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With Communities Slow to Embrace Density, Denver Waiting to Realize Promise of Transit-Oriented Development

Most New Transit Stations Have Seen Little Mixed-Use Development
June 20, 2018
Pictured: HUB, Beacon Capital Partners' new transit-oriented development being constructed near the 38th and Blake station in Denver's River North district.

Transit-oriented development in the Denver area has been high on the list of priorities for many in the development and local government communities as transit lines by the Regional Transportation District have proliferated.

But true transit-oriented developments, or TODs, have been somewhat slow to rise around newer transit stops, including those along the W line that runs west to Golden, the G line to Arvada and the R line through Aurora.

There are some 75 existing or planned stations along RTD’s FasTracks rail lines, with about half of those built before 2013. Development around those older stations has filled out more, having had 10 years since early FasTracks construction began to get projects finished.

But within a half-mile radius of stations built since 2013 or those that are currently in the works, development that has taken place in the same timeframe has been sporadic, according to CoStar data.

Many newer TODs have one kind of development, but only a few have a mix of asset classes, which, along with density, is critical for establishing a true transit-oriented development, said Mike Cantwell of CBRE Group Inc.’s capital markets, debt and structured finance department in Denver.

Of the newer stations, only four have new multifamily, office and retail development all happening within half a mile, according to a CoStar analysis.

These include the 38th and Blake station along the A line, the Decatur Federal station and the Jefferson County Government Center on the W line, and Union Station, which serves as a hub for several of the area’s rail lines, as well as a bus terminal.

Two of these, 38th and Blake and Union Station, are on a list of "true" TODs in metro Denver, by Cantwell’s approximation, or those that include both mixed-use and an adequate amount of density.

The rest of the "true" TODs in the area, with one exception, are along longer-established lines. They are the Belleview and I-25, Village Center and Lincoln stations, Cantwell said. The final one is at the Fitzsimons station, along the R line to Aurora near the Anschutz Medical Campus.

Including a mix of uses makes developments more walkable, because people can live, work, shop and take in entertainment all within walking distance, reducing the need for a car, which is the idea near transit.

But beyond that, adding multiple uses to a project can help with financing and also justifies the higher land values found near transit. Projects with more than one asset class are more insulated financially because they provide more than one type of revenue stream.

There are a number of challenges with developing true TODs, including land assemblage in an increasingly high-cost environment, finding the right funding mechanisms and maneuvering through sometimes contentious political environments.

But as time goes on and more rail lines open, companies and organizations in Denver are finding ways around those challenges.

Lakewood-based FirstBank jumped into TOD financing, starting with its involvement in the redevelopment of Union Station and moving on to join with other local entities in supporting other projects as more lines are built.

"We think they’re wonderful projects to pursue," said Dave Fisher, market president for the southwest metro area at FirstBank. "From our perspective, having seen a lot of them, not all area is created equal. Some require significant public-private partnerships to get off the ground, while some happen more organically depending on the node and the existing infrastructure."

The fact that there are so many different options for putting together a TOD is at once an opportunity and an added layer of complexity, Fisher said.

Because so many TODs are done with some kind of government input or by using the increasingly common public-private partnership model, there are more players involved than in a purely private deal, as well as more widely varying kinds of capital.

For example, in addition to making loans on TOD projects, FirstBank is an investor in the Denver Regional TOD Fund, which was established to help facilitate the creation of TODs in Denver and expanded for use in the entire metro region at the end of 2014.

Additionally, RTD itself, a municipal government or organizations such as the Urban Land Conservancy can be involved in the deals, which requires increased communication, coordination and experience on the part of all involved, Fisher said.

What it all boils down to is much more complicated than a basic development deal, which means it takes more time.

But they’re worthwhile for FirstBank, Fisher said, because they support two main goals for investments at the bank: projects that benefit the community and locating new developments in the path of growth.

Part of the community benefit comes with the inclusion of affordable components in TOD, which is often desired and sometimes required for a project to go forward.

Projects built using the Denver Regional TOD Fund, for example, are required to include an affordable component as part of the city’s ongoing efforts to combat the affordable housing issue amid years of double-digit price appreciation for homes.

Land and construction costs often make affordable development difficult, regardless of where it is located, but inflated pricing near transit can make building such product next to impossible.

That’s where the Urban Land Conservancy comes in. The organization banks land in anticipation of market changes and development trends, then works with other nonprofits as well as for-profit business and local governments to create projects, often transit-oriented, that address gentrification concerns both for residential and commercial real estate.

Urban Land Conservancy is always working on a TOD puzzle, but is in the middle of one near the 38th and Blake station on the edge of Denver’s popular River North district, where the Denver City Council this year approved a new zoning overlay allowing buildings to be constructed up to 16 stories tall.

The organization is working with Denver-based Medici Consulting Group and Loveland-based McWhinney to build both workforce and market-rate housing, as well as a commercial component, under the new zoning allowance. The entities are still hammering out the details of how the various financing pieces will fit together.

But the zoning overlay that allows the project to happen is a step in the right direction, said Christi Smith, vice president of strategy and communications at Urban Land Conservancy.

"Council’s approval of the height overlay is a good example of Denver working to increase density in the urban core," Smith said. "It’s a good first step, but a lot more needs to be done."

In the suburbs, community resistance can hold up TODs even when public and private efforts sync up.

Last summer, Greenwood Village held a vote to determine whether it would allow local developer Alberta Development Partners to develop 25 acres near the Orchard station at the intersection of Interstate 25 and East Orchard Road.

The Greenwood Village City Council had approved changes to a city plan that would have allowed taller, denser buildings on the site, but after residents raised concerns, they referred the question to voters, who resoundingly defeated the measure by a vote of nearly four to one against.

Other discussions less specifically aimed at TOD but generally in favor of limiting development have popped up in other suburbs through which the light rail runs, giving some developers pause about considering projects in those areas.

But the key to increasing the amount of TOD in the Denver area, Cantwell said, lies with critical mass, and with getting Denverites, who only within the last decade have had access to rail transit, used to the idea of using it.

"As cities absorb light rail and how to use it, we will see development increase," Cantwell said. "We’re just at the beginning, but the sites are primed. The timeline for when we might start to see more development is a function of when the stations open."

Molly Armbrister, Denver Market Reporter  CoStar Group   
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