In public-private partnerships (P3s), ground leases have become a helpful tool for public agencies to facilitate the development of affordable housing, schools, community facilities, and infrastructure development on publicly owned land. In a typical scenario, a long-term ground lease by a public partner permits a private partner to develop a project on public land. Whether or not a ground lease is a good delivery approach in a public-private development project can vary significantly based on who owns the land at the outset.

When The Public Owns the Land

Ground leases are a logical choice in public-private development scenarios when the public agency already owns the land on which the private partner will develop the project:

1. Control and Oversight: Ground leases allow public agencies to control the land, ensuring the development aligns with public objectives and community needs. This oversight is crucial in public-private partnerships when the public’s interest is paramount.

2. Revenue Generation: Through ground leases, public agencies can generate consistent revenue streams over extended periods, benefiting municipalities or agencies seeking long-term financial stability from an asset.

3. Risk Mitigation: By leasing the land rather than selling it to a private partner, a public agency can mitigate potential risks associated with development failures or non-compliance by the private partner. The lease terms can be structured to ensure the land reverts to the public agency in such scenarios.

4. Preservation of Public Ownership: Ground leases in public-private partnerships allow a public agency to maintain ownership over public land, which may be located in high-value urban areas or close to other public facilities. They also offer flexibility for a public agency that may change the future use of the property.

When The Public Does Not Own the Land

When neither the public agency nor the private partner owns the land earmarked for development, or the private partner owns the land, opting for a ground lease might not make sense:

1. Added Complexity: Acquiring or reconveying land for the sole purpose of establishing a ground lease adds an unnecessary layer of complexity to a public-private project. Direct acquisition and ownership by a private partner streamlines the negotiation and development process.

2. Increased Costs: When a public agency acquires land it does not own, it will incur acquisition costs and ownership liability only to lease the land to the private partner. This increases project costs, potentially making the project’s private component less economically viable while reducing the public benefit achieved because of unnecessary added project costs.

3. Delay: The process of acquiring land, followed by negotiating a ground lease, introduces significant delay to a project timeline. In the fast-paced world of real estate and infrastructure development with constant market fluctuations and escalating construction costs, time is of the essence in delivering viable projects.

4. Public Review: Public-private developments often involve multiple sources of public and private financing, and transaction documents and agreements typically must be reviewed by public grant agencies and lenders. Public staff only offer guidance after a final review of project documents, which introduces significant uncertainty into the document preparation and negotiation process. Because of the complexity of ground leases, public comments received after ground lease negotiations can undo months of progress and materially impact the project schedule.

In a public-private development project, partners must assess the merits, risks, and challenges of using a ground lease on a case-by-case basis, ensuring their approach aligns with the project’s objectives, timeline, and broader community interests. While a ground lease may be a suitable ownership vehicle for a public agency that already owns the land, defaulting to a ground lease in other land ownership scenarios can introduce unnecessary complexities, costs, and delays that create more risk for a project than the risk the public agency is trying to mitigate with a ground lease approach.

INNOVATE P3 helps partners identify, analyze, and structure ownership frameworks that optimize the benefits of public-private partnerships.

New development is an ever-present challenge for established, historical neighborhoods, particularly around universities. As urban areas grow and evolve, tensions inevitably arise between prioritizing the preservation of historic districts with rezoning areas for increased building density. While the need for commercial expansion and accommodating growing populations is undeniable, it is equally important to recognize the value and significance of historical places in rapidly growing areas.

Historical elements in a community provide a tangible connection to our past, offering a glimpse into the previous era’s rich heritage, culture, and architectural styles. They serve as reminders of our collective history, telling stories of generations that came before us. By preserving these structures, we maintain a sense of continuity, identity, and cultural heritage within our urban fabric.

From an urban design perspective, preserving historic buildings and neighborhoods contributes to a city’s overall aesthetic and character. Historical structures’ unique architectural styles, materials, and craftsmanship often create a sense of charm and authenticity that cannot be replicated in new construction. These buildings add diversity to the urban landscape, balancing the sometimes-featureless aesthetic of modern development and creating a sense of place. They enhance the visual appeal and contribute to the overall livability of urban areas.

In college neighborhoods, weighing the preservation of historical buildings with the need for new development is more complicated. Historical places on campus often hold a special place in the hearts of students, alums, and residents alike. Historical campuses, such as Harvard University in Cambridge, Massachusetts, or the University of Oxford in the United Kingdom, are characterized by their stunning architecture and historical significance. Preserving the surrounding neighborhoods ensures that students and visitors can experience these areas’ unique ambiance, fostering a deeper connection to the institution and its history. Historical features on and around college campuses provide a vital sense of community and cultural identity. These areas have a distinct atmosphere, featuring lively streets, local businesses, and gathering spaces. They create a supportive student environment and contribute to campus vibrancy and social cohesion.

Financial benefits can be derived from redeveloping property on and around university campuses. When carefully planned and executed, redevelopment projects can unlock new revenue streams for university leaders. By strategically repurposing underutilized properties, universities can tap into demand for office spaces, research facilities, or student housing, generating steady rental income. These projects can attract private investors willing to partner with universities, bringing additional capital and expertise to the institution, particularly in life sciences and biotech. The generated revenue can then be reinvested into academic programs, research initiatives, or campus improvements, enhancing the overall quality of education and student experience. Moreover, well-programmed redevelopment projects can contribute to the local economy by creating jobs, stimulating business growth, and attracting talent and businesses to the surrounding area. The careful balance between preserving historical architecture and maximizing the potential of university property can result in a sustainable financial model for college leaders, supporting the institutions’ long-term growth and sustainability.

While surplus land can generate new revenue for institutions of higher education, the actual profitability of these assets is often lower than many assume. Developing university-owned land for commercial purposes can come with various challenges, including increased construction costs, zoning restrictions, and community opposition. Additionally, the potential returns from such developments may not be as substantial as commonly perceived, and bringing commercial tenants and visitors onto or near campus raises safety and policing issues for students and faculty that must be addressed with higher investments in robust on-campus policing. Thus, it is critically important for any university-led development effort to prioritize programming in new projects that focuses on and benefits the institution’s academic, research, and entrepreneurship mission.

Leveraging the value of historical architecture on campus in a new development can contribute to the programmatic goals of universities. Landmark buildings on university campuses contribute to the institution’s prestige, attracting students, faculty, and researchers who enjoy their unique character and ambiance. These architectural gems are physical manifestations of a university’s rich heritage, adding depth and authenticity to its academic reputation.

Preserving historical architecture also can enhance a university’s fundraising efforts. Alums and donors often feel a deep connection to their alma mater’s historical buildings, considering them sacred spaces imbued with cultural meaning and personal memories of time spent within their walls. The emotional resonance associated with historical features can inspire alums to contribute to preservation initiatives, ensuring that future generations experience the same awe-inspiring environment. The value of preserving historical buildings becomes an investment in the long-term sustainability and growth of the university.

Finding the right balance between preserving historic buildings and neighborhoods and accommodating new growth requires a holistic approach. It involves comprehensive urban planning that respects the university’s and the surrounding community’s programmatic, cultural, social, and economic dimensions. Adaptive reuse, where historic buildings are repurposed for contemporary needs, can be a viable strategy to preserve their value while meeting modern demands.

Considering the financial, cultural, and programmatic value of historic buildings and neighborhoods around college campuses is as crucial as the need for increased building density. By respecting a campus’s heritage and recognizing these historical elements’ benefits to our communities, we can create harmonious urban environments that balance the old and the new while meeting higher education’s academic, research, and entrepreneurship goals. With their unique history and cultural significance, historical areas around college campuses provide a valuable opportunity to preserve unique architecture while maintaining a sense of community and fostering long-term institutional growth. Through thoughtful programming and meaningful stakeholder engagement, we can create vibrant, sustainable, and culturally rich campus neighborhoods for generations.

Innovate P3 works with higher education institutions and stakeholders to develop student and faculty-centric programs to support and fully leverage public-private development initiatives on and around college campuses. We supplement our programming efforts by collaborating with specialists in archaeology, architectural history, historic preservation planning, public interpretation of heritage sites, and cemetery studies.

Innovation ecosystems have gained significant attention in recent years, although the concept is not new. Throughout history, human progress has been driven by the interconnectedness of various actors, institutions, and ideas, which laid the foundation for contemporary innovation ecosystems. During the Renaissance, the exchange of knowledge, ideas, and resources flourished in city-states like Florence. The Medici family, renowned patrons of the arts and sciences, created an environment that fostered collaboration and innovation, bringing together artists, scientists, philosophers, and entrepreneurs. This vibrant network of thinkers and doers revolutionized artistic and intellectual endeavors and paved the way for groundbreaking advancements in fields such as architecture, engineering, and mathematics. The Medici’s support, coupled with a thriving cultural and economic environment, exemplified the fundamental elements of an innovation ecosystem: diverse talents, entrepreneurial spirit, knowledge exchange, and supportive institutions.

Today, vibrant innovation ecosystems continue to foster collaboration, fuel economic growth, and drive innovation across industries. The modern-day innovation ecosystem resides in the innovation district.

  1. What is an Innovation Ecosystem? An innovation ecosystem is a dynamic network of interconnected entities, including organizations, institutions, individuals, private entities, and resources, that collectively contribute to the generation, diffusion, and commercialization of new ideas and technologies. Physical facilities can support an innovation ecosystem, but at its heart, it is a programmatic web of partnerships and collaboration. The most successful and enduring ecosystems encompass diverse economic and community interests and industries. They also have access to financial resources and an educated and multicultural workforce.
  2. What is an Innovation District? An innovation district is a physical area that gathers components of an innovation ecosystem in one location. The proximity of interconnected uses facilitates cooperation and provides a supportive environment for innovation-driven activities and in-person collaboration. Innovation districts typically are centered around research institutions and universities and feature integrated spaces for startups, established businesses, investors, and cultural amenities. This mix of innovation uses creates a vibrant ecosystem that encourages spreading and sharing ideas.
  3. What Makes an Innovation District Successful? While vibrant places support innovation districts, a fledgling district will not thrive on coffee shops and co-working spaces alone. The success of an innovation district hinges on several factors. First, the creation and support of the district require strong leadership from a single institution or stakeholder partners who share a vision to drive collaboration and strategic initiatives in and around a specific location. The selected area must be able to support new development or redevelopment with a focus on physical and digital connectivity and infrastructure. Accessibility is critical to provide tenants with transportation options and connect the district to the broader community. Programming and partnerships are the most crucial element to the success of an innovation district. Intentional and consistent programming by the district’s leadership supports the growth of diverse industries, ensures the availability of flexible and shared spaces, and fosters a culture of innovation and entrepreneurship.

The historical precedents for innovation ecosystems and districts remind us of the importance of collaboration and interdisciplinary approaches in advancing innovation and driving societal progress. Innovation ecosystems continue to thrive and evolve in innovation districts worldwide, which coalesce diverse stakeholders in an environment conducive to innovation and economic growth.

Innovate P3 works with institutions of higher education and professional schools to develop programmatic blueprints for innovation ecosystems and to incorporate those programs into new projects designed to create vibrant and sustainable innovation districts.