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technische universität dortmund. External Benefits of Urban Real Estate Developments ERES Conference 2012. 14th June 2012, Edinburgh Michael Nadler, Stefan Thiel TU Dortmund University Faculty of Urban & Regional Planning Chair of Real Estate Development. Agenda. - PowerPoint PPT Presentation
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technische universität dortmund
ERES 2012
External Benefits of Urban Real Estate Developments
ERES Conference 2012
14th June 2012, Edinburgh
Michael Nadler, Stefan Thiel
TU Dortmund UniversityFaculty of Urban & Regional PlanningChair of Real Estate Development
technische universität dortmund
2
technische universität dortmund
ERES 2012
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Agenda
• EIBURS programme
UDFs in Europe: Opportunities, Structures, Operations
• Rationale for external benefits
evidence based planning, intertemporal allocation of funds, property-led development
• Goal structure for external benefits
General principles, objectives, indicators
• Systemisation of external benefit indicators
Systemisation, measurable vs. non-measurable, 3 level controlling
• Practical application
private urban development project: Le Quartier Central, Düsseldorf
• Conclusion and outlook
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technische universität dortmund
ERES 2012
EIBURS: UDFs in Europe: Opportunities, Structures, Operations
Analysis of integrated planning instruments
Objectives of sustainable urban development planning (ex ante)
Indicators for sustainable urban development
Operationalisation methods for sustainability indicators
Project evaluation (ex ante and ex post)
Systematisation of economic, ecological and social objectives
Supranational, national, regional and project level indicator
catalogues
Direct versus indirect methods, quantitative versus qualitative
From Cost Benefit Analysis to anIntegrated Controlling
Methodology
MethodOur approach
Formal (legally binding) versus informal instruments
B
C
D
E
Step
A
Starting point: Requirements of the JESSICA Initiative
Art. 44 EC 1083/2006: „…urban development funds, that is, funds investing in public-private partnerships and other projects included in an integrated plan for sustainable urban development.”
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
4
technische universität dortmund
ERES 2012UDF-Projects should generate also an external/economic rate of return!Definition: external benefits = positive impact on welfare of 3rd partiesUDF-Projects should generate also an external/economic rate of return!Definition: external benefits = positive impact on welfare of 3rd parties
Financial returnsCapital contributions or provision of guarantees
Legend:
This could include
contribution of land and buildings
Leverage
Contributions from OPs of SFs
UDF investment
Citizens
External/Social benefits
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
EIBURS: UDFs in Europe: Opportunities, Structures, Operations
5
technische universität dortmund
ERES 2012
- Scientific-empirical foundation of decision-making in politics and planning
- Well-established in EU evaluation policy: indicator based empirical analysis, best-practice, major pre-requisite for funding
- evidence ex-post calls for consistent indicator set (comprehensive)
- External benefits in this context:
> knowledge of effects secures decision-making
- Scientific-empirical foundation of decision-making in politics and planning
- Well-established in EU evaluation policy: indicator based empirical analysis, best-practice, major pre-requisite for funding
- evidence ex-post calls for consistent indicator set (comprehensive)
- External benefits in this context:
> knowledge of effects secures decision-making
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Rationale for external benefits: evidence based planning
6
technische universität dortmund
ERES 2012
Initial case
- private investment project in the context of urban development, e.g. infrastructure or real estate
- Public interest, expectation of external benefits
Initial case
- private investment project in the context of urban development, e.g. infrastructure or real estate
- Public interest, expectation of external benefits
€+
-
planningplanning realisationrealisation commercialisationcommercialisation
Private perspectivePrivate perspective
Public perspectivePublic perspective
utilisationutilisation
external benefitsexternal benefits
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Rationale for external benefits: intertemporal allocation of funds
7
technische universität dortmund
ERES 2012
Initial case
- private investment project in the context of urban development, e.g. infrastructure or real estate
- Public interest, expectation of external benefits
Initial case
- private investment project in the context of urban development, e.g. infrastructure or real estate
- Public interest, expectation of external benefits
€+
-
Private perspectivePrivate perspective
(Im-)material Public support* (Im-)material Public support*
> Selection of suitable private investment projects> Selection of suitable private investment projects
*consideration of mandatory EU state-aid regulation*consideration of mandatory EU state-aid regulation
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Rationale for external benefits: intertemporal allocation of funds
8
technische universität dortmund
ERES 2012
Property-led development is a concept that combines real estate development with sustainable (economic) urban development
- Private investment projects, mobilisation of private capital
- large-scale brownfield redevelopments (critical size)
- Creation of new markets
- Attraction of solvent households and solid companies
> Expectation of external benefits
Cooperation with public authorities:
- use of scope in land use planning settings, moderator/ promoter, investments in public infrastructure
- material and immaterial support of private investors
> Justification towards society
> Indicator based transparency, derived from certain objectives
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Rationale for external benefits: property-led development
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technische universität dortmund
ERES 2012
Relevant general principles
- Sustainable Development (superior concept)
- Urbanity
- Smart-Cities
- European City
Goal structure for external benefits: General Principles in Urban Planning
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
10
technische universität dortmund
ERES 2012
The Smart Cities concept focuses on sustainable investments in
- Human and social capital
- Transport
- Communication (ICT)
- Low-carbon energy supply
Main objectives:
- High quality of life
- Intelligent management of natural resources
- Participatory governance
- Environment for innovations
- Attraction of solvent households and solid companies
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Goal structure for external benefits: General Principles in Urban Planning
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technische universität dortmund
ERES 2012
Leipzig Charta 2007: Sustainable development of the European City
- Human and social capital
- Unique Cultural and architectural qualities
- Strong forces of social inclusion
- Exceptional possibilities for economic development
BUT
- Demographic problems
- Social inequality and exclusion
- Lack of affordable and suitable housing
- Environmental deficits
Main objectives:
> Economic prosperity
> Social balance
> Healthy environment
Instrument for implementation:
integrated urban development concepts + projects
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Goal structure for external benefits: General Principles in Urban Planning
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technische universität dortmund
ERES 2012
Deduction of goal structure according to general principles,
3 examplesUrbanity, Smart City, European City European City
Superior level Economy Ecology Society
Objective Strengthening the economical base of municipalities
Increase of environmental quality
Creation of equal chances
Subordinated Objective
Higher revenues from taxes
Improvement of soil quality
Strengthening of education
Indicator Municipal share of income-, business- and real-estate taxes
No. of de-contaminated sitesm³ of exchanged contaminated soil> real estate value
No. of welfare recipientsMunicipal expenditures for social welfare
Who? Municipalities CitizensLand owners
CitizensMunicipality
Where? Municipality SiteSite peripheryUrban district
Municipality
When? During investmentTime-delayed after investment
Directly after investmentTime-delayed
Time-delayed
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Goal structure for external benefits: General Principles in Urban Planning
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technische universität dortmund
ERES 2012
Application
Agenda
EIBURS
General Principles
Integrated Urban
Planning
Practical
Application
Conclusion and
Outlook
OBJECTIVE SUBORDINATED OBJECTIVE INDICATOR
Economyeconomical land management mixture of living and working
percentage of new soil sealing of the whole demand on sealed areasposition of the location in the settlement structureuse of Brownfields
strengthening the economical base of municipalities municipal investments in and conesequential costs infrastructuremunicipal costs for the modernisation of an area for a reusemunicipal allotment of income-, business- and real estate-taxessales revenue and increase in standard land values
improvement of the general conditions for companies use of the potential for innovative businesses (demographic development)impact of the use on the location-security of neighboured companiesnumber of new jobs
Ecologymaintenance of nature and environment removal of enviromental pollution by new use
maintenance, cross-linking and creation of habitatsmaintenance, cross-linking and creation of green spacesmaintenance and creation of private gardens
improvement of the municipal energy balance use of solar energy (on rooftops and free spaces)use of geothermal energy and biomassconnection to a district heating networkconnection to a local heating networkstrengthening of ecomobility
increase of enviromental quality low soil sealingprohibition of the drag-in of pollutantsexchange of contiminated soilsmaintenance of worth protecting soilsimpact of the use on (eco-)toxic immissionsimpact of the use on sound- and electromagnetic immissionsimpact of the use on emissions from freight transportmaintenance or improvement of areas of fresh/cold air development/aislesagglomeration of building development
Societyresource-friendly control of mobility connection to the municipal street network
connection to the local public infrastructureconnection of the bicylce network
high-quality living environment and neighbourhood impact of the use on local supplyimpact of the use on local leisure areasprotection of townscape's defining landmarks (including monument protection)impact of the on landscapeimpact of the use on image, quality and functionality of neighboured areas
strengthening of urban design and maintenance culture quality of urban development concepts as landmarksmaintenance and improvement of town scapeorientation on existent axes for important urban viewsconsideration of topgraphyconnection with existent neighbourhood by new waysquality of planned landscapeadaptation on neighboured building developmentorientation on bulidling linesurbanistic quality
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technische universität dortmund
ERES 2012
INDICATOR
PlaceFields of
application
TimeStakeholder
District
City
Region
State
District
City
Region
State
Before
During
After
Before
During
After
Investors
Citizens
Municipality
Politics
Stakeholder- Organisations
Investors
Citizens
Municipality
Politics
Stakeholder- Organisations
Target setting
Planning and rating
Funding decision
Ex-post analysis
Target setting
Planning and rating
Funding decision
Ex-post analysis
Cost Benefit Analysis
(CBA)
Systemisation of external benefits indicators
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
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technische universität dortmund
ERES 2012
Objective
not measurablemeasurable
monetary not monetary
direct indirect qualitative
•Tax revenues(e.g. business-tax)
•Market prices(e.g. CO2 emissions)
•…
• opportunity costs(e.g. reduced transport costs)
• hedonic prices(influence of independentvariables on pivat priceof goods, e.g. noise)
•…
•Quality of life
•Perception of environment
•…
Measurable vs. not measurable indicatorsAgenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Systemisation of external benefits indicators: quantification
16
technische universität dortmund
ERES 2012
Controlling is a method to assure logical reasoning in management decision through identification, reduction and elimination of deficits in skills or motivation of managers (Juergen Weber).> From our perspective CBA needs to be enlarged to an
integrated three-step- controlling approach.
screening Scoring (ranking)
analysis of cash-flows and risks
financial- engineering
asset-allocation (UDF-portfolios)
number of projects
Monitoring / reporting
learning-effect
3. Ex post deviation analysis
2. Ex ante monetary analysis for funding decision support (internal & external monetary effects)
1. Planning & rating pro-jects by (non-monetary) sustainability indicators
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Systemisation of external benefits indicators: 3 level controlling
17
technische universität dortmund
ERES 2012
Practical application: Le Quartier Central
• Private investment project:
Le Quartier Central, aurelis Real Estate GmbH und Co. KG
• CBA (ex-ante) elaborated by BDO during project development
> good database in regards to overall project costs
> contract fixed the municipal cost share for the project
development
• Focus on infrastructure follow-up costs and long-term fiscal benefits for the
city of Düsseldorf
• Economic analysis was a pilot within a certification process
DGNB certification of sustainable urban development
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
18
technische universität dortmund
ERES 2012
Transformation in a theoretical base: Theory of property-led development
1. Structure of research approach
2. Analyses on Level 1 (macroeconomic)
3. Analyses on Level 2 (microeconomic)
Rationale for external benefits
Transformation in a theoretical basePre-Condition for further analysis
Goal structure for external benefits
Systemising external benefit indicators
Applying external benefit indicators
Consequences for Project Evaluation
4. Outlook on Further Research
19
technische universität dortmund
ERES 2012
Transformation in a theoretical base: Theory of property-led development
1. Structure of research approach
2. Analyses on Level 1 (macroeconomic)
3. Analyses on Level 2 (microeconomic)
Rationale for external benefits
Transformation in a theoretical basePre-Condition for further analysis
Goal structure for external benefits
Systemising external benefit indicators
Applying external benefit indicators
Consequences for Project Evaluation
4. Outlook on Further Research
20
technische universität dortmund
ERES 2012
• Results from the municipal perspective
> during project development
> after project development
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Practical application: Le Quartier Central
21
technische universität dortmund
ERES 2012
Le Quartier Centraldiscounted cumulated fiscal effects for the city of Düsseldorf
-10.000.000
-5.000.000
0
5.000.000
10.000.000
15.000.000
20.000.000
20
03
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Le Quartier Centraldiscounted cumulated fiscal effects for the city of Düsseldorf
-10.000.000
-5.000.000
0
5.000.000
10.000.000
15.000.000
20.000.000
20
03
20
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• Results from the municipal perspective
> fixed municipal expenses during project development
> cash-flow shows break-even in 2017
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook
Practical application: Le Quartier Central
22
technische universität dortmund
ERES 2012
Conclusion and Outlook
• Project is a perfect case-study for the enhancement of the CBA method
• Ex-ante assumptions will be checked
• Indicator set will be enlarged (Ecology, Society)
• Concentration on broad and integrated approach
> quantification of benefit indicators
> analysis of interactions
> I-CBA
Univ.-Prof. Dr. Michael Nadler
Chair of Real Estate DevelopmentTU Dortmund University
August-Schmidt-Strasse 6D-44227 DortmundPhone +49/231/7557906Fax +49/231/[email protected]
technische universität dortmund
Thank you very much for your attention !Thank you very much for your attention !
Agenda
EIBURS
Rationale
Goal structure
Systemisation
Practical
Application
Conclusion and
Outlook