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Doing the deals But transit-oriented development also carries risks and challenges. Naturally, the first risk is the bet that developers Minnesota Real always face — that future growth and demand will evolve the way they think it will. If transit such as light rail does- attractive development opportunity. • n't take off in the Twin Cities, there will Creating an optimal mixed-use pro- be few hubs and arteries around which ject requires considerable foresight in to focus successful development pro- legal structuring. Consider the follow- jects. ing issues: Is that a likely scenario? Make your • Should the separate uses be carved own prediction. Mine is that Hiawatha into separate ownership units or just LRT will be successful and exceed pro- leased separately? jections because the quality and conve- • If separate ownership is desired, is nience of its service will simply attract this best done by platting or by condo- customers. Its success, as well as the minium or by common interest commu- sheer frustration of commuters —par- nity? ticularly voting commuters—sitting on •If separate ownership,how are com- area freeways is likely to spur politi- mon elements and common expenses cians to fund further transit improve- allocated? ments. • How does the legal structure affect The other principal risk lies in the mortgage financing — a simple mort- nature of transit-oriented projects. They gage on the entire mixed use or separate tend to be mixed use, and they usually mortgages on separate elements? require substantial government action • How does it affect application of and approvals. Both factors make these building and fire codes? deals among the more complex projects These are just a few of the complex that a developer will likely undertake issues developers face. The time to I from a legal, regulatory, financing and address these questions is at the earliest business standpoint. planning stages of the project. Indeed, Mixed use. Transit-oriented develop- the resolution of these issues will often ment is almost always mixed use, both shape whether the project is financially in the older European model and in the feasible and can ultimately be approved, new, evolving U.S. model. In fact, the financed and built. diversity of the development is often a Governmental involvement. Transit- key factor in its appeal.The mix may be oriented developments also tend to have focused primarily on office complexes extensive governmental involvement, III or residential development, but usually often in several different respects: also includes retail, retail services and restaurant space. Some projects include • A governmental unit will own the hotels. Most also include parking, transit right-of-way itself and often a because transit availability does not transit station or shelter. In these pro- eliminate the need for parking. Indeed, jects the transit elements are often sep- park-and-ride hubs, which inherently arated from the other real estate inter- feature parking, may be a particularly ests. This includes not just "horizontal" elements surrounding the transit hub • itself, but also vertical elements, such that valuable air rights can be created over the right-of-way and/or station. ' • Often a governmental unit initially owns some or all of the land and is a seller or lessor. Estate Journal Page 1 1 • Often the project serves governmen- ed-development in the Twin Cities will tal objectives and may be eligible for attract significant interest from govern- various forms of governmental financial ment and real estate developers alike, as assistance. : ' •, the region struggles with'its.traffic con- .• Generally, the;projects do.:not- - gestion problems: This may create entirely fit within existing zoning and opportunities to launch highly attractive land use entitlements, and require new projects —if developers can navi- approvals or variances. gate the various challenges inherent in Given the scope of governmental these properties. involvement, a timely and successful result requires foresight and expertise in Charlie Ferrell practices in real • addressing the governmental elements, estate law at Faegre & Benson in Min- including financing, permits, project neapolis. He is a past chair of the Alin- approvals and even broader community neapolis Downtown Council and the relations. The governmental process is Downtown Minneapolis Transportation greatly facilitated if the developer's Management Organization. team has a good working relationship with the governmental bodies and a sophisticated'understanding of bureau- cratic and political dynamics. Overall. it's likely that transit nriant-