July 31, 2011 - From the July, 2011 issue

Roger Moliere Leads Metro's $5 Billion Joint-Development Program

The following TPR interview with Roger Moliere, executive officer of real property management and development for Metro, details the efforts of L.A. County's transportation agency to build quality transit-oriented development on the land it owns surrounding the county's transit station-the potential impacts of these developments is not lost on Moliere, who endeavours to maintain the character of neighborhoods while delivering the benefits of TOD to the region.


Roger Moliere

As the head of real estate development for L.A. County Metro, you reportedly have more than 30 projects ongoing at venues around the county, representing $5 billion in construction. What precisely is the scope of your responsibilities for Metro?

Those TOD projects are all public-private partnerships. We don't use any of Metro's money to do those projects. They are built on Metro land on ground lease, and they are done by private developers pursuant to a joint development agreement with Metro.

We do that for a couple of reasons. One, to make sure that the kind of development that we envision gets built. Two, so that it stays that way throughout the term of the lease-so it doesn't change in character from its original intention as a transit-oriented development and so ownership doesn't change. We want to make sure that any transfer of ownership goes to someone who is experienced, has the financial ability to keep it up, and has good character. This is a public agency, so we have to be somewhat careful about who owns things above our transit stations.

The projects range in size from very large to very small. The largest to date has been Hollywood and Vine, which is a little bit over $500 million and includes the 300-room W hotel, residential, and retail. We also have very small sites left over from construction, for example in East L.A, that are less than an acre in size. We were able to fit some 40 apartments on those.

Projects range around the county; our jurisdiction is countywide. We don't acquire land to do development. This is land that we've acquired for other reasons-surface parking, for example, or former construction right of way that we inherited from former partners.

Which transit-oriented development projects does Metro find most attractive?

There are two main categories there. One, of course, is that we always want to make them transit-oriented. That is, of the character that improves the area in and around transit stations to make it more attractive for people to live there and get out of their cars and use public transportation, rather than driving to venues for the kinds of things that can be made available at these stations.

The second is that each of our developments is very different. If you look at our spectrum of development, you'll rarely see one that looks much like the others. We try to make sure that they fit into the character of the neighborhood. We do a lot of spadework to do that. For example, Hollywood and Vine is very glitzy and fits the Hollywood image, while the Del Mar station in Pasadena is almost rural, although we try to put in as much density as is reasonable because that really fulfills the purpose in terms of traffic mitigation and transit use.

For more than 25 years, TPR/MIR has been covering Metro and transit-oriented development. The hope two decades ago was that the rail stations would allow for greater density nearby, thus reducing traffic congestion. But Metro was limited from day one by it's board in buying property around stations. Is that legacy now a significant limitation for you?

It would be better to have more land for that purpose. However, we've been able to do a fair job of that work in conjunction with the cities by "retrofitting." We'll frequently have adjoining land owners join us to make a bigger footprint. When we're on the development side, we're no different from any other private developer. We don't get any special dispensation except for the fact that if a development is in a transit area we may have some relief from parking and that kind of thing. That being said, each of the cities and other jurisdictions in which we work have been relatively kind to us in giving us some extra density. There is a growing realization that density near transit stations really does good things for traffic.

We' have embarked on a relatively larger scale effort in conjunction with the city of L.A., for example, and other jurisdictions to update all master plans and do some station area planning. We're doing that so that in the future we'll have that density as a part of the ongoing process from the time we plan the new lines.

Metro does this collaboration with city planning departments at a time when their budgets are being cut and planners are being laid off. Is there capacity within cities to be a good partner with Metro?

The willingness is truly there. The capacity, as you suggest, has been doubtful because of the funding reasons. One thing we're doing, starting this year, is embarking on a series of grants to local jurisdiction planning departments to directly assist them with people and resources to engage in that planning exercise. We have $4 million set aside this year. It comes out of our planning department. That money is going to go directly to the various jurisdictions' planning departments to do just this kind of work.

Your real estate development position at Metro exists in parallel with the agency's Planning Department, led by Martha Welborne. Elaborate on your independence from, and collaboration with, Martha.

The Planning Department is the countywide planner for all transportation. That includes rail lines, highways, and everything else. They have a purely planning function and don't really work in the same area that we do. Joint Development used to be part of planning, but then Metro realized that it's a very different discipline. Although we work closely in conjunction with them, we are completely separate.

There are actually two parts of the Real Estate Department. We have our more traditional real estate function, which is buying rights-of-way and buying areas for rail maintenance and parking. Then there is the separate transit-oriented development part of it. The transit-oriented development section is quite small in number, only about five employees, but they are highly specialized and have a lot of experience in transit-oriented development.

The other part of working in conjunction is that we have now embarked on a program of working with the Planning Department as they plan the lines and the station areas. We give as much input as we can to optimize the station locations so that they will be suitable for development as we move forward.

After Metro signs a transit-oriented development agreement with a developer, what happens?

After we sign it, we monitor the construction. We're part of the process in terms of getting entitlements. We are partners because we are the landowners. We go all the way from there through working with the lender of the private developer because often they'll want certain things as part of the agreement. That being said, our projects are always on unsubordinated ground leases because we don't want to have our land put in jeopardy, and we have certain requirements ourselves. We do monitor and ensure the building. We have a graduated rent structure from the time we start, allowing an exclusive negotiating agreement. So, we have a holding rent, a construction rent, which is higher, and then the regular ground rent which is higher still once the property is up and running. We then monitor all through the 40 to 60 years of the lease term, taking care of whatever problems that may arise.

Sometimes there are extensions-lots of different things happen. At the end of the day, when the leases start to run out, you have to make a decision as to whether you want to renew that lease, knock things down and start over, or any number of other options.

Metro recently purchased Los Angeles' Union Station. How is Union Station likely to evolve as a regional transit hub?

That was the most exciting project we had for a long time. We worked on it for pretty close to a year and closed on April 14th.

Union Station is literally the transportation hub of Southern California. Metrolink and Amtrak are the major outside tenants that come in there, but we have all of our major lines coming through there and the regional connector, which is now being built. High-speed rail, when it is up and running, will also come through Union Station. It's a transportation hub, but it also consists of 42 acres with 5.9 million square feet of entitlement attached-very broad entitlement. It's a terrific development opportunity.

One thing that has really changed in the last few years is the amount of traffic in terms of both trains and people that come through Union Station. At our last count, we were up to something close to three million people a month coming through the station. That creates a lot of retail opportunities, and there are a number of other development opportunities with the acreage and the entitlements that we have left there.

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What can Metro do that Catellus/ProLogis couldn't do with that property?

The difference is that they are real estate development companies, and we are a transportation company. We're starting with a different focus. We're starting with the transportation focus, looking at the bones of the thing and seeing what we can do to optimize transportation uses. Union Station is also a bus hub, so thousands of buses go through there monthly. Those all connect to the rail, connect to the trains, and connect to the commuter rail. That kind of traffic begets its own impetus, and with all that we are able to do as a governmental agency, we're able to attract other governmental agencies and uses to the location.

It's partially time and tide. We're catching it on the upswing. The former owners were in a different business. This wasn't part of their core business. It became a kind of an adjunct to a company that was primarily in the automated warehousing business. That gave us the opportunity to work with them and put in a process to own it. We need to own it, because we're going to be here for a long time.

For our readers\' benefit, share more on the other 30 Metro projects, from Hollywood and Vine to the smaller projects around the county.

We have a couple under construction. There is one right at Westlake/MacArthur Park. That's one of the prettier areas of the city but also one of the more difficult ones. There, we have a two-stage development under construction that will include over 200 affordable apartments and quite a bit of retail space. It's going to be quite an attractive building located right above our subway station.

We have about 270 units at Santa Fe, which is a Downtown location. Some of the others we're working on are in communities as far away as West Hollywood, where we have a very large area right next to the Design Center at San Vincente and Santa Monica Blvd. That is a terrific location. That will be a very large development and a very expensive one, if we can get it going, because that one is going to have the challenge of being built over a bus operational facility.

We also have a very, very large site in North Hollywood, which is where the Red Line and the Orange Line connect. It's about a 15.5-acre site. Now that the economy and the banking environment are improving, we're going to take another look at that. We were right at the cusp of having that one put together for development when the financial crisis hit.

In terms of smaller ones, we have a number right along the Gold Line through East L.A. that we are extraordinarily excited about. These demonstrate the economic activity that transportation creates and the value that it brings to land. For maybe 40 years you had very little investment in East L.A. of any significance. With the coming of the Gold Line there, even with our smaller sites, we've received an extraordinary amount of interest from developers. We'll have developments on at least four sites in East L.A.

You recently made a presentation to the LAEDC's Land Use Committee about the possibilities of public-private partnerships (PPPs). What are Metro's expectations and objectives for PPPs?

Metro's objectives are in two categories. The real estate is a form of public-private partnership. As I mentioned a little bit earlier, we don't really use any of our money. We're furnishing the land. But all of the money for the construction, operation, and maintenance of the development, which is sometimes a quite substantial sum, $500 million and on up, comes from the private sector. We're extending that theory to transportation and highway projects; we're going to leverage funds from Measure R, federal sources, and private sources to build sooner. Many of these projects we would otherwise have to wait years before getting the proceeds of Measure R, which comes in over 30 years, or federal loans.

In other words, private financing will come in and build a toll road for us, for example, or a subway line. We will then pay them later, once the project is available, because we will have accumulated the necessary funding from Measure R and from other sources. It's an extension of private financing and private building.

It also does some exciting things in terms of allocating the risks and responsibilities for building. The private sector is demonstrably better at contracting, watching over contracts, and coming in at a price certain. So the contract risk of time and cost of delivery for a project are now transferred to the private side, while the public side concentrates on what it's best at and what it needs to do, which is taking care of the environmental risk and also the pubic support for a project.

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What is the County/Metro's oversight capacity to assure accountability for expended project funds? Is there an Inspector General?

Metro has lots of oversight. We have our own Inspector General, which is a wholly separate agency of the county and reports directly to the Board of Supervisors. We have oversight to the extent we use any federal funds or state funds from the Federal Transportation Administration, which makes us account for every penny. We have lots of independent oversight. In terms of the projects themselves, our procurement process is highly proscribed. One of the things about a public agency that make it a bit ponderous also make it a bit safer is the process for selecting contractors and paying them. All of those things are highly audited and highly structured, such that you minimize the opportunity for mischief.

In closing, if we were to talk a year from now, what do you expect we'll be talking about re Metro's TOD program?

A year from now we'll be talking about the fact that at least two projects on the transportation side, probably highway projects, will have started several years early because of public-private partnerships. Also, we will have at least three new projects on the books that will be just about raring to go on the TOD side. The dam is kind of breaking on the apartment side of things. There is a massive change in demographics going on, it's almost a paradigm shift, where single-family large-lot homes will almost become a thing of the past. The demographic is so different, with baby boomers now retiring and with empty nesters and young people wanting to live in an urban environment.

Apartments are right up our alley because we are doing things on leased land. We like that kind of thing anyway just because of the density. We're in for a very busy and exciting and positive period both on the transportation side and on the TOD side.

What was the takeaway from last week's "Carmageddon" event for you and for Metro?

It turned out to be fun! We got a lot of positive feedback. If nothing else, people realized that with very little change traffic could be massively different. We found that out during the Olympics many years ago here in L.A. There was only a 5 percent reduction in the number of cars on the road, but by staying home once in a while or, even better, using public transportation, a fairly small percentage reduction in single-occupancy vehicle traffic will make an enormous difference in overall traffic congestion. People are realizing that, and I think that's one of the things that "Carmageddon" demonstrated.

How were you enticed to work for Metro?

It was mainly a question of the scope. You rarely get a chance to work on projects of this scope. I was at Marina Del Ray and extraordinarily happy because I had acres and acres of publicly owned waterfront land to develop. That was a marvelous opportunity. I didn't envision ever leaving there because I could look out my window and see the ocean.

When I had the opportunity to come here, I looked at the map of the infill and terrific land all around L.A. that was owned and ripe for development by Metro. That made the decision easy. There are very few people who get the opportunity to do the two things I've done in the last 15 years or so. One is all the work at Marina Del Ray, where we finished about 25 projects, The other is the 30 or so projects at Metro that will change the character of L.A. and make it a more pleasant place to live.

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