April 2, 2008

Infrastructure

TransLink launches real-estate division

RICHARD GILBERT

staff writer

Metro Vancouver's transportation authority is launching a real estate division and plans to develop property as a way to generate financing for public transportation operations.

TransLink hired Phil Christie in July 2007 to be the new vice president real estate.

The formation of a new real estate division was made possible when the provincial government passed the Vancouver Transportation Authority Amendment Act in November 2007.

The new legislation allows TransLink to purchase land along new rapid transit routes and near transit stations.

This business activity will ramp up the value of the land through denser zoning and partnerships with land developers.

Despite the formation of the new real estate division, Christie said TransLink is not going into the property development business.

“We are first and foremost in the transportation business. We like to characterize the real estate transactions that we will undertake as those of a diligent owner, more than those of a developer,” Christie said in an e-mail to the Journal of Commerce.

“We will be doing some property development with extensive help from the private sector. We would not be getting into the construction end of things.”

A spokesman for the Greater Vancouver Home Builder’ Association (GVHBA) said the formation of the new real estate division at TransLink is a positive development.

“They are looking outside the box to find new ways to finance services. They must look at all possible solutions and we applaud that,” said Peter Simpson CEO of the GVHBA.

“This is good for the industry, because it creates more jobs. General contractors and the sub-trades will be happy.”

An $18 million proposed parking tax was cancelled by the provincial government at the end of 2007 and half of the shortfall will be made up by a recently announced property tax hike for businesses.

“Currently financing for transportation operations comes from various sources including fares, property tax, hydro levy and gas tax,” Christie said.

“Revenue raised through the real estate program will offset tax increases.”

However, the unpopularity of tax increases makes real estate development an important option for financing public transportation operations.

“Early estimates indicate that land sales could generate $25 to $30 million per year, once the program is fully developed,” said Christie.

“However, this does not include either savings on capital spending that would occur as a result of a well run real estate program or revenue from potential partnerships. These two additional areas of the program could affect TransLink’s annual budget by tens of millions annually.”

Even though, Simpson said, he understands the need to find alternative sources of funding for public transportation, he expressed concern that TransLink could use its position to gain an unfair advantage.

“The idea is good as long as the process is open and transparent. It is not fair to the seller if they know about lines and stations in advance. They (TransLink) will get land for a lower price, if this information is not made public first,” Simpson said.

“There can be no potential for insider trading or to buy property in advance knowing the price will increase when an announcement is made.” The proposed Evergreen Line will be the first opportunity to leverage the value that rapid transit creates to finance operations. To achieve this objective, TransLink must sell existing real estate holdings to finance land purchases.

Some of the more high profile parcels of land are the Oakridge Transit Centre, which has an estimated land value of almost $46 million, two False Creek properties ($34.5 million) and the Coquitlam Centre park and ride ($14.5 million).

This new approach will speed up the development of high-density residential areas along rapid-transit routes and improve the development process.

“If a municipality works to ensure this process is effective it could speed up the timeline for building the new SkyTrain facilities in that particular community.” Christie said.

“We will be working with municipalities to develop concept plans that improve servicing, access and zoning. In this way we provide a better, less risky property for the developer and maximize our return.”

Simpson has no problem with the fast-tracking of high density residential developments as long as TransLink is not allowed to jump ahead of private developers.

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