Several of our MSRE students were in San Francisco recently for the 23rd annual Bank of America Affordable Housing Challenge. Sponsored by Bank of America, the Challenge is a competition among several West Coast graduate schools where teams must create a low income housing proposal. Each team must identify a viable site and then develop a proposal that includes design, finance, market and community support elements while working with developer and community partners. The project proposals are judged by a panel of local professionals.
The University of Washington team was comprised of (L to R, above): Jeff Bernard (MSRE Candidate 2014), Corbin Jones (MSRE Candidate 2015), Jean Bailey (MPA Candidate 2014), Lei Wu (MSRE Candidate 2015), Katie Escudero (MPA Candidate 2014), Lauren Mathisen (MPA Candidate 2014), and Zac Strode (MSRE Candidate 2016). The team was led by Runstad Center faculty member Al Levine, who together with Chris Bitter led the development studio team to victory in the NAIOP competition earlier this spring.
Team warmup! Presentation underway
The full presentation, which was shown at the awards ceremony, is available online here. UCLA was ultimately named the winner, but the UW team made a very credible showing, and were complimented by Bank of America for producing an excellent report and a strong presentation. Congratulations, team!
At the spring meeting of the Runstad Center Advisory Board last week, outgoing chair Lisa Stewart was presented with a token of our gratitude for providing the framework of our success over the last two years. Our sincerest thanks to Lisa for her invaluable leadership, and an enthusiastic welcome to incoming chair Anne Lawler.
Can increased physical mobility lead to increased social mobility in a city? In one resilient Colombian city, leaders believe physical mobility is a necessity.
Medellín, Colombia is a city on the rise. It was recently named City of the Year by Urban Land Institute and was the host of the United Nation’s prestigious World Urban Forum this past April. The resilience of this city is noteworthy considering it is just one decade removed from widespread violence and instability. The reign of terror brought by the drug lord Pablo Escobar is still a fresh memory for many residents. However, progressive and innovative urban planning techniques have gone a long way to help remake this city, and it is now receiving great acclaim for urban planning techniques that look to tackle social equity issues.
Medellín’s Mobility Issues
As Medellín emerged from its years of violence, its leaders acknowledged that mobility was a key issue for the city. First, there was a lack of connectivity between the city center and the city’s hillside communities. These hillside communities were largely unplanned, informal settlements that included a maze of pathways and streets that lacked connection to the rest of the city. This meant that people living in the hillside had poor access to good jobs and had to devote considerable time their commutes.
Sprawling hillside communities in Medellín, photo by Eric Hadden
‘Within the communities, this lack of connectivity created an environment that allowed crime and violence to persist – even when it was decreasing across other parts of the city. Neighborhood gangs controlled access points into the neighborhoods, and a lack of connections and interaction between neighborhoods allowed tension to fester and cross-neighborhood wars to break out. While mobility’s impact on these problems may not be obvious, it’s clear that violence and a lack of access to jobs do not create the ideal conditions for someone looking to move up in the world.
Strategic Changes
To alleviate these problems, city officials worked with individual communities to develop a strategy to open and connect these communities. They did this through a series of precise, targeted projects, which became known as “urban acupuncture”.
To increase mobility within a community, the city created a network of pedestrian paths and plazas that were connected vertically by hillclimbs, stairs, and, most notably, outdoor escalators.
Escalators in Comuna 13, photo by Eric Hadden
To open up a community to its neighbors, the city developed additional access points with turnarounds for emergency vehicles and taxis, tore down walls to extend dead-end streets to the next neighborhood, and, in some cases, constructed literal bridges between neighboring communities.
New entry point into Comuna 13, photo by Eric Hadden
To increase access from the hillsides to the city center, the city established a network of gondola lines that linked neighborhood centers directly to the artery of the city’s transit network – the light rail line.
Gondolas connecting hillside communities to the light rail, photo by Susan Jones
The result of these projects is a well-connected workforce, social exchange – “intercambio”, reduced rates of violence, and a sense of pride. What was once a two-hour trip for work in one of the city’s job centers is now around 45 minutes. Streets that were once ruled by gangs are now shortcuts for children going to school. Residents of warring neighborhoods now gather at the same weekend markets. Mobility has been the key to transforming these neighborhoods and creating a situation where people have social mobility.
Mobility in Seattle
Seattle doesn’t have warring neighborhoods or broad swaths of informal settlements on its hillsides, but with the current transit funding gap, a recent proposal for gondolas, and debates about equity in Seattle, Medellín provides more parallels than one might initially think. What would a Medellín-style approach to mobility look like for Seattle? We’ll explore this more in an upcoming post.
Last week, the University of Washington Board of Regents approved the selection of Wright Runstad & Company to redevelop Rainier Square, a 140,000 square foot retail property that is part of the University’s Metropolitan Tract in downtown Seattle. Wright Runstad & Company was selected through a competitive process managed by the University of Washington.
The project will total 1.15 million square feet in the taller tower and a separate, connected 15-story hotel. The taller building will include approximately 750,000 square feet of office, 240 apartments and 30,000 square feet of retail. The luxury hotel will have 198 rooms, and the project would have a 1,200-stall parking garage. The project schedule calls for design and entitlement to occur in 2015-16, with early construction targeted for 2017 and completion three years later. A detailed development portfolio is available at the Wright Runstad website.
The new skyscraper will be the second-tallest building on the Seattle skyline. We at the Runstad Center extend a hearty congratulations to our friends at Wright Runstad, especially Jon Runstad and Greg Johnson!
Washington State’s housing market finished weaker in the first quarter of 2014 when compared to the end of 2013, according to a new report from the Washington Center for Real Estate Research here at the Runstad Center.
The housing market is still suffering from low inventory, as evidenced by decreased sales volume and by an overall decrease in available listings. Preliminary analysis shows that only 4.2 months’ worth of supply is currently available on the market across the state, with metro counties such as King and Snohomish having as little as 2.0 and 2.8 months available, respectively. Final numbers on supply constraints, prices, building activity and more will be released next month in the Center’s full Washington State Housing Market report.
“The Eiffel Tower was financed by Gustave Eiffel, the Empire State by John Jakob Rasob and Pierre Dupont, and the Burj Khalifa, the tallest skyscraper in the world, was financed by Sheik Mohammed Bin Rashid Al Maktoum…the first skyscraper in Colombia is being financed by thousands of Colombians.”
Image c/o SkyscraperCity.com
BD Bacata will be the first skyscraper in Colombia in 35 years, and the largest in the country, at 66 stories. Even more remarkable, it has become the largest crowdfunded real estate project in the world. Prodigy Network, the Bogota- and New York City-based real estate company developing the project, sought to provide “small investors the opportunity to buy participations in large-scale real estate.”
The project is located in the el Centro district of Colombia’s capitol city, Bogota. El Centro was once the city’s thriving downtown area, but over the past several decades, the area saw increased levels of crime and poverty, and development shifted to the Financial District, which is located several miles north of el Centro (think: Wilshire Boulevard compared to Downtown LA) Despite cheaper land prices, and a city “Regeneration Plan” for downtown, many standard, institutional-scale investors are still leery of investing in el Centro . Conversely, Prodigy Network saw an opportunity to use crowdfunding as a tool for securing capital in a location that locals believe to be a needed investment in their community.
When complete, BD Bacata will be a truly mixed-use building, combining retail, office, hotel and for-sale residential. Prodigy Network felt it was especially important to have diversified uses (and exits) in a project with this level of complexity. The 1.2 million square foot project is being built in phases by use type. Phase one includes nearly 50,000 square feet of retail, anticipated to attract 12,000 visitors per day. Phase two will be the construction of the shorter tower with 396 for sale apartments. The final phase is the construction of the tallest tower, which includes 117 offices and a 364-room hotel. Despite initial construction issues, Prodigy Network expects a 2015 delivery.
The residential portion is the only aspect of the project that is not being crowdfunded and is expected to cover 45% of the project costs.
Even with such a unique product, neighborhood and financing strategy, Prodigy Network was able to meet their fundraising goals, securing the first $80 million dollars within six months of entitlements. To date, over 3,800 Colombians have bought ownership shares, bringing the total crowdfunded investment to over $200 million dollars.
FINANCIALS
In order to fund the approximately $240 million dollar project, Prodigy Network targeted the “informal market” in Colombia. This market segment consists of individuals, as opposed to institutions or even high net worth family offices, who do not typically have access to institutional grade investment, but who understand the local conditions and want an opportunity to impact growth in their city. To manage such a large number of investors, Prodigy is harnessing CRM technology and a legal system in Colombia that has been used to the concept of crowdsourcing for some time. Without getting into the nuanced comparison of securities laws between the two countries, the U.S. is effectively beginning to allow the type of investments that have been legal in Colombia for some time. In addition, Prodigy honed its marketing platform while doing business selling condominiums in places like Miami and New York, and is now applying lessons learned to creating a massive marketing effort to source investors in BD Bacata.
In the Fall, The Runstad Fellows will be hosting an facilitated discussion about the BD Bacata project, and the implications for real estate in Seattle and the US, more generally. Some of the interesting topics that may be explored include:
How will changes in regulations in the US affect crowd-sourcing?
Would use of a Columbia-style “fiduciary model” better support crowd-sourcing in the US?
To what extent can socially-valuable investments be competitively sourced via crown funding?
How much less are investors willing to receive for the “right” projects and can that resulting cost of capital be appealing for a developer?
How do you put in the place an effective marketing program for a crowd-sourced project?
Special thanks to Rodrigo Nino and Magdalena Sartori for their insight on this project.
Accomplished Seattle developer Maria Barrientos gave our students a veritable master class in residential development at a brown bag lunch session yesterday. Maria has completed trendsetting mixed-use apartment and condominium projects in all of Seattle’s hippest urban neighborhoods. She also has an impressive project management practice, focused on cultural arts facilities, having managed the renovation of McCaw Hall, and served as the project manager for the development of the Bellevue Performing Arts Center and the Olympic Sculpture Park as well as other arts facilities. Students dug deep with questions regarding market analysis and the selection of amenities to meet each target market. Maria provided valuable counsel to our NAIOP challenge competition team, and we will be looking for other ways to engage her expertise with the program in the future.
L to R: Jun Yong An, Patrick Kassin, Eric Hadden, Suzanne Cartwright, Maria Barrientos, Michael Miller, Cameron Hypes, Ben Lukes
Congratulations to our second-year MSRE student Nowelle Knutson, whose company Seven Rue has advanced to the Investment round of the annual Foster School Business Plan Competition! Seven Rue is an innovative real estate company that helps homeowners sell their homes themselves without the use of a traditional real estate agent. It was one of 36 teams (out of a pool of 92) that was selected to move to the next round of competition. Meet the rest of the teams here and follow their progress as they compete for a spot in the Final Four and a chance to win the $25,000 grand prize.
Best of luck as you prepare for the next round, Nowelle!
“It’s not about infrastructure, architecture or engineering, it’s about a political project inclusive of citizens”. Jorge Perez, current Director of Planning, Medellín
Escalators in Comuna 13. Photo by UW’s Runstad Fellows
Inspiring images of libraries, escalators and metro-cables in Medellín have populated the pages of worldwide media in recent years. But the real story of triumph does not come from any of these photogenic projects, but rather from the construction of invisible yet intentional ties and bridges: communities that care, support and ultimately, love and protect those investments.
In areas with a delicate social fabric, standard police is not successful. Similar to Sao Paulo’s favelas that have their own structures of control, Medellin’s gangs used to patrol territories where the state had little or no presence. So investing in mobility infrastructure alone only evidenced and exacerbated these traits. Soon after the escalators were built for example, gang members would charge a fee in order to leave users alone. By finding, training, connecting and supporting community leaders -and ultimately branding them as a state presence- Medellín has succeeded in leveraging its investments to provide full value to its people, while lowering maintenance costs and creating opportunities in the center and the periphery, as well as a sense of pride and inclusiveness that seemed impossible some years ago.
Another example comes from the metro system. In the very first days of operation, many of the cars were vandalized. The city quickly moved to repair them, fully aware that nothing invites more chaos than chaos. But the long term solution came through their youth. Free education and basic nutrition (0-5 included) is the city’s strategy for equity in the long term, so they made the most out of their investment. Similar to how Malmo, Sweden taught “Separation at Source” to new communities, Medellin designed communication campaigns aimed at kids to educate their parents. Medellin succeeded to create pride and belonging to all “paisas” in every sector: Medellín is the only city with a Metro system in Colombia.
Buen Comienzo daycare system. Photo by UW’s Runstad Fellows
In a similar way than Bogota’s trinity of aligned Mayors Castro, Mockus and Peñalosa invested in social inclusion and mobility projects to bring “dignity” and “decency” to the less favored (and majority) of inhabitants, Medellin’s Mayors Perez, Fajardo, Salazar and Gaviria also committed heavily and continuously in those communities under a common vision that prevailed across political administrations. And not only in mobility, but in utilities and services, formalizing extralegal settlements along the way to most of the “developed” world’s dismay.
Undocumented settlements are the defining factor of developing nations. Because land titles are absent, cities cannot invest in infrastructure and plan to recover it through taxes, becoming unable to leverage the borrowing power of the crowd as collateral for loans from standard multilateral organizations. Because of this, each territory must deal with their problems in unique ways, but rarely succeed in creating capital for their new citizens along the effort.
Curitiba for example, implemented inspiring programs like “Garbage that is not garbage” to deal with waste collection in extralegal areas that would otherwise create a health problem to the city at large. But Medellin used the muscle of its Public Utilities (the second largest enterprise in the country) to solve this problem in a more permanent way. New settlers were served with electricity, clean water and waste collection –and now mobility- on the general public’s tab. They were served with a utility bill of “Estrato Uno”, the lowest possible price bracket in the city -out of six – and almost fully subsidized, even before they procured a land title. Areas of this kind generally end up stealing light and water and create a public health concern, so it’s better for everyone to serve them formally anyways. And those are now tax-paying citizens with default rates that any public entity would envy, enabled through pre-paid cards and other creative strategies.
But this didn’t happen overnight. Property rights were not clear in about 60% of the city in the 80’s, so the city started an effort to legalize and serve them, and steadily succeeded thirty years later. But undocumented settlements continued to grow fast, especially in a country hit hard by displacement due to rural violence (read guerrillas, paramilitaries and land pressures derived from unlimited drug demand from developed nations), among other factors. So about 20% of the land area today is still considered outside the legal framework and the effort continues. The biggest challenge is where to draw the line.
Public Private Partnerships made possible through a strong Academia, today studies how to create that invisible limit working closely with the communities that live in the border to self-patrol. An Urban Growth boundary that adapts to the realities of these settlers that often prefer landslide risks that seem minimal by comparison to the threats they are accustomed to. Medellin prides itself as an urban laboratory and a city that prefers the “do” strategy than the “talk”, and that adapts quickly to the challenges that arise. Resiliency is only an afterthought, but it is tangible there.
Moravia, for example, an open air dump turned laboratory of bioengineering, lies in the outskirts of the 1900s Medellin –today’s central area-. Moravia was home to communities in desperation whose sustenance came from the waste itself in the most Dantesque inferno scene imaginable. People built their homes atop a time bomb of gases and contamination. So with academic collaboration and public resources over several decades, property titles were issued only so that they could be applied as down payment for homes in other areas, first far away, then nearby in order to keep the community connected. Subsidies and donations then took care of the remainder, and social housing with no debt now exists where only garbage was, surrounded by public amenities and community centers where kids learn to play instruments under the slogan “a kid with an instrument is a kid without a gun”
Moravia project Photo by UW’s Runstad Fellows
Throughout the whole city, architecture plays a fundamental role in dignifying and beautifying the areas, undoubtedly increasing value to the surroundings while transforming the neighborhoods. And to many’s dismay, property taxes are not increased in order to deter gentrification. Only Havana comes to mind with such clear conscience to maintain social capital; except in Medellín citizens can sell their homes whenever they want.
Medellin’s success story lies in the bond and sense of pride of an already tight community that morphed from being a shame for the country’s tourism organizations to its biggest pride in less than two decades. The biggest lesson seems to be about working united as an organism to adapt while protecting the weak, in order to secure the opportunities for the private sector to develop and the quality of life for all. Even the most pro-capitalist people in Colombia agree that this is the right step ahead: a redistribution of the wealth that lies not in the pastoral rural lands, but in cities that will increasingly house the great majority of the population. (over 75% already in Colombia’s case).
The World Urban Forum recognized Medellin’s success stories selecting it as a worthy host for the 2014 event; ULI recognized its capacity as the most innovative city in the world in 2013; but perhaps the most revealing world title is the one obtained last week: the WWF recognized Medellin as the most socially connected city in support of their sustainable strategies. Their hashtag was the most voted in the planet: #welovemedellin. Yes we do.
It’s impossible to capture all we saw in small blog entries, so the Runstad Affiliate Fellows are working to collected all their images and display them on an upcoming online gallery. Stay tuned…
