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Reshaping the greater San Juan metro area

The Urban Train’s corridor, Ciudad Red, will bring $400 million in public- and private-sector investment, 16,000 direct jobs, 1,080 housing units, and 373,000 square feet of commercial and office space


April 14, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

Capitalizing on the Urban Train’s $2.25 billion investment

Ciudad Red will help increase train ridership by strategically placing government facilities along the train’s corridor, generate income through the sale of surplus government land near train stations, and attract more private-sector investment

After several years of delays and false starts, the first phase of the Urban Train is expected to finally begin operating full-time in a few weeks. With its trademark-elevated guideway spanning from Bayamón to Santurce, a 40-minute ride, the Urban Train has dramatically changed the landscape of the San Juan metro area since its construction began in May 1995.

The impact of the $2.25 billion mass-transit project, Puerto Rico’s first modern rail system and the island’s most expensive and complex infrastructure project ever built, goes way beyond the 11 miles of tracks, the 16 state-of-the-art train stations, and the number of vehicles that will hopefully be off local roads when an estimated 82,000 daily passengers use the mass-transit system during its first year of operations. That number is expected to increase to 115,000 by 2010.

More than just a mass-transit system that will reduce traffic congestion and pollution, the Urban Train represents a unique opportunity to transform and reshape the San Juan metro area’s urban growth pattern into one that is more habitable, livable, and pedestrian-oriented.

This will be accomplished by redirecting public and private investment towards the Urban Train corridor, or, more specifically, to areas around certain train stations, essentially transforming these into intensive, varied-use urban redevelopment zones through the land-use pattern commonly known as Transit Oriented Development (TOD).

TOD refers to pedestrian-friendly land development activities built within easy walking distance of a major transit station. TOD’s generally include a compact mix of different land uses oriented to public walkways, and automobile parking is minimized to promote pedestrian activity and mass transit use.

Parcels around the Urban Train stations of Martínez Nadal, Domenech, Roosevelt, Hato Rey, and Sagrado Corazón are about to experience a remarkable transformation as several TOD projects have already begun construction or are slated to do so soon.

Ciudad Red

The Department of Transportation & Public Works and the Highways & Transportation Authority (DTOP and ACT by their Spanish acronyms, respectively), in charge of the Urban Train and the parcels around the train stations, have embarked on an ambitious project called Cuidad Red (Network City) that combines several of these parcels into clusters, each with its own theme and identity, to be developed according to the theme.

The main principle behind Ciudad Red is by using the Urban Train; commuters can carry out 99% of their daily tasks within the corridor without having to use a car. Therefore, Ciudad Red promotes housing, office, and commercial development projects around the stations.

"Ciudad Red is an opportunity that the investment in the Urban Train gives us to redo the city and promote smart growth," designated DTOP Secretary Javier Alcaraz explained to CARIBBEAN BUSINESS. "It takes what at one time was the trolley city concept of Santurce and expands it from Bayamón to Santurce, redeveloping the Urban Train’s corridor."

During the early years of the 20th century, a trolley on rails operated throughout Ponce de León Avenue, from Puerta de Tierra near Old San Juan (Stop No. 1) to the Sagrado Corazón University area in Santurce (Stop No. 26). Despite being San Juan’s downtown at the time, use of the Santurce trolley quickly faded with the arrival and rising popularity of the car, which eventually sealed the trolley’s demise.

Briefly stated, Ciudad Red is an extension and formalization of the government’s joint development programs for the areas around the Urban Train stations first implemented and set in motion by DTOP in 2002 (CARIBBEAN BUSINESS, July 1, 2002) and takes the program one step further, this time with the full backing and support of Gov. Aníbal Acevedo Vilá, said Alcaraz.

Some of these joint development programs at several train stations have already gone to bids and have contracts signed, the designated DTOP secretary added.

"These developments were planned already and will not change," said Alcaraz. "Now, as a matter of public policy, we are going to start bringing governmental facilities to these developments."

Among the main purposes and short-term goals of Ciudad Red is to increase train ridership through TOD projects; to dispose of surplus land around the train stations that are owned by ACT but have no practical use, thus helping the government generate additional funds immediately; to jumpstart the second phase of joint development projects in addition to TOD anchor projects along the corridor; and to develop mass-transit related initiatives such as the expansion of park-and-ride facilities.

What Ciudad Red does, said Alcaraz, is use public investment as a catalyst for development to attract private capital into the local economy. It is an opportunity to finance the projects the government needs, but without having to put down the funds, he added.

"What we are trying to do is take the $2.25 billion invested in the Urban Train and use it to generate a secondary, indirect redevelopment economy," said Alcaraz. "Take that investment and use it, not only as a project in itself, but as an opportunity to do more."

First phase of Ciudad Red

Under the first phase of Ciudad Red, there are seven projects involving parcels of land around five stations totaling 17 acres. These projects, said Alcaraz, represent $400 million in public- and private-sector investment plus an additional $123 million in infrastructure improvements, plus the creation of 16,000 direct jobs, 1,080 housing units, and 373,000 square feet of commercial and office space. Of the $400 million, $100 million is from the Government Development Bank (GDB), the rest comes from the private sector.

The seven projects are located in the following parcels: Sagrado Corazón A, Domenech A, Martínez Nadal A & B, Roosevelt A & B1, and Hato Rey A. Some 350,000 square feet of office space and 123,000 square feet of commercial space will be built on these parcels.

The developers involved in these parcels include the GDB (Sagrado Corazón A); SANND Corp., an EDP College affiliate (Domenech A); Martínez Nadal Development Co., composed of Interlink Group and Aireko Corp. (Martínez Nadal A); Donato Design & Development (Martínez Nadal B); Tres Ríos (Roosevelt A); Nevares & Villavicencio Construction Group (Roosevelt B1); and Rapid Transit Development Corp. (Hato Rey A).

"We are also bringing over 1,000 housing units to the parcels along the corridor. Of these, 10% of the units will be allocated for the workforce market, with a maximum price of $198,000," added Alcaraz. "These will be located in the Roosevelt and Hato Rey parcels."

The project at the Domenech parcel involves 70,000 square feet of office or housing space plus 22,000 square feet for commercial space, representing a $19 million investment.

At Martínez Nadal A, several high rise condominiums have been proposed, while at Martínez Nadal B there is a proposal for a multifamily apartment complex.

Development of clusters

One unique element of Ciudad Red is it combines an anchor tenant with other TOD projects within a station or its area and develop these under a theme, giving each cluster of projects its own identity.

"The objective is to avoid having a single generic theme replicated along the train’s corridor," Alcaraz explained. One cluster may be conceptualized and developed as an office park of corporate headquarters, while another may be a financial center, a research & development complex, or a cluster mixing entertainment and tourism related activities."

"The intention is each cluster will have its own theme and anchor tenant, which will provide extra revenue to the government in addition to adding diversity, which will help us develop parts of the city around that theme and tenant," said Alcaraz.

Already the GDB is the anchor tenant and developer of the parcel of land next to the Sagrado Corazón station in Santurce. The Government Financial Center is currently under construction and will be the new home of the GDB and the Economic Development Bank. The $100 million project encompasses 360,000 square feet of office space, plus 60,000 square feet of commercial space. This project will unite the Sagrado Corazón area with Hato Rey’s financial district, creating a financial cluster.

The second cluster will be the University of Puerto Rico’s (UPR) Biomolecular Lab, to be located at the former San José Shopping Center site next to the Cupey station. It will be combined with UPR’s Río Piedras campus, the Botanical Gardens, and the Metropolitan University to create an academic- and education-themed cluster.

A third cluster is contemplated along Eleonor Roosevelt Avenue behind the Domenech station of the Urban Train in Hato Rey. The cluster will have a residential and commercial theme. A $192 million investment is slated for that cluster.

Near the Puerto Rico Coliseum station, Alcaraz envisions the establishment of an entertainment cluster using the Coliseum, the Aquaexpresso, and the complex currently being built by Banco Popular next to its headquarters. The Aquaexpresso could bring people from the new Convention Center to Hato Rey, which in turn will bring nightlife activity to the financial district after 5 p.m.

Relocating government facilities

Another interesting element of Ciudad Red is government agencies can be anchor tenants at these development clusters. By using land already owned by the government, the government agencies and the central government can save money.

A typical four-acre parcel of land in the San Juan metro area can cost between $800 and $1,400 per square meter, which means the government could save between $13 million and $22 million in the cost of land for one project.

In addition, by having a government agency near a train station, the need for parking space is significantly reduced. A 400,000-square-foot office / commercial building could use 1,000 fewer parking spaces. At an estimated $15,000 per space, that means a savings of $15 million.

Rent collected for the use of commercial or office space at these governmental facilities will help subsidize the cost of these, noted Alcaraz. "What we intend to do is have properties for lease within these developments and turn unused land into a commercial area the agency could rent to subsidize these developments," Alcaraz explained.

Currently, DTOP and ACT are analyzing each government agency’s needs and what kind of synergy these can create by being located at a particular area or station.

Among the options contemplated for the Justice Department’s headquarters, for example, currently in Miramar and subject of a heated debate between the Justice Department and area residents, is to relocate it right across the Hato Rey Judicial Center train station on Muñoz Rivera Avenue, at the site of the former Sears store and the Puerto Rico Telephone Co.

"In that sense, the Justice Department is ideal because the Urban Train runs along two main judicial centers [Bayamón and Hato Rey], which can lead to locate it at a specific location along the train’s corridor," said Alcaraz. "The best part of all this is we are changing the role of government, from a doer to a facilitator."

The idea, said Alcaraz, is to tie together the Hato Rey judicial center with UPR Río Piedras, Cupey, San Francisco, and Medical Center stations and give the parcels around these a governmental use.

At the San Francisco station, where DTOP has two parcels, Alcaraz said they have been in talks with the Veterans Hospital, which wants to consolidate its operations there. Likewise, the State Insurance Fund wants to relocate somewhere else. In its place, Alcaraz said DTOP is proposing the construction of a residential project.

"This is about changing the way of doing business. We have to see ourselves as project facilitators, not doers. As a big agency, we have to use our leverage to help move these projects," commented Alcaraz. "This requires good relations with the Regulations & Permits Administration, the Planning Board, and the municipalities."

Alcaraz commented that the mayors have been very receptive to the projects and actively participated in the Ad Hoc committee created to review these.

Sale of surplus government land

DTOP conducted an inventory of all the parcels owned by the government along the Urban Train corridor. There are 2.3 million square meters of public land within the corridor, of which 205 acres belong to DTOP and its agencies and 353 to other governmental entities, for an estimated market value of $723.4 million.

"Part of Ciudad Red’s initiative is to take some of these parcels of land with no useful life and dispose of them. If I have a three- or four-acre parcel, I can do something with it; but if it is a small remnant of land, then I have a maintenance problem, not a usable property," said Alcaraz.

DTOP is currently identifying these remnants of land, a byproduct of right-of-way acquisition for the train, and disposing of them. The money generated from the sale of these small parcels of land must be reinvested in joint development programs or in the financing of future phases of the Urban Train. The idea, said Alcaraz, is to continue acquiring properties along the Urban Train corridor in order to keep the development ball rolling.

"Right now, we don’t have the critical mass for those revenues to have a significant impact. We estimate the development of the train corridor will eventually generate some $20 to $30 million each year. This year we expect to generate $7 million from the remnant land sales," said Alcaraz.

Once the critical mass is generated, Alcaraz said Ciudad Red could help finance DTOP’s capital investment in mass transit and allow the agency to go ahead with the land expropriation needed to extend the Urban Train to Carolina. Extending the Urban Train to Carolina, slated to begin construction in 2008, has an estimated price tag of $914 million, of which 50%, or $457 million, will come from the federal government.

DTOP must invest in the Urban Train corridor as long as the mass-transit system is operational and until the city is densified and becomes a transit city such as Boston, Alcaraz commented.

"What this does is further promote the joint development initiatives already in place. The governor’s instructions were that we have to have the land-use regulation for the parcels around the stations ready before summer so everyone interested in these clearly knows the rules of the game. We have been working on it for a year and half."

Through the competitive process of joint development, DTOP can sell or lease (on a long-term basis) the parcels to be developed by the private sector. The process has restrictions to guarantee development materializes within a time frame, and the public interest and the mass-transit system are protected. The joint development process also sets use and design guidelines required for high quality TOD projects built on public land.

Joint development alternatives

As an option of having the government develop its own installations, and through a competitive (bidding) process, DTOP and the developer can employ one of three financing alternatives for these projects.

In the first alternative, the developer acts as project owner within a predetermined time frame, charging the government entity a rent that reflects the savings related to land and parking space, among other things.

In the second alternative, the developer acts as agent for DTOP, ACT, or the corresponding government agency and receives a compensation for the services rendered. This is known as developer fee or turnkey.

In the third alternative, the bid incorporates private uses in the government development such as commerce, housing, and offices, which urbanistically and physically contribute to the public investment, Alcaraz said.

Attracting stateside investors

So far, most of the developers involved in the first phase of Ciudad Red were local, but Alcaraz is confident the government will be able to attract more stateside investors in subsequent phases, as several have already shown interest during recent urban development presentations on the U.S. mainland.

"What we are looking at is to use these government tenants at these projects and use them as anchors to attract other types of investors. In subsequent bids we hope to have four or five big stateside developers come in and compete," said Alcaraz.

The fact the Urban Train’s corridor passes through underdeveloped areas opens up a whole world of opportunities limited only by our imagination, stated Alcaraz, adding he hoped the second phase would bring other types of investors who would open the door to other types of developments.

Transit Oriented Development

Using public transit to create more accessible, livable, valuable neighborhoods

Transit Oriented Development (TOD) refers to residential and commercial areas designed to maximize access by transit and nonmotorized transportation. A TOD neighborhood has a center with a rail or bus station, surrounded by relatively high-density development, with progressively lower-density spreading outwards. TOD neighborhoods typically have a diameter of one-quarter to one-half mile (stations spaced one half to one mile apart), which represents pedestrian scale distances.

Transit Oriented Development can consist of new suburban neighborhoods designed around public transit stations or as in the Urban Train’s case, incremental changes to existing urban neighborhoods that have public transit.

TOD reduces transportation costs and externalities, increases travel choice, and reduces paved land per capita. It can also increase transit service efficiency, resulting in improved performance and cost-effectiveness. Briefly stated, TODs can help create more livable communities, meaning that neighborhoods are physically and socially more desirable places to live.

These benefits are also reflected in higher property values and increased commercial activity, which can result in increased tax revenue.

Stateside TOD case studies

Sunnyside Transit Village, Portland Oregon

The Sunnyside Village Transit Plaza is a Transit Oriented Development located about 10 miles from downtown Portland, Ore., built with $2.15 million in combined federal, state, and local funds. In addition, apartments, townhouses, small-lot single-family residences, and professional offices surround a core of retail and public services, including a library, community center, and daycare around a transit plaza, all in a dense and walkable setting. The goal is to allow Sunnyside residents to satisfy more of their needs without adding to regional highway traffic congestion.

King County, Washington TOD Program

King County, Wash., has been working on bus-related TOD joint-development projects since 1998. King County projects are underway in the cities of Redmond, Renton, Seattle, and Shoreline. These projects include transit centers, park-and-ride lots, off-street bus-layover facilities, and residential, institutional, retail office, hotel, and entertainment uses. Project concepts range from 300 apartments above a park-and-ride lot in Redmond (near Microsoft world headquarters) to four skyscrapers above an underground bus-layover facility in downtown Seattle near the state Convention & Trade Center.

New Jersey TOD Program

There are no locomotives powering trains on New Jersey Transit’s Hudson-Bergen light-rail system. There is a different kind of engine at work, an economic one. Development is sprouting alongside the first segment of the Hudson-Bergen light-rail, through Jersey City and Bayonne, which opened April 15, 2000. Hundreds of townhouses and apartments are being built on Essex Street in Jersey City. Scrap yards and old warehouses are being cleared off for office buildings and Jersey City Medical Center’s new complex. Union County officials hope economic growth for major cities, such as Plainfield and Elizabeth, will follow the tracks of the county’s proposed light-rail system.

Portland TOD Program

Westside Station Area Development–About 7,000 dwellings and more than $505 million in residential and nonresidential development have been built, permitted, or proposed since 1990 within half a mile of Westside light rail stations. About 3,600 of the dwellings were completed in 1998. Over 3,000 of them are located in two station areas. One developer is building about 2,000 of these units in three station areas with backing from a pension fund.

Ciudad Red in a Nutshell

This initiative will develop the surrounding areas of the Urban Train’s corridor with combined uses of housing, commerce, recreational areas, and governmental buildings in a planned way through the use of public and private funds. Cuidad Red will unite in a linear way the cities of Bayamón, Guaynabo, Cupey, Río Piedras, Hato Rey, Santurce, and eventually Carolina and Caguas.

Source: P.R. Department of Transportation & Public Works

Economic Impact of Joint Development Programs Under Ciudad Red

  • Public Investment in Infrastructure: $123 million
  • Public & private investment: $400 million
  • This investment is in addition to the $2.25 billion already invested in the construction of the Urban Train

Source: P.R. Department of Transportation & Public Works

Government Finance Center

Sagrado Corazón Station

$100 million investment

360,000 square feet of office space

60,000 square feet of commercial space

Great Opportunity: Land Inventory

  • Within the Urban Train corridor, there are 2.3 million square meters of public land divided among:
  • Department of Transportation & related agencies: 205 acres
  • Other governmental entities: 353 acres
  • Estimated total market value: $723.4 million

Source: P.R. Department of Transportation & Public Works

This Caribbean Business article appears courtesy of Casiano Communications.
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