Urbanization of Downtown Monterrey, N.L. Conceptual Study
Contents:
1-
Background.
2-
The Proposed Urban
Concept.
3- The Legal-Economic
model.
4- Program
Description.
Phase 1: Concept Study
Phase 2: Execution
Phase 3: Construction
Phase 4: Sales and Return On
Investment
5-
Preliminary
Assessment.
6-
Conclusions.
1- Background.
Monterrey, capital of the State
of Nuevo León, was established in the year 1596 by Don Luis Carvajal y de la
Cueva.
The urban mapping of this city
followed the patterns of Hispanic boroughs, with city blocks measuring 100
Spanish varas (canes) (83.7 meters) long and streets 16 varas
(12 meters) wide.
In this city the industrial
revolution appeared at the middle of the 19th Century and henceforth,
begins its growth based on steel mills, breweries, glass making and textile
factories.
The center of this
city, which comprises a surface area of 649.8 hectares, was mainly reserved for dwellings, small businesses
and artisan shops.
Conversely, factories were
located on the outskirts of these boroughs.
The quality of life for the Monterrey citizens was good,
migration was at a minimum and homes had
large patios that partially substituted the absence of parks.
The quantity of motorists and
their automobiles increased substantially at the middle of the 20th
Century resulting in a marked detriment in the quality of life in the city.
City buses and the huge amount of automobiles quickly
saturated every street and avenue, forcing
the inhabitants of better means to flee to the suburbs, which were
located further away than the factories and shops that surrounded the city.
From this time forth, a gradual yet steady deterioration
in the downtown business district ensued.
At the present time, at the turn
of the 21rst Century, this business district displays a sad and
regrettable image. The absence of parks
and recreational areas, the relentless daytime and nighttime vehicular traffic
on every street, the sight, noise and
atmospheric pollution makes this an inappropriate place to live in.
The government's lack of vision
in addition to the excessive rules and regulations with
respect to land use as well as a lack of business interest has taken its toll.
In recent decades a few government plans and programs
attempted to improve this situation. All the same, these programs had a biased
vision, involved only with the
architectural aspects, generally forgetting about the legal problems and, most essentially, economic solutions.
The proposal, which ¡s presented at this point, considers actions that must be taken to
attain this objective.
With the purpose of generating an
attractive profit for investors of this proposed project,
allowing for market demand, a procedure is to be carried out to re-urbanize and
re-populate downtown Monterrey and increase the quality of life of its
citizens, in a framework in agreement with the necessities and possibilities of this 21rst Century.
2- The Proposed Urban Concept.
Presently, downtown Monterrey is
arranged in rectangular city blocks 83.7 meters in length separated by streets
that are 12 meters wide.
Urban bus service has been poorly
planned. Bus stops and the bus routes that serve them pass right through the downtown business district, using
it as a transfer zone.
This, and the lack of wide avenues for heavy vehicular traffic, caused a permanent vehicle gridlock in this area.
This proposal considers the
establishment of a system of super city blocks, each of these made
up of nine of the old city blocks. This
would eliminate a substantial share of the
present downtown thoroughfares, which would then have to be replaced by an
increase in avenues and public gardens and park areas.
The final objective of the
proposal described herein provides the technical, legal and economic
workings to enable a group of investors to purchase large tracts of real estate, presently owned by private
citizens or the municipal government, to accomplish this executive
venture of developing and marketing the
abovementioned super city blocks.
The contribution of both the
investors and the State Government of Nuevo León is necessary to achieve this objective, under the framework of an
expropriation decree by the Hon. State Congress, guaranteeing the viability of a
project of this nature.
Then again,
this urban renewal requires solving the following aspects:
A- Master Traffic
Flow Plan
The creation of wide avenues to
guide heavy traffic is essential in order to eliminate vehicular traffic on
secondary byways, which are to be used for internal traffic and
traffic to and from the outside areas.
B- Land Use
This project provides for incorporation of groups of city blocks in to large tracts reserved for the construction of new
homes, offices and commercial properties within
the most satisfactory architectural and zoning guidelines.
And above all, this project provides these areas with
an independent and detached character separate
from the rest of the other renewed areas.
These private areas or super city blocks would include
their own parks and recreational sports areas.
C- Gardens and Parks
Reserving areas meant for public
parks and gardens is necessary to bestow harmony to these developments, which
other than serving their primary function, would also serve as antipollution
barriers, offering a nicer scenery to the traveler.
D- Public Works
Infrastructure
Added to market demand brought about by the lifestyle
change of the buyers of these properties,
the change ¡n traffic and the re-densification of the urban setting would entail the
complete reconstruction of the following public works infrastructure:
Thoroughfares
Street drainage
Sewers and sewage treatment plants
Potable water distribution and
storage systems for drinking water and firé
hydrants
Irrigation
Natural gas distribution system
Electrical power grid
Street illumination system
Telephone, cable TV and the
internet
3- The
Legal-Economic Model.
The gist of this project is the framework of a legal
standard that permits capital investment with the judiciary assurance of an
acceptable return on investment.
This outline is not practicable
on the basis of contract negotiation between private parties since part of this
urban renewal plan requires remodeling thoroughfares,
Utilities and public services, thus demanding participation by the State and Municipal establishment and the utility
companies.
Moreover, since it's almost a certainty that a few private
citizens are not willing to sell their
properties, it would be necessary to put into practice an expropriation decree
for the benefit of the general public. This requires the participation
of Monterrey's City Hall and the Congress of the State of Nuevo León.
This procedure is usually followed to widen avenues or
to build public plazas in this city. But then again, this poses an additional
problem since, according to this law, properties are not subject to
expropriation for reasons other that the benefit of the of the general public or citizens, requiring all
expropriated property to be handed
over to the state authority that fosters this decree.
The procedure that seems most
workable would be to finance the Municipal Government to
enable it to perform this project under a contract, which would justify and guarantee an acceptable return on
investment.
This scheme would not work since public officials lack
the entrepreneurial vision required to make
this a profitable venture.
The creation of a legal framework, which would
comprise the project investors as the major
participants and the government powers as the minor players would therefore be
necessary. This requires additional
steps.
The turning over of the remodeled
areas to the investors calls for the sponsorship of a trust fund, which
would guarantee the purpose of this venture and
which would be the means to acquire the real estate by private investors.
Unfortunately, even though the aforementioned is
legally dependable, it is not a very swift
course of action since this would entail a great deal of red tape at various
government levels as well as lobbying the powers that be, civic associations
and the citizens of Monterrey.
4-Program
Description
In order to pull off a project of this nature, it
would be necessary to divide it into the following four phases:
Phase 1: Concept
Study
Development of an abstract urban draft;
Master growth plan
Draft of a typical super city
block destined for habitat, offices and services
Groundwork on thoroughfare and public works and
utility services infrastructure mentioned in item D
Procurement of a construction, thoroughfare and public works budget
Preliminary legal analysis to determine:
Laws and regulations that govern land
use Laws which regulate land ownership Regulations
for acquisition of municipal property Laws
to bring about an expropriation decree Procedures to obtain
aforementioned decree
Estimated lead
times for these activities
Costs involved in these actions
Proposed legal-economic model of
operation
Description of the legal
framework that will handle these investments
Listing of legal actions and
procedures to be followed
Prior research with the proper authorities on the plan's viability
Draft for the establishment of a board of
administration and a trust fund for the urban renewal of downtown Monterrey,
N.L.
Engineering and Scheduling
Scheduling
activities taking into account the following phases of this project:
Design, official procedures, public relations, real
estate acquisitions, thoroughfare
refurbishment, infrastructure building
Determination of costs of each
phase and stage
Study of economic viability
Incorporation of budget to execute
project
Programming of proceeds and disbursements
Internal rate of return on
investment
Project schedule
Critical route diagram of concept
activities and interval forecast
Gantt chart and project calendar
according to phases 2 and 3
The scope of activities of phase 1 is to provide sufficient highlights
to enable
would-be investors to judge the associated costs, lead
times and forecasts of viability of this
project.
The estimated lead-time for
implementation of phase 1 is six months
The scope of this phase is to put into practice
construction projects for each of the items mentioned in the previous chapter.
This second phase also involves
lobbying Municipal and State Government
circles as well as
with utility service providers, the present term State Congress
members and the powers-that-be in this city,
guaranteeing the viability of this urban renewal plan.
Aditionaly it includes
the Marketing Research Evaluation.
The methodology used for this
evaluation will consist in validating
the
Information with different direct and indirect sources
to the ones used in the
market research, with players such as:
Prospective buyers.
Realtors.
Real estate developers (office, home, and shopping mall
builders).
Urbanistic Project Evaluation.
Analyze the project and make recommendations that
could enrich the concept:
Validate the logic of the
urbanistic characteristics to the market research.
Revise the current consumer needs and preferences in
the area.
Create a Buying Strategy.
Develop a procedures manual on
the purchasing strategy in order to:
Avoid market speculation.
Resolve possible selling
obstacles encountered during the process.
Create the Selling Strategy.
The main objective during the selling process is to
avoid over-supply and unfair
competition (from possible investors who may acquire
Wholesale real estate
through this project). Therefore, the strategy should be developed
based on
the following issues:
A thorough selling strategy,
making recommendations on the most viable
options, such as creating our own
sales force, hiring outside specialized
agencies, or a combination of
both.
Establish realistic sales goals
based on current market conditions.
Develop the most adequate marketing strategy for the
product.
Sales
Management.
Based on the selling strategy, the critical points for
the sales management are:
Select, hire and supervise the
companies and sales force responsible for the
commercialization.
Employ the most adequate advertisement tools for the
product, based on the
marketing strategy.
Be aware of any market change and adapt the selling
strategy accordingly.
A more detailed description of the last three phases
will be presented when investors accept the general outline of this proposal.
- Preliminary
Assessment
In order to have an idea of the possible extent of
this venture, an outline was prepared which can be looked at in the enclosed city
map.
The land-use draft would do away
with lesser thoroughfares in the city's business district, create 122 new super
city blocks covering present day city blocks and the lesser, secondary
thoroughfares now in use.
The same amount of alternate
thoroughfare area would then have to be swapped with the municipal government
by developing a series of wider
boulevards, which would permit a more
efficient means of transit through this zone. Gardens and public parks would also be
included in this swap.
The aggregate area subject to
urban renewal is 649.8 hectares.
The erstwhile city block area is 390
hectares. The resulting renewed area is 378
hectares.
Since the land use ratio that will be applied in this
zone is 2.5, surface area to be built on
would be 945 hectares, not including parking spaces.
Expenses of this project are:
a-
The land:
Acquisition cost of real estate =
3,900,000 m2 x $US 400.00
= $US 1,560million
Urban infrastructure cost = 3,900,000 m2 x $US 100.00
=$US 390 million
Amount = $US 1,950 million
Managerial and Operational expenses 10% = $US 195 million
Land expenses = $US 2,145 million
b- Construction costs:
Surface
area =
9,450,000 m2
Construction
cost, including internal thoroughfares
and parking
areas:
9,450,000 m2 x $US 450.00 = $US
4,252.5 million
Total investment = $6,397.5 million
Return on
investment:
(Initially only taking into
consideration 200 m2 housing)
Number of
units = 47,250
Sale price = $US 200,000.00
Total sales = $US
9,450 million
Profit = $US 3,052.5 million
Present value rate of return is
47.7% Financial expenses must be added
in.
Since urban renewal of the
downtown area will take a long time, initial investment is
deemed to be the acquisition cost of 25% of the real estate and 25% of the
construction costs in a 6-year term.
Urban
remodeling $US 390 million
Real Estate
Acquisition $US 195 million
Construction $US 531.6 million
Management $US 111.2 million
Amount $US 1,227.6 million
Divided into 6 years = $US
204.6 million per year
6- Conclusions
A very rough draft on the extent and mode of operation
of the urban renewal of downtown Monterrey has been completed.
A venture of this nature is very
comprehensive but innumerable stumbling blocks must be
dealt with for happy accomplishment.
It is for that reason that viability or profitability cannot be assured in advance.
The problems that are most serious which we will have
to face are the following:
The possibility
that the existing legal framework is not suitable for the proposal presented,
specifically in view of the fact that lead times for activities are quite lengthy.
The possibility
that market potential is insufficient and demand for housing and offices is weak for a project of such as this.
The possibility that real estate acquisition, infrastructure and
construction costs surpass the upper limit that would make this a profitable
venture.
The possibility that adverse reaction to a project of this
nature by citizens and/or the authorities
takes place.
A pilot investigation, such as
that which is described in phase 1, is necessary to surmount any of
the aforementioned problems. Once this investigation is completed, it is
assumed that the project can probably continue on to the activities of formal
negotiation with the powers that be,
launching phase 2.
Given that it is possible
investors may not feel sure enough to begin on phase 1 of this project
without the previous endorsement by the authorities involved, a series of meetings involving these authorities and
investor representatives would be necessary.
Raúl Cadena Cepeda
y
Esteban Rock Varga.