Managing the development of the real estate portfolios of state transportation authorities in the Boston area

Abstract

This study explores the question of whether it is possible to maximize the value of the real estate portfolios of the Commonwealth's transportation authorities while respecting these authorities' respective core public missions. This study develops several major policy initiatives designed to responsibly facilitate real estate disposition programs that maximize the benefits to the sponsoring authority, but concludes that real estate cannot be treated as a primary source of financing for an authority's capital or operating programs. The policy initiatives proposed in this study include: revised institutional approaches to the development process, new legislation to allow for greater flexibility in negotiating development arrangements and project procurements, and an innovative program intended to make authority-owned development parcels accessible to a broader real estate investment and development market by breaking down the existing barriers to entry in to authority-sponsored development processes. The study includes three case studies that demonstrate challenges and complexities currently facing the real estate development and disposition programs of the Commonwealth's three major transportation authorities. These challenges include high procedural barriers to entry that present the private sector with significant disincentives to participate in authority-sponsored disposition processes, statutory restrictions that hinder the negotiation of creative development arrangements, the potential for real estate disposition programs to distract agencies from their core public function, and the general impression among the private sector development community that state-sponsored development processes are inherently prone to significantly greater risks and uncertainty than private deals. The study was based in part on a series of in-depth interviews with development professionals and current and former government officials, as well as on the findings of an extensive review of past development initiatives sponsored by the Commonwealth's transportation agencies.