Municipal Property Advisors

To unlock the value of public assets and overcome capacity limitations faced by most local governments and public entities, we propose creating and scaling a new class of housing professionals — Municipal Property Advisors — to identify and leverage public assets as a key solution to the housing crisis.

Under this approach, a city could issue an RFQ to select a municipal property advisor, or advisors, for a defined period of time. Selected advisors are pre-qualified to evaluate the city’s real estate portfolio, identify asset opportunities, present development proposals and negotiate terms directly on behalf of the jurisdiction, subject to final approval by the jurisdiction of the particular process and terms, and ultimately participate in the project redevelopment to ensure its success. This approach is similar to how local governments pre-qualify outside local counsel or bond underwriters to represent them in financial transactions generally and not confined to individual legal matters or one-time bond issuances.

MPAs fill the gap between public sector capacity and private sector investment by evaluating project options, assessing market interest, identifying capital sources, running RFP or RFQ processes to select a project developer, and coordinating large-scale development projects aligned with the long-term overall development strategy of the city. As part of the selection process, the local government can set goals and guidelines around using public assets to advance the production of affordable housing.

The MPAs should be highly skilled and trained in the redevelopment and revitalization of public assets in the private market. Their tasks include creating an overview of public assets, selecting the most promising locations for revitalization, and executing first-mover projects to demonstrate the potential value of public assets. They will ensure that new developments fit and feed into the city’s overall strategy. They will also research and resolve complex title issues often associated with publicly owned property, design and manage public-private partnership formations (which may include competitive bid processes or other processes approved by the jurisdiction) and negotiate contracts for jurisdiction approval.

Additionally, MPAs formulate various financing options and innovative approaches to capital formation for approval by the jurisdiction and private parties, prepare relevant documentation, supervise project implementation and development activities on behalf of the jurisdiction, and report on ongoing performance metrics.

This third-party intermediary approach can operate on minimal investment from the jurisdiction by allowing the MPA to assess project participation fees from transactions. Such fee structures are already common in government where a jurisdiction uses a real estate broker to sell public property who is compensated through a fee on the land sale transaction, or a municipal financial advisor or underwriter who is compensated through bond issuance fees or other financial transaction fees. Similarly, this structure is commonplace in private-sector transactions where developers readily pay a “finder’s fee” or origination fee to parties who source transactions or a capital sourcing fee to parties who bring investment capital to support various projects. However, we are proposing to aggregate the real estate broker and the finder of the finder’s fee into an all-encompassing role to enable a holistic approach that fully leverages the full potential of the public assets. In Austin, the city has already completed the development of a 251,000 square foot facility based on its use of an MPA.