply/average sales) between 2010 and 2015 (7.86).

Furthermore, as in the case of VIS-VIP housing, projections for non-VIS housing should

incorporate any changes in price that might arise as sales are being completed.

c. Commercial – Industrial: The projections for this type of project require a formal market study on

the performance of each sector to be analyzed, including demand, sales price, and construction

price. In addition, as in the case of housing construction, projections should be made of the

performance of sales prices over time. In addition to sales projections, the financial model should

outline the projected flows from such sales, bearing in mind that they perform differently over time,

depending on the type of project.1

With respect to Colombia, it is essential that the following data be included in the analysis: (i)

separate project cash flows with a specific amount for leveraging part of the initial project

construction cost; (ii) initial payment flows; (iii) credit flows that relate to the percentage (%) of sales

financed by a banking institution. Such credit flows usually correspond to 70 percent in the case of

housing construction and are received when the project is handed over. A Table of Costs for Bogota

(2017) for each type of saleable urban development was obtained as part of the preparatory work and market

study carried out for the case in question. Nevertheless, a formal study should be conducted to verify and

apply these data sets for each type of development in each applicable park.

1 In the case of a housing project, it should be borne in mind that the financing limit should not exceed 70 percent of the commercial value of the

building and the initial payment is made between purchase and handover. This has an impact on the availability of funds for the project. In the case of industrial and commercial projects, while there is no financing law as in the case of housing construction, financing such projects has an

impact on the availability of funds for the project.

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Table N6. Average costs for housing projects in Bogota that may be applied to TOD areas

Project Sales vr / US$

m2

m2 Direct

Cost in US$

m2 Indirect

Cost in US$

Urban

Development

Cost in US$

Financial

Costs

Profit

VIP 520 200 70 40 60%CD *DTF

+ 4 %

8%

VIS 700 320 120 40 60%CD *DTF

+ 4 %

10%

Non-VIS - type

3

870 420 160 40 60%CD *DTF

+ 4 %

12%

Types 4 - 5 1400 480 180 40 60%CD *DTF

+ 4 %

14%

Type 6 2000 530 200 40 60%CD *DTF

+ 5 %

18%


In addition to the above, in the context of saleable commercial developments, it is important to

analyze the areas dedicated for private use that may be of interest to investors, such as savings public

companies, clinics and companies providing health services, among others.

Chart N4. 2017 Commerce Projection


5.1.3. Dedicated Areas and Public Space with potential for TOD

Projections of the costs involved in constructing, managing and developing dedicated units in TOD

areas should be made. Outflow-cost calculations and projections should be done on the basis of

market reference data and the specific characteristics of the type of facility. Dedicated social service

facilities and public spaces that have TOD potential because of their location are to be considered.

• Projected Outflows – Construction Costs

For estimates of construction on lots for dedicated use and public spaces, standard cost parameters

per square meter are used. These standards were derived from a market base study. However, when

implementing the project, a formal study should be carried out and the standards for each type of land

parcels should be verified and applied.

-5,000

0

5,000

10,000

Mes 1 Mes 2 Mes 3 Mes 4 Mes 5 Mes 6 Mes 7 Mes 8 Mes 9 Mes 10Mes 11Mes 12Mes 13Mes 14

Comercio

Costo Comercio Ingreso Comercio

COMMERCE

COMMERCE COST COMMERCE INCOME

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Table N7. Average Costs of Housing Projects in Bogota that may be Applied to TOD Areas

Project Total Cost

/m2 in US$ Direct Cost Indirect Cost

Urban Development

/m2 in US$ Financial Cost Profit

Multi-purpose Park -

Field 55 55% 20% 15 8% 15%

Local Park 12 15

School 400 55% 20% 34 8% 15%

Health Center Level 1 400 55% 20% 34 8% 15%

Health Center Level 2 400 55% 20% 34 8% 15%

Police Station 300 55% 20% 34 8% 15%

Cultural Center 400 55% 20% 34 8% 15%


Chart N5. Projection by each type of area for Dedicated use


5.1.4. Social Management

In view of the requirement for the District and Transmilenio to mitigate the possible social impacts

generated by the project, social management is seen as having a direct impact on project cost. It is

therefore necessary, because of the specific nature of each land parcel, to conduct an independent cost

modeling exercise over time for each park. To this end, the studies being conducted by Transmilenio can

facilitate the identification of the costs involved and may be used as a source of reference.

Chart N6. Projection of General Social Management Costs


0

5,000

10,000

Mes 1Mes 2Mes 3Mes 4Mes 5Mes 6Mes 7Mes 8Mes 9 Mes10

Mes11

Mes12

Mes13

Mes14

Centro de Salud Colegio CAI Parque Centro CulturalHEALTH CENTER SCHOOLS POLICE

STATIONPARK CULTURAL CENTER

0

2,000

Mes 1 Mes 2 Mes 3 Mes 4 Mes 5 Mes 6 Mes 7 Mes 8 Mes 9Mes 10Mes 11Mes 12Mes 13Mes 14

Gestión SocialSOCIAL MANAGEMENT

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5.1.5. Land Use Management

Cost modeling should be carried out in respect of costs associated with the purchase or lease of land,

as appropriate. In both cases, the value is calculated on the basis of market reference data and the

total area to be dedicated for the project. The purchase of land is a significant investment at the start of

the project, while the lease of land, as modeled in the lease agreement, represents a series of small

investments over time. Furthermore, each scenario entails additional costs related to notarial and legal

services. This may be seen in the chart below, which shows the possible trends in both these scenarios.

Chart N7. Comparative General Cost Projection Between Purchase and Lease in Land Management.


Three kinds of co-share systems may be developed between property owners and the District. These

include: (i) Template 1: The property is leased, and the owner is interested in selling or in participating in

the project; (ii) Template 2: the property is leased, and the owner is not interested in selling; and (iii)

Template 3: The land is owned by the district. For the templates where the option of land purchase is

chosen, expenses incurred as a result of the purchase must be included in the cost modeling exercise. The

modeling of this expenditure must be projected over time to reflect the specific circumstances of each

project.

5.2. SOURCES OF FUNDING FOR TOD PROJECTS

When developing TOD projects, the identification of the potential arrangements for attracting financing

should involve all stakeholders that have an interest in this stage of the project.

5.2.1. Sources of Non-Reimbursable Financing

Given that the project for the construction of logistic terminals will have a major impact on mobility within

the city, financing may be obtained from governmental and non-governmental entities that are interested in

the project, as well as through measures undertaken by the district to obtain resources from TOD real estate

developments.

0

10,000

20,000

Año 1 Año 2 Año 3 Año 4 Año 5 … Año 10

Land Management

Compra ArriendoPURCHASE LEASE

YEAR YEAR YEAR YEAR YEAR YEAR

15

• Transit Infrastructure (Depots): This project is included in the plans of the Ministry of Transport

(Secretaría de Movilidad) and can therefore receive budgetary resources from a variety of

institutions, such as the Instituto de Desarrollo Urbano (IDU) (Urban Development Institute),

Unidad Administrativa Especial de Rehabilitación y Mantenimiento Vial (Special Administrative

Road Rehabilitation and Maintenance Unit), and Transmilenio, among others. These bodies may

serve as funding agencies in the construction of logistics terminals.

• Spaces for Public and Dedicated Use: As stated above, some aspects of this type of construction

may be of interest to various District institutions, such as the Ministry of Health, in the case of the

Health Centers, and the IDRD (Municipal Institute for Sports and Recreation) for parks and areas

for dedicated use. The Secretaría de Seguridad, Convivencia y Justicia (Ministry of Security,

Coexistence and Justice) would have an interest in a CAI (First Response Post), while the Ministry

of Education would have an input in educational institutions. Based on the foregoing, these entities

may use some of their own resources to provide funding, notably for purchasing land for the

construction of the facilities. The land and all the infrastructure may then be shared with the entity,

under a free-use contract with the body responsible for operating the bus depots and terminals of

the Public Transport Ministry.

• Land Value Capture (LVC) financing for the construction of TOD support infrastructure. The

project focuses on the theme of urban re-development and incorporates the concept of capital gains

generation and value upgrades. Since some of these projects are not commercial in nature, no

income is derived from the sale or commercialization of the projects themselves. Nevertheless,

consideration should be given to the possible positive impacts that such projects can generate by

the enhanced property value associated with the upgrade of the urban environment in the vicinity

of the project, opening the way for the imposition of taxes associated with such upgrades or for

benefiting from capital gains tied to public works. It must be stressed that income flows from capital

gains do not necessarily constitute a recurrent source of cash for the District, since the income is

the result of a change in the regulations. The change is specific to the works and payment is made

by the owner when the land is transferred or when the project is developed, thus reducing the burden

of cost during the construction phase of the depot and/or for the land on which it is to be developed.

Main LVC tool that could be implemented is land readjustment and transfer development rights

through partial plans.

5.2.2. Private Funding Sources

Consideration should be given at the project design stage to private investors who have an interest in

participating in the project or in any of the complementary urban developments. As mentioned above,

such investors may represent a positive net present value (NPV) for the builder/investor. For this reason,

it is vital to attract resources of this kind as they can be incorporated as positive flows in the project design

phase and contribute to the development of Transmilenio.

5.2.3. Sources of Bank Financing

If financing cannot be secured from grant resources or private investors, financing could be

generated from loans granted by banking institutions at the national and international levels. Such

loans will promote project development and may be sourced form entities such as the World Bank, the

Andean Development Corporation (CAF) and National and International Banks that may demonstrate an

interest in providing loan financing.

16

6. APPLICATION OF THE METHODOLOGY BY TYPOLOGY

6.1. Description of Typologies by Variables

• Typology 1: This refers to a project development that includes an underground public transit

infrastructure (depot) with a saleable commercial development above. In such a case, it will be

necessary to purchase the land and invest in mitigating the social impact of the project.

• Typology 2: This refers to a project development that includes underground public transit infrastructure

(depot) with a complementary development above, divided between commercial units and dedicated

private service providers. In such a case, it will not be necessary to purchase the land as it is leased by

the project developer as a concession in exchange for the expanded building developments authorized

by the change of law (this is an example of capital gains).

• Typology 3: This refers to a project development that involves underground public transit infrastructure

(depot) only, with an area for dedicated use or public space above. In such a case, it is not necessary

to purchase the land as it belongs to the district. However, it will be necessary to invest in mitigating

the social impact of the project.

• Typology 4: This refers to a project development that involves ground-level public transit infrastructure

(depot) without any other development. In such a scenario, it will be necessary to purchase the land

and invest in mitigating the social impact of the project.

• Typology 5: This refers to a project development that involves ground-level public transit infrastructure

(depot) along with a saleable commercial development. In such a scenario, it will be necessary to

purchase the land and invest in mitigating the social impact of the project.

Chart N8. Variables by TOD Typology


TRANSPORT

INFRASTRUCTURE/ DEPOTS

COMPLEMENTARY

URBAN

DEVELOPMENTS

PUBLIC

FACILITIES AND

PUBLIC SPACE

SOCIAL

MANAGMENT LAND

TYPOLOGY 1

TYPOLOGY 2

TYPOLOGY 3

TYPOLOGY 4

TYPOLOGY 5

Bus Depot/ Terminal/

Underground/high costcost

Bus Depot/ Terminal

/Underground/high cost

Bus Depot/ Terminal

/Underground/high cost

Depot/ Ground Level

/low cost

Depot/ Ground Level

/low cost

Commerce development/

High Cost/High Income

costcost



Underground/high

costcost



Public facilities /

Middle Cost/

costcost

Public facilities /

Middle Cost/

costcost

High Cost

High Cost

Middle Cost

High Cost

High Cost

High Cost

High Cost

High Cost

17

6.2. Valuation Methodology

It was decided that globally accepted reference material would be used to prepare the methodological

guidelines. With this in view, the Methodological Guidelines applicable to measuring fair value were

based on the Methodological Guidelines contained in the International Private Equity and Venture

Capital Valuation (IPEV) and the International Financial Reporting Standard No. 13 (IFRS 13) on

Fair Value Measurement. Fair Value refers to “the price that would be received to sell an asset or paid

to transfer a liability in an orderly transaction between market participants at the measurement date on

current market conditions,” (that is, the exit price at the measurement date from the perspective of a market

participant who holds the asset or owes the liability).

• Cost approach: This is a valuation technique that “reflects the amount that would be required

currently to replace the service capacity of an asset (often referred to as the current replacement

cost).”

• Income approach: This is a valuation technique that “converts future amounts (cash flows or

income and expenses) to a simple current (discounted) amount. The measurement of fair value is

based on the value that reflects current market expectations about those future amounts.”

• Market approach: This is a valuation technique that “uses prices and other relevant information

generated by market transactions involving identical or comparable (similar) assets, liabilities, or a

group of assets and liabilities (e.g. a business).”

These three approaches were analyzed for the execution of the project. However, the market method is not

considered appropriate as it would be extremely difficult, because of the complexity of the project, to find

comparable market reference transactions.

Based on the foregoing, the methodological approach proposed for the valuation of the depot project

is based on applying two possible scenarios: (i) Apply the income approach, as the project includes a

“depot” and a saleable commercial development. By establishing the fair value on the basis of the projected

inflows and their discounted amount at a defined rate, account is taken not only of the market price of the

land but also the possible income or expenditure that might be generated in the development of projects of

this nature; and (ii) Apply the cost approach when the option to build a commercial development as part of

the TOD is excluded, as the fair value of this type of project is derived predominantly from its assets and

not its capacity to generate future income flows.

• Calculation of Investor Cash Flow

Having identified the income approach as the valuation methodology, it is proposed that the financial

modeling exercise be carried out by calculating the investor cash flow. This will facilitate the modeling

of changes from an operational point of view, while, at the same time, serving as a tool for projecting the

impact of cash inflows and outflows involved in the financing of the project. In this way, the investor can

be informed of the level of available resources over time.

• Calculation of terminal value

The three main methodologies for calculating the terminal value of the project are outlined below:

• Terminal value by the multiple comparables methodology: this method serves to calculate the

terminal value of a project using multiple similar transactions. This method is useful when it is not

possible to stabilize cash flows or project margins over a reasonable period.

18

• Terminal value by perpetuity growth methodology: this serves to calculate the terminal value of a

project on the assumption that cash flows will continue to grow in perpetuity, using a gradient tied

to the perpetual growth of cash flows. This method is useful when it is possible to stabilize cash

flows or profit margins within a reasonable timeframe.

• Terminal value by net asset value methodology: this method serves to calculate the terminal value

of a project using the projected value of the project’s assets in the final projection period. This

method is useful when the value of the assets forecast in the final projection period is greater than

the capacity to generate positive cash flows in the future.

As the project ceases to generate cash inflows and outflows at the close of the projection period, the

perpetuity growth methodology cannot be usefully applied. Furthermore, as there are no comparable

project transactions, the multiple comparables methodology should also be excluded in this case. It is

recommended, therefore, that the net asset value methodology be used for calculating the Terminal Value

of the Project. It is recommended that the terminal value calculation period (final projection period) be

determined depending on the sustainability of the project upon completion.

• Calculation of Discount Rate

A suitable discount rate should be calculated to determine the current value of project cash flows.

This rate will be determined by the actors that will be exposed to risk during the life of the project

(construction risk, market risk, others). In this case, the actors exposed to risk are the district, Transmilenio,

investors and construction managers, meaning that the discount rate calculation should take account of

investor costs and be based on the cost of equity. The “Capital Asset Price Market (CAPM)” methodology

is used for calculating the cost of equity (Ke). This method seeks to estimate the returns that investors

would obtain from investing their resources in the execution of the project rather than in a risk-free asset.

• Calculation of the Present Value of Cash Flows

Once the cash flows for each projection period, the terminal value and the discount rate have been

estimated, then the present value of the cash flows is calculated.

7. RECOMMENDATIONS FOR USE

• In view of the current shortage and high cost of property in the city of Bogota, the project analysis

should contemplate measures to utilize property in rural areas or in municipalities in close

proximity to the city.

• When conducting the operational, transit and demand analyses, account should be taken of the

different actors and the future mobility plans projected by the district and Transmilenio, among

others. This is to ensure that the construction of the project is not based on the way the system

currently operates but is future-oriented and geared toward the city’s mobility.

• It is important that project developers ensure that their objectives include the incorporation of TOD

into the land parcels to be developed, where applicable. This will ensure that developments are not

focused solely on generating income or lowering costs but will also have a positive impact on the

city in terms of urban development and mobility.

• The land parcels selected should meet the minimum requirements for approval and the highest

qualification criteria, as outlined in the document.

19

• Any rule changes to be made in relation to the land parcels for simplifying work and improving

management timelines should avoid the need for stopgap planning or additions to the TOD.

Furthermore, a process of urban renewal of the lots forming part of the parks to be developed should

already be underway to facilitate the development of the project.

• Where the parcels are subject to a possible change in connection with future developments, it is

best, when negotiating the construction of depots by private investors, to use the option of changing

the Indice de Edificabilidad (floor area ratio).

• To facilitate policy management and project execution, actions should be taken to change the

configuration of the depots from amenities to transit infrastructure.

• An examination should be made of the possible sources of financing that will have the lowest cost

implication for Transmilenio and the district. It should also be clear what timelines are in place for

receiving such financing.

• Depending on the type of project, it is important to select the fair value methodology that uses

either the income or cost approach, as applicable.

• It is recommended that the net assets value approach be used as the methodology for calculating

the terminal value.

• Projected cash flows over time should be investor cash flows to facilitate change modeling in

operational terms as well as in relation to the impacts of project financing cash inflows and

outflows.

20

8. ANNEX

8.1. ANNEX1- POSSIBLE TOD LAND PARCELS

Chart N9. Location of Possible TOD Land Parcels

Source: Nino G, Trígono, 2017 for the World Ban

21

8.2. ANNEX 2 – METHODOLOGY OF APPLICATION FOR ELEGIBILITY CRITERIA

• Land parcels feasibility selection: Given the operational characteristics mentioned in TIER I and the

characteristics of the land associated with the land parcels in TIER II, the land parcels for each zone

are screened using these requirements, with the elimination of those that do not meet the minimum

operating or land requirements.

• Land parcels identification and prioritization: Once the list of feasible land parcels by zone has been

obtained, the matrix ranking them is prepared based on the rating criteria listed in TIERS I, II, and III.

Using the rating criteria, a decision is made on the best land parcels by zone and a list of the feasible

ones for each IPTS zone is generated, along with their ratings.

• TOD integration: An analysis is done, for each feasible land parcel obtained from the selection list, to

determine the use that will be made of each of them to ensure that its area of influence is TOD focused.

In conducting this usage analysis, projects that involve the land parcels must have: (i) presence of new

real estate development nearby; (ii) availability of land suitable for development; (iii) existence of

strong regional demand for new growth or supportive government policies and measures ; and (iv)

ability of development of this nature to help ensure that financial sustainability efforts can draw on land

value capture instruments to generate revenue through TOD.

• Form of implementation and costs: After ranking the bus depot options by zone and their potential for

the establishment of TOD, the cost of project implementation is calculated (investment to be made by

the district) for each park.

• Cost-benefit comparison: Based on numbers 2, 3, and 4 of the process, a comparison is done of the

operational requirements, establishment of TOD, and project investment in each land parcel. As a result,

the best park options from a cost-benefit standpoint are obtained for each IPTS zone. The selection

decision with respect to land parcels will be based on the district criteria in conjunction with

Transmilenio.

• Final selection of management and financing tools: For each land parcels selected as part of the project,

different management and financing tools are analyzed and chosen. These include public-private

partnerships (PPPs) (private or public initiative) and concessions, among others.

Chart No. 10. Process flow for TOD pre-feasibility


The list of feasible parks is

obtained

Operational and land screening (TIER I – TIERII)

Financial and management analysis

of each park regardless of previous

rating

Analysis of the use of each park to ensure

that its area of influence is TOD

focused

Final selection of management and

financing tools

Final selection of parks and determination of operational benefit vs cost vs TOD

Prioritization based on

operational needs (TIERS l-

ll-lll)

22

8.3. ANNEX 3- METHODOLOGY APPLIED TO LAND PARCELS, BY TYPOLOGY

TYPOLOGY 1

23

TIPOLOGIA 2

24

TIPOLOGIA 3

25

TIPOLOGIA 4

26

TIPOLOGIA 5

27

9. REFERENCES

Municipality of Bogota. Decree 30, 2015.

Greater Municipality of Bogota DC, Resolution No. 62872, 2015.

Municipality of Bogota. Decree 1788, 2004. July 18, 2016,

Municipality of Bogota. Decree 1788, 2004

Municipality of Bogota, Decree 879, 1998

World Bank Colombia, TRIGONO. SAS. Definición de las guías financieras para la valoración de la

implementación de los Patios logísticos del Sistema Integrado de Transporte (SITP) para la ciudad de

Bogotá, 2017 (Financial guidelines for the valuation of logistics depots in the Integrated Transit System,

city of Bogota, 2017)

World Bank Colombia, Nino Gabriela. Consultoria para el análisis urbano de la prefactibilidad de los patios

del SITP, base para establecer estrategias de gestión y financiación. (Urban anaylsis of preselected public

depots, 2017)

Damodaran Aswaht, Damodaran, on Valuation, Security Analysis for Investment and Corporate Finance,

August 2006, p46.

Hiroaki Suzuki, Robert Cervero and Kanako Iuchi. Transforming cities with public transit – Integrating

public transit and land use for sustainable urban development, 2000

Transmilenio. Operadores del Sistema. July 25, 2016

http://www.sitp.gov.co/Publicaciones/el_sistema/operadores_del_sistema

Transmilenio. Informe Resumen de Zonas del SITP. July 25, 2016,

http://transmilenio.com.co/sites/default/files/informe_resumen_de_zonas_del_sitp.pdf

http://www.sitp.gov.co/Publicaciones/el_sistema/operadores_del_sistema

http://transmilenio.com.co/sites/default/files/informe_resumen_de_zonas_del_sitp.pdf

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