Request For Proposal Compañía Tres Ríos

Roosevelt Station, Parcel A

TRANSPORTATION ORIENTED DEVELOPMENT ANALYSIS

BY ADAM GREENFADER

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TABLE OF CONTENTS

GOAL OF THIS STUDY PG 3 ABOUT AXYON PG 3 GENERAL ASSUMPTIONS PG 4 CURRENT ECONOMIC OUTLOOK PG 5 KEY FACTS PG 6 MARKET AREA PG 7 CENSUS DATA PG 8 SITE LOCATION PG 10 HATTO REY PG 11-14 PUBLIC TRANSPORTATION PUERTO RICO PG 15 TREN URBANO PG 16 DEVELOPMENT & TRANSPORTATION PG 17-20 S.W.O.T. ANALYSIS STRENGTHS PG 21-26 WEAKNESS PG 27 OPPORTUNITIES PG 27-30 THREATS PG 30-33 TARGET PROFILE PG 34-37 CURRENT COMPETITION PG 38-48 HOUSING DEMAND PG 49 FUTURE PROJECTS PG 50-51 PRICE POINT ANALYSIS PG 52-55 CONCLUSION PG 56 ADDENDUM

GENERAL RECCOMENDATIONS PG 57-59

SUCCESSFUL TOD EXAMPLE PG 60

INTERIOR DESIGN RECCOMENDATIONS PG 61-64

GUAYNABO CONDOMINIUMS PG 65-66

LUIS ABREU COMPARABLE SALES REPORT PG 67

FUTURE PROJECT LIST PG 68

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TRANSIT ORIENTED DEVELOPMENT Transit Oriented Development (TOD) is defined as development built within proximity to, and reliant upon, transportation. A key characteristic of TOD is that it is located within ¼ of a mile from a transit station. The goal of TODS should be to :

Place commercial, housing, jobs, parks, and civic uses within walking distances of transit stops.

Create pedestrian-friendly street networks that directly connect destinations.

Provide a mix of housing types, densities, and costs. According to Volinski, Hendricks, and Goodwill from the Center for Urban Transportation Research at the University of Florida, there are several conclusions that can be drawn about TODS:

1. The acceptance of TOD is an incremental process that can take decades.

2. TOD will have greater success when combined with other municipal tax incentives, parking restrictions, density bonus, etc.

3. In order for TOD to be successful, it must capture the traditional suburban

amenities such as the perception of quietness, spaciousness, light, privacy, and safety.

4. TOD must allow residents to truly rely less on automobiles and make most

routine trips on foot…thus avoiding the need for parking. HISTORY OF TRANSPORTATION- PUERTO RICO As of the early 1900’s, Puerto Rico enjoyed public transportation that was centered on rail. The rail connected the entire island. For many years, this was the principal mode of travel for both individuals and freight. Puerto Rico, after the Second World War, began to decentralize. The train was stopped. Much of the island’s major road construction was undertaken in the 1960’s and 70’s. By the 1980’s, most the island’s transportation was based on the private automobile and truck. Today, there is no island wide rail transportation. There exists a fleet of public and private “mini-buses” that transport individuals. Inter-island airfare is limited and very costly.

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SITE LOCATION

The proposed Roosevelt Parcel A site is located in the heart of Hato Rey. It is located on Avenida Muñoz Rivera between Avenida Roosevelt and Eleanor Roosevelt. The site is adjacent to the new Roosevelt light rail station. The 500- meter “zone of influence” surrounding the site contains: HATO REY TRANSPORTATION FUTURE The future of Hato Rey looks quite favorable. This is due to the following:

1. Demographic Shifts – Puerto Rico 2. Traffic Blues 3. New Entertainment, Retail, and Commercial Developments 4. Government Density Zoning 5. Environmental Consciousness 6. Transportation Improvements

1. Demographic Shifts – Puerto Rico

Like the United States, the population of Puerto Rico is getting older. As the Baby Boomers´ children leave their homes, the Boomers are finding themselves with “too much space”.

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Numerous studies have revealed that Baby Boomers in Puerto Rico want “no lawns to cut”, less space to clean, and non-vehicular access to shopping and leisure.

2. Traffic Blues In Puerto Rico, long commuting times have become the norm. There are three main municipalities that account for the majority of vehicular circulation in/out of the city during weekdays: Bayamón, Caguas, and Carolina. On an island that is only 35 miles by 100, it is amazing to think that many people regularly leave their homes at 5:15 a.m. in order to be at the office by 9:00 am….for only a 30 mile commute.

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3. New Entertainment, Retail, and Commercial Developments Unlike previous decades, Hato Rey is currently undergoing a significant amount of development in entertainment, retail, and commercial uses. Particularly, the new coliseum (located within ½ mile of the site) promises to bring much needed nighttime activity to the area. This will most likely generate ancillary support services, restaurants, bars, and evening retail.

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Banco Popular, the largest bank in Puerto Rico, is currently undertaking a significant amount of new entertainment, office, and retail development in Hato Rey – all within ¼ mile of the Roosevelt site. This includes 36,000 square feet of restaurant and retail space, 6 movie theatres, 73,000 square feet of commercial space, and various new parking structures. 4. Government Density Zoning: Opportunity The government recently enacted a special overlay zone to increase density in the metropolitan area. This overlay zone should provide financial incentives for inner city development. Consequently, Hato Rey should begin to see increased density, more diverse communities and better land usage.

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5. Environmental Consciousness Puerto Ricans today are becoming increasingly aware of their finite land resources and the cost of uncontrolled development on their environment and quality of life. Homebuyers are demanding that developments stop plowing over green areas. This environmental awareness might make homebuyers think twice about living in a

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community that was once agricultural land. More importantly, they will seek out metropolitan developments that re-forest or are environment friendly.

6. Transportation Improvements Today, Puerto Rico is introducing an “Integrated Transportation System” or ATI. This system includes a coordinated transit effort between a new rail line, bus service, and water taxi or “aqua expreso”. This new investment should begin to address some of the transportation issues that face metropolitan residents.

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TREN URBANO It is projected that by September 2004, the Tren Urbano will begin to service the metropolitan area. The Tren Urbano is a heavy rail train. A heavy rail train is characterized by its large capacity to transport individuals. It also runs independent of vehicular circulation. The Tren Urbano will operate from Bayamón to Santurce. The Tren Urbano will make a total of 13 stops. It will take approximately 25 minutes to service all the stops. The rail frequency will be approximately every six to eight minutes.

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The Tren Urbano has the capacity form 170 people per car. There are a total of four/six cars per train. Daily ridership is initially projected at 30,000-40,000 passengers. The ridership is projected to increase at a rate of 10%-15% per year. The train has capacity to transport over 150,000 people per day. Increased ridership will be a direct result of:

Augmented density in the locations adjacent to the rail stations.

Changes in social attitudes about public transportation.

Inter-modal transportation systems.

More accessible park and ride facilities. Currently, there are “park and ride” facilities for approximately 4,000 vehicles. This does not provide sufficient parking for the projected need. Unlike road congestion, increased rail ridership will only increase the Tren Urbano’s appeal to the masses. The cost of an individual rail ride will be subsidized by both local and federal government. This should encourage initial ridership. A ticket for the Tren Urbano is projected to be at around one dollar. This will include the use of other public transportation such as busses and the “aqua expresso”.

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According to the ex-secretary of Transportation, Carlos Pesquera, the key to the Tren Urbano’s success will be based on inter-modal transportation - the use of multiple transportations in a single commute. For example, if one drives to a “park and ride”, jumps on the Tren Urbano, and then walks to work, the commute can be said to have three inter-modal participations. According to Mr. Pesquera, the network of private mini-vans known as “Pisa y Corres,” municipal trolleys, and AMA buses will play a significant role in transporting individuals to the Tren Urbano stations. “We must see the entire system as one inter-connected network, like the circulation system in the human body. Distances will shrink. One location will nourish another to create one cohesive community”, quotes Mr. Pesquera. DEVELOPMENT & TRANSPORTATION:USA Development and Mass Transportation “While in 1910 no one dared advertise a home that wasn’t within an easy walk to a train depot, by the 1920’s no one dared offer one that didn’t have a garage and easy road access,” note Michael Bernick and Robert Cerevo in their book Transit Villages in the 21st Century. Prior to the invention of the automobile, trolleys and real estate projects were often bundled together. Transit itself was usually the loss leader that allowed a huge windfall

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profits from land sales. Developers were thus encouraged to build high density on small lots. By building density, a developer would allocate risk amongst many consumers. For the home buyer, mortgage as we know it today, did not exist. Capital was usually available only in very short term notes. These early mortgages often required up to 50% down payments. Note: Unlike, single family homes, high density projects require more construction financing. Risk also increases because of slower cash flows. Development and Automobile After the 1920’s, there were three key changes to residential real estate development:

1) The automobile - The automobile facilitated increased mobility. This allowed developers to build single family units on cheap land - outside of the city.

2) Mass construction of housing - After World War II, Levitt introduced a

revolutionary mass construction system. Homes that once took years to build could now be delivered within weeks.

3) The secondary financial market - For the consumer, the secondary market

made money readily available. Mortgages could be obtained with 80% loan to values and the GI Bill made qualifying for a home significantly easier.

4) Government subsidies for road infrastructure – massive highway projects

were undertaken as a result of the new deal in the 1930’s. These projects put thousands of people back to work and developed what today is the national highway system.

Suburban Development The suburban development of the last 50 years has created a growing concern on: traffic congestion, long commutes, air pollution, oil prices, farmland depletion, division of neighborhoods, loss of open space, and the deterioration of social networks. Statistics from the Home Builders Association Transportation Committee reveal that every new home creates 10 new vehicle trips daily. Attempts to alleviate the problem of long travel commutes by constructing more highways almost always has led to more sprawl, and eventually, more congestion. Statistics confirm what every commuter knows intuitively - more cars than ever are on the road. Americans spent 4.5 million hours stuck in commuter traffic, a 325% increase since 1982. Rush hour has grown to six hours a day, twice as long as 1982. Uncontrolled Sprawl

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If sprawl is uncontrolled, an estimated $927 billion of new roads will be needed to accommodate growth in the United States over the next twenty-five years. In a scenario where growth is concentrated in existing metropolitan areas, this cost can be reduced by $110 billion (Transportation Research Board. 2000. Cost of Sprawl). Suburban Development: Puerto Rico In the last two decades, Puerto Rico has seen the rise (and perhaps fall) of the suburban communities. A prime example is the Sabanera project in Cidra developed in the early 1990’s by Frederico Stubbe. Many construction lenders at the time did not think Cidra was a viable market for 200 plus homes ranging from $180,000-$285,000. They felt that Cidra was too far from the metropolitan area and that consumers would not make the “sacrifice” and drive. In addition, lenders thought it was not financially feasible to have such large up-front costs in recreational and landscaping facilities. The Sabanera formula was essentially based on the now over-used movie quote from Field of Dreams, “If you build it they will come.” Stubbe built some of the most amazing recreational and green facilities ever seen in Puerto Rico…and he built it before optioning a single home! To the chagrin of the financial institutions that passed on the deal, Sabanera was an amazing success. People stampeded from the city in herds to live in this “wonderful green environment.” In fact, it was such a great concept, that Stubbe went on to develop two other communities with the Sabanera brand. Many other developers were quick to follow Stubble’s formula. Today, however, suburban development continues, but with much less sales success. Many of the initial buyers in Sabanera, for example, sold their homes after several months of struggling with traffic jams. It appears that suburban commuting has become extremely burdensome - especially from the Caguas/Cidra market. This is particularly true for middle + income individuals who have children in private schools in the metropolitan area. Innovation trends Some developers have introduced innovative ways to combat this commuting dilemma. For example, Sabanera in Dorado has built a high quality private school for its residents. The success of this venture will not be seen for many years. Re-Birth Urban Center “We are overwhelming the roadway network, which means we have to find ways to make movement more efficient. We have to see how people can live together and be happy about it. That means building communities,” quotes Ken Kruckenmyere from the Massachusetts Institute of Technology, Center for Transportation Studies.

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Cities once stigmatized as crime-ridden repositories of the poor, are now being seen as vital, resource rich places. This is in part because urban density creates opportunity for a more diverse mix of amenities than is available in one-dimensional suburban locations. According to Census figures for 2000, research by the Brookings Center on Urban and Metropolitan Policy and the Fannie Mae Foundation, there is currently a dramatic re-birth of urban centers. This rebirth is the result of three major factors:

I. Demographics - Rise in immigration, aging baby boomers, and increase in non-family households.

II. Aging of suburban developments. III. New interest in rail travel and avoidance of vehicular transit.

New Parking Paradigm For many years, parking has been seen as part and parcel of any successful development. In fact, more parking would equate with more success. Today the paradigm might be shifting. According to Donald Shoup, a professor of Urban Planning at the University of California in Los Angeles, minimum parking requirements produce a local benefit – they ensure that every land use can accommodate all the cars drawn to the site. However, this local benefit comes at a high price to the whole city. The price is paid in the form of traffic, congestion, and a less dense auto-oriented city. There is often tremendous pressure to provide ample parking a project’s residents. Yet parking complicates the political, financial, and design aspects of the TOD project. More importantly, parking can conflict with the goals of creating a pedestrian-friendly, mixed-use environment. Note: The aim today is to “un-bundle” parking. This will allow homeowners to rent or purchase parking separately from the housing itself. Another parking option, is to use shared space in parking garages for commuters and office workers during the day, and for community residents at night. RECCOMENDATIONS Design

Advanced engineering techniques can provide on-site store of energy from renewable sources such as wind and solar power. Efficient HVAC systems can filter outdoor air and provide healthier indoor environments.

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Other green features can include innovative plumbing systems that recycle building wastewater (gray and black) water reducing flow to sewers. Innovative designs provide sod roofs that become public spaces. This reduces storm water run off, and flow to storm water drainage.

T1 lines wired into each apartment. There is great demand for bandwidth on demand. More and more home products will require fast connections. Some innovative examples include internet refrigerators, office connected appliances, internet surveillance systems, etc..

A separate entrance and lobby should be reserved for resident’s privacy. Amenities should include an outdoor pool, a rooftop deck, a health club, a party room, underground parking, and a business center.

Transportation

Employer-sponsored transportation services such as subsidized transit fares, guaranteed ride home programs, company vehicles for personal use, and membership in a car-sharing program can greatly increase transit use.

Car sharing has arrived in the United States with several car-sharing organizations- City Share in San Francisco, Flexcarin in Seattle, and ZipCar in Boston. On average, cars sit idle 22 hours a day. Car-sharing can be developed as an amenity that can increase the value of a residential property. “Depending on the expected level of vehicle ownership of the target market, housing units can be provided with access to car sharing in place of a second parking space”, quotes Gabriel Metcalf, Deputy Director of the San Francisco and Urban Research Association.

St. Paul Minnesota has installed bicycle lockers at 30 transit and “park and ride” locations. The lockers can be rented for a total of 40 per semester.

Under Cambridge’s regulation, developers must draw up a “Transportation Demand Management Plan” (TDM). The purpose of the TDM is to achieve a 10% cut in the

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need for parking. Some measures include subsidized transit passes, parking charges, reductions in parking supply.

Finance

Tax Increment Financing - During the life of the TIF, any increase in property taxes above the base year in which the TIF was created is distributed into a TIF fund to help pay for public improvements in the TIF. This TIF has been a boom for Illinois cities looking to do urban renewal.

Some national mortgage lenders are offering “transportation-efficient loans” for properties located within walking distances of transit stations. The reasoning is that the money a homeowner saves by taking public transportation (rather than driving a car) can be added to monthly mortgage payments – thus, higher loan amounts are possible.

The Location Efficient Mortgage (LEM), developed by the Center for Neighborhood Technology, the Natural Resources Defense Council, the Surface Transportation Policy Project, and Fannie Mae, was a pilot project in three cities. Fannie Mae has also derived its own product, the Smart Commute Mortgage, which offers a smaller credit based solely on transit proximity.

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Below you will note how a location efficiency mortgage reduces the income necessary to qualify for a home of $286,000.

Cost of Automobile: Consumer According to the Urban Land Institute Transportation Committee, the average U.S. household spent $6,600 on transportation ($550 a month), the second highest expenditure next to housing. Allocating these costs to individual trips, the drive to work costs $7.70, non-work trip costs $2.60, and shopping trips cost $2.00. NOTE: How individuals perceive these costs is less clear. For example, 75% of the expense of operating a car is fixed costs such as depreciation, insurance, licensing, and taxes. Most drivers thus only consider the marginal costs of commuting such as parking, gasoline, and parking tickets.

Standard Mortgage 7.0% interest 30 years

Home Mortgage Down Closing Total Mo. Insurance Total Price 90% Pmt. 5% Investment Payment Taxes Monthly

$286,000 $257,400 $28,600 $12,870 $41,470 $1,729 $150 $1,879

Income to Qualify $5,635 Monthly

$67,629 Yearly

Location Efficiency Mortgage 7.0% interest 30 years

Home Mortgage Down Closing Total Mo. Insurance Total Price 90% Pmt. 5% Investment Payment Taxes Monthly

$286,000 $257,400 $28,600 $12,870 $41,470 $1,729 $150 $1,879

Income to Qualify

$4,696 Monthly

$56,357 Yearly

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ADDENDUM B Examples of Successful TOD The recently completed Mockingbird Station, located along the Dallas Area Rapid Transit (DART) rail line, has become one of Texas’s most successful mixed-use urban villages built adjacent to a rail station. A sign of just how far the interest in mass transit systems has evolved is that it reached Dallas, where the automobile is deeply interwoven into the image of Texas rugged individualism – “Marlboro men do not share a seat on a light rail vehicle,” or at least they did not until 1996. The 20 acre mixed-use project comprises of 220,000 square feet of retail space anchored by Virgin Megastore, the state’s first urban outfitters, Gap, and Starbucks. In addition, there are 250,000 square feet of office space, 211 loft style apartments, and a 500 unit luxury apartment building. The project, like our proposed site, is within walking distance of the Southern Methodist University. The Mockingbird Station has led to an important shift: communities once reluctant to have DART rail stations are now showing significant interest. For more information see: http://www.mockingbirdstation.com/