Services

Public-Private Partnerships

Public-Private Partnerships have long existed as a tool for development that neither the public nor private sector could do alone. Given the increased stress on capital markets, the opportunity to participate in public-private partnerships has never been more attractive and/or necessary. Developers have been unable to access the capital markets, and many of them have had to cancel or postpone planned developments, as they cannot secure the debt and/or equity needed to fund their projects. Conversely, the public sector is faced with the challenge of downward pressure on assessed values of real estate, causing a reduction in ad valorem tax revenues. The public sector is also feeling the negative affects of lower sales-tax revenues as consumer spending contracts.

Download the Downtown Amarillo Presentation by David Wallace - November 9, 2010 (PDF, 16.70MB)

"The number of cities that are seeing an absolute drop in general fund revenue, it is the worst we've seen in decades. When there is a revenue shortage the first thing cities do, they will cut spending on capital items like streets and roads and buildings and so on."

Texas Municipal League Executive Director Frank Sturzl, August 16, 2010

Having been on both the public and private sector sides of the development equation, Wallace Bajjali knows from experience that a PPP does not make a bad project good, rather it can make a good project possible ... especially in a tumultuous economic climate. Generally speaking, there are well-intentioned people on both sides of the PPP discussion, but there is a better way to approach the question of community development or redevelopment. It requires a commitment to the final outcome, recognition of the differences in both parties, an openness to communication, some innovative thinking, an openness in approach and a good deal of listening. In short, getting to that "win-win" situation requires a commitment to building relationships and a focus on the end game. Both the public and private sectors can work together to create new developments which achieve the mutual and respective goals, increase economic activity in a specific area, attain a required internal rate of return for developers, and in the end, deliver a better life for all residents of the area.

In order to accomplish this, however, the PPP model must break the status quo and broaden the universe of partners. In expanding this list of partners, Wallace Bajjali is not necessarily referring to the classical sense of investment equity partners, but Wallace Bajjali looks to bring other public-sector partners to the table such as the Municipality, County, Public Improvement District, Management District, etc.

Municipalities are beginning to craft their own visions of what they want their futures to look like – from small towns to large cities. These vision statements, or “comprehensive plans” can be used to direct development projects and funds, encourage economic investment by targeted companies, or identify areas of the city that need new development or redevelopment. Often times, these vision statements are paired with development incentives or economic development funds that aim at facilitating the realization of this vision – resulting in additional benefits for developers that seek to meet the vision. These statements are created after a process of community input, professional evaluation of the applicable economic factors, and a review of the area’s existing resources and benefits. For developers, these documents present opportunities to create partnerships with the relevant public entities and fulfill the residents’ collective vision while creating economic opportunities for citizens and a higher return on investment for the developer.

The common thread that runs through all of these PPP projects is that the public sector’s support is leveraged to facilitate increased economic activity that can be a catalyst for positive impact of job creation, increased property values in the surrounding area, greater ad valorem taxes collected from sales and property taxes, higher average income, and more school taxes collected. These benefits justify the risk that the public sector will take.

Most private developers think of two traditional classes of capital, debt and equity. Often overlooked, is the capital that can be secured through Public-Private Partnerships. The private-sector developer benefits from such a partnership because the incentives offered by the public sector can be viewed as part of the project's capital structure. In addition to enabling a project to get off the ground, such incentives can significantly enhance the return on the developer's cash investment. Such incentives include, but are not limited to, public grants of capital and real estate, tax credits, private activity bonds, rebates and TIF financing. Likewise, the public sector benefits as a result of economic development that would not otherwise have occurred, especially in light of the current economic/development environment. The extent of those benefits depends on the economic return on the investment made whether via a cash contribution, deferral of fees, tax revenues, grants or other incentives.

Wallace Bajjali has and continues to implement such capital investment strategies as:

• Development of new, mixed-use assets having a publicly owned and operated "public space" component.
• Redevelopment of existing mixed used assets.
• Opportunistic commercial real estate development opportunities.

The senior management team holds over 50+ years of public and private sector real estate development, investment banking and work-out experience. The principals have a proven track record in real estate development and the creation of successful public-private real estate developments. Presently, Wallace Bajjali is developing over 20 separate projects, including single-family residential, office, retail, student housing, assisted living, memory care, independent living, recreational facilities, mixed-use downtown redevelopments, and more.

As the team focuses on Public-Private Partnerships, their experience in both the public and private sector presents an added advantage. Successful projects involving the principals on either the public or private sector include Sugar Land Town Square, Houston Museum of Natural Science, University of Houston Sugar Land, Imperial Sugar redevelopment, Waco Town Square, First Colony Mall expansion, the first class-A office building in Pearland, TX, to name a few.

The team is currently working on a number of PPP projects, in various stages of development, including:

• Mixed-Use / Town Square Projects in Rowlett, TX and East Montgomery County, TX
• Revitalization / Redevelopment in downtown Corpus Christi, TX, Topeka, KS and Lafayette, LA.

Through our experience in developing public-private development partnerships from both the public and private sectors, the management team has distinctive credibility and the ability to create a large funnel of viable projects. The senior management's expertise in Public-Private Partnerships has enabled the principals to become national authorities in this area and provide a platform to speak of, and source, these opportunities at a national level.