How to Make Auctions of Public Land

Transcription

1 Hw t Make Auctins f Public Land Successful? Olga Kaganva, PhD, CRE, FRICS The Urban Institute kaganva@urban.rg THE WORLD BANK ANNUAL BANK CONFERENCE ON LAND POLICY AND ADMINISTRATION Washingtn, DC April 26-28, 2010 Cntent Defining success Recipes f successful land auctins fr gvernments Open issues, technical and plicy 2 1

2 What is a success in land auctins? A prcedure is pen, fair, and cmpetitive Land is sld (i.e. land rights, permanent r temprary, are sld) Price btained is a market price (i.e. the highest pssible) Land became available fr the mst prductive use 3 Examples: success and nt Land Auctins in Serbia, March 2010 City Nis Nvi Sad Ppulatin 253, ,000 Number f sites ffered n 5 7 auctins Number f sites sld 5 2 Number f bidders fr the Min 2, max - Min 1, max - 2 sld sites 4 Land area sld, m2 10,370 1,097 Revenues btained, EURO 1,458, ,995 The secret f Nis s success: A prfessinal real estate cmpany was marketing the sites 4 2

3 Underlying factrs f success 1. Enhancing attractiveness / value f the land fr investrs: 2. Pricing it right Bradening land use parameters / increasing ecnmic density Reducing gvernment-related risks fr investrs 3. Recgnizing where the real estate market is alng its cycle 4. Being practive: Packaging sites Marketing sites well 5. Securing hnest, transparent, and market-attuned prcedures 5 Why? Simple recipes fr gvernments: 1. Enhance attractiveness / value f the land fr investrs: Braden land use parameters, instead f tailring them fr a specific buyer r under arbitrary classificatin by urban planners Why? Real-life example f excessive land use limitatins: A 10-hecrate green-field site is zned fr prductin & strage use, with up t 14% f the flr space permitted fr ancillary ffices. An estimated market value f land: EURO 30/m2. If permitted land uses wuld allw up t 30% f the built space t be used fr retail and retail-related warehusing, the estimated market value f land = EURO 42/m2. The difference in municipal revenues frm land auctins under these tw scenaris wuld be EURO 1.2 millin. 6 3

4 Simple recipes fr gvernments, cnt d: 2. Price it right - starting prices at auctins: Apprximate the estimated market value, but stay belw it Rule f thumb: starting price = 80% f the market price Use prices at previus auctins fr setting prices fr next nes Sl Select an auctin step right: iht Rule f thumb: 2-7% f the stating price 7 Simple recipes fr gvernments, cnt d: 3. Recgnize where the real estate market is alng its cycle Example: In 2009, Warsaw cllected frm land auctins 17% f the 2007 revenues Lessns fr all: a)d nt make land / prperty sale revenues a part f annual budget targets b) Instead, attune sales t dynamics f the real estate market and place revenues in a special multi-year fund t be used mainly fr capital investment 8 4

5 Simple recipes fr gvernments, cnt d: 4. Be practive, instead f waiting fr investrs Passive management Investr as a detective: lks fr a vacant site Municipality attaches strict land use cnditins and puts the site n auctin Advertises fr 15 days Auctin Buyer gets 2-page lease cntract 15 days Pr-active - management Municipality inventries vacant sites, maps them ; Municipality plans sites release n the market Municipality attaches flexible land use cnditins Packages sites and advertises fr days Auctin Buyer gets a gd quality lease cntract t 60 days 9 9 Simple recipes fr gvernments, cnt d: 4. Be practive, instead f waiting fr investrs, cnt d: Have sites fr sale pre-apprved (annually, semi-annually) Package sites well (prvide a clean title; prvide infrmatin, which investrs need, t all ptential bidders; make ther csts, such as payment fr ff-site infrastructure, knwn in advance f auctins; prvide a gd-quality cntract and make a draft available prir t the auctin) Allw sufficient time fr sites market expsure (15 30 days are nt enugh!) Use prfessinal real estate cmpanies fr marketing sites Use innvative techniques such as n-line auctins 10 5

6 Simple recipes fr gvernments, cnt d: On-line auctins: braden gegraphic utreach t buyers; extend auctin s duratin => prduce higher purchase prices Example: Building wned by Federal Gvernment, managed by GSA, marketed by Jnes Lang LaSalle. The starting price is $14 millin. Online auctin will start n April 30, 2010 at 9 AM EDT via a 60-day perid. An industry frum n this pprtunity will be held n April 28 at the nearby Hyatt Regency Htel in Bethesda. 11 Simple recipes fr gvernments, cnt d: 5. Secure hnest, transparent, and marketattuned prcedures N tricks with last-minute change f place / time N crrupt leaks f price ffers frm sealed envelpes Open auctins t the public Publicize results 12 6

7 Open technical and plicy issues Technical: Which frmat is better: sealed bids r verbal auctins? Sell t a single bidder r declare the auctin vid? Plicy: When/why can land be sld nt fr the highest price? Auctins vs. multi-criteria prcedures Can land be given with discunts? When and where? Use f land sale revenues: are restrictins needed? Is the cncept f access t land fr everybdy a gd and sustainable plicy gal in urban settings? Shuld freigners be admitted? 13 Summary Hlding successful land auctins is simple and easy, as sn as gvernments (i) recgnize benefits (ii) admit a need fr prfessinal handling f packaging, pricing, and marketing, and (iii) vercme crrupt interest inside gvernment 14 7

8 Cnclusin: Hw D We Prceed? Educate & build capacity at gvernments Demnstrate hw t d Disseminate 15 8