Trader Trains

1
Trader Trains
A Transit-Oriented, Transit-Owned Development for Davis Square, Massachusetts
Submitted to:
Peg Barringer (UEP 271, Urban and Environmental Policy and Planning, Tufts University)
Submitted by:
Rayn Riel
Nathaniel Mayo
Gary Hoffman
Zhamilya Tobabekova
December 14, 2015
Table of Contents
I. Executive Summary
II. Description of Proposed Program or Project
III. Community and Project Concept and Background Issues
14
IV. Ownership Roles and Roles of Other Parties
16
V. Economic Development Connection and Benefits
20
VI. Market Analysis
21
VII. Marketing Plan
25
VIII. Staffing and Management Requirements
26
IX. Operations Analysis
27
X. Budget and Financial Analysis
27
XI. Conclusion and Assessment of Critical Risks and Opportunities
32
Appendix A: Case Studies
34
Appendix B: Davis Square Survey
44
Appendix C: Supermarket Access and Saturation
46
Appendix D: Trader Joes Corporate Office Interview
48
Appendix E: Davis Square Commercial Lease Survey
48
Appendix F: MBTA Funding and Siting Process
49
Appendix G: NAICS Profile of Trader Joe's on Memorial Drive
51
Works Cited
52
Figures
Figure 1: Logic Model
Figure 2: Massachusetts Turnpike Air Rights
Figure 3: Davis Square Eastern MBTA Red Line Entrance
Figure 4: City of Somerville Zoning Process and Map
Figure 5: Site Dimensions
10
Figures 6.1-6.9: SketchUp of Proposed Development
10
Figure 7: MBTA Real Estate Stakeholders
26
Tables
Table 1: Central Business District Zoning Requirements
Table 2: Trader Joes Somerville Market Demographics
23
Table 3: Development Budget
28
Table 4: Funding Sources
29
Table 5: Pro Forma at $21 per SF
30
30
31
31
I. Executive Summary
Davis Square is the central commercial hub of the City of Somerville,
Massachusetts, and hosts one of the busiest subway stations in the Massachusetts
Bay Transportation Authority (MBTA) network: Davis Square, on the Red Line.
However, Davis Square Station is underdeveloped, with the eastern entrance
consisting solely of a small, single-story building.
Despite a wide range of shopping and recreational options, Davis Square has no
true commercial anchor business. Additionally, there is no full-service supermarket
within a half-mile, forcing residents out of the neighborhood (often via automobiles,
contributing to congestion and pollution) to do much of their food shopping.
Our project investigates the feasibility of building a second story of 10,000 square
feet atop MBTA property and integrating it within the station, to be leased to Trader
Joe's, which will operate a small-format supermarket. We propose that the MBTA
use its debt authority and institutional resources to finance and manage the
project, with permitting assistance from the City of Somerville and MassDOT. This
project will develop some of the city's most appealing and underutilized commercial
space. It will also provide competitively priced, full-service grocery options within
walking and biking distance for its residents, provide a better transit experience and
transit-owned, transit-oriented development, and bring a long term source of lease
revenue to the MBTA, while creating 30-50 above market jobs with benefits to the
neighborhood. Finally, Trader Joe's will act as an anchor business, bringing MBTA
customers into Davis Square, and making the area a more appealing and dynamic
destination for residents in and beyond Somerville to live, work, and play.
Figure 1: Logic Model
II. Description of Proposed Project

Why are the two MBTA Red Line station entrances at Davis Square in Somerville,
Massachusetts each only one-story tall, when surrounding buildings are at least a
few stories tall, with ground-floor retail, and office space on the upper floors?
Couldnt the MBTA use the (relatively marginal) extra real estate revenue, and
wouldnt it also enliven the area further, allowing for more places to live, work, and
play? It is in this context that our community economic development team proposes
the joint development of the eastern Red Line entrance at Davis Square, while also
tackling food insecurity in the neighborhood. Similar to the supermarket built atop
the Massachusetts Turnpike upon approach to Boston, our program will bring a
supermarket much needed in the area atop a transportation asset.
Figure 2: Massachusetts Turnpike Air Rights
Figure 3: Davis Square Eastern MBTA Red Line Entrance

According to the City of Somerville, the Davis Square commercial district, located in
Ward 6, is less than a mile away from Tufts University, and strategically served not
only by the Red Line, but five MBTA bus lines (the 88, 89, 90, 94, and 96).
Moreover, Cambridge is only a few minutes away on the T, while Boston is a mere
15 minute commute. Meanwhile, at the intersection of Holland Street, Dover Street,
6
7
Day Street, Elm Street, Highland Avenue, and College Avenue, as well as the
Somerville Community Path, Davis Square provides pedestrian and bicycle access
to the Minuteman Commuter Bicycle Path and is one of Somervilles most vibrant
economic and cultural engines. Indeed, it is home to many cafes, restaurants,
theaters, clothing and sundry shops, as well as office space and a range of
affordable to high end housing, and the Square hosts several arts-related festivals
each year, including Art Beat, Honk! and Open Studios1. Today, Davis Square is
known as a model of vibrant mixed-use and transit-oriented development, and the
City of Somerville has noted that future development will mostly be strategic infill
or rehabilitation projects that will enhance an already vibrant community2. Clearly,
the City of Somerville prioritizes infill, and working with the T could provide
opportunity for growth. But, they would need a champion, such as an anchor
tenant, in order to get started. They would need a supermarket.
According to the City of Somerville, which has zoned Davis Square as a Central
Business District (CBD), a CBD must be preserved for retail, business services,
housing, and office uses, while promoting a strong pedestrian character and
scale in order to provide environments that are safe for and conducive to a high
volume of pedestrian traffic, with a strong connection to retail and pedestrian
accessible street level uses. Moreover, buildings should complete the street wall,
providing continuous storefronts which shall house either retail occupancies, or
service occupancies 3. Furthermore, Davis Square already has municipal parking,
and due to its urban character, our site will not be adding additional parking
spaces. Instead, we will be adding additional bike racks in the rear. We will seek a
variance if the City ordains vehicular parking.
Curtatone, Joseph. "Squares and Neighborhoods - Davis Square." City of Somerville. Web.
2 Dec. 2015.
2
Ibid.
3
Ibid.
1
Figure 4: City of Somerville Zoning Process and Map

8
Minimum lot area/dwelling unit for 1-9

units (s.f.)
875
Minimum lot area/dwelling unit for 10

or more units (s.f.)
Maximum ground coverage (%)
Landscaped area, minimum percent of
lot
Floor area ratio (F.A.R.)
Maximum stories
Maximum feet
Minimum rear yards (ft)
1000
80
10
2.0
4
50
10 feet, plus 2 feet for each story
above the ground floor
Table 1: Central Business District Zoning Requirements (MuniCode.com)

Currently, the eastern entrance to the Davis Square Station is a one-story
structure, with bus connections, secure bike storage, and a small bodega, Au Petit
Pain. A second-story, decked over the bus station, would be a perfect square at
10,000 square feet. Massachusetts Realty, the MBTAs designated real estate
consultants, would manage the supermarket tenant, Trader Joes, and assist with
the renovation and construction plan. The MBTA would work with Trader Joes to
begin a thorough inspection of the site to determine load capacity, ground
specifications, existing access to services (electricity, water, gas, telephone), site
drainage, capacity to support proposed development, and necessary costs involved
with preparing site for development. Specialized green contractors would be
consulted for various aspects of green design, such as energy efficient lighting,
appliances, and water use, as well as the use of recycled materials in construction.
The maximization of Leadership in Energy & Environmental Design (LEED) criteria
will be emphasized and a green roof will be built atop the structure.
According to Francis DeCoste, Chief Operating Officer of Transit Realty Advisors
(TRA), a transit-oriented development (TOD) consulting firm, a good range for
retail construction is $250 to $300 PSF. In addition, we would need to add a
premium for the escalator and elevator, and the MBTA may also require fire
suppression and ventilation for the buses that idle at that spot4. Since our building
is 10,000 SF, and two stories, our building costs are approximately $6,000,000.
DeCoste, Francis. Personal interview. November 2015.
10
Figure 5: Site Dimensions (100 feet x 100 feet)
Figure 6.1: SketchUp of Proposed Development
10
11

11
12

12
13
13
14
III. Community and Project Concept Background Issues

Americas public transportation agencies cannot be profitable in the 21st century
due to a political economy that isolates these agencies from municipal zoning and
land use policies, and from forming value capture mechanisms from tax
increment financing to joint development and the transfer of development rights.
This siloization of zoning, land use, taxation, and transportation operations is
largely due to American fears of density alongside protections of private property,
but it limits the potential for transit-oriented and transit-owned joint development,
and it hinders the formation of public-private partnerships (P3s). Local, state, and
federal structural reforms are necessary in order to streamline value capture
processes, such as up-zoning transportation assets and relaxing land use
requirements, in order to facilitate TOD. While value capture will provide marginal
financial benefits due to the limited assets that U.S. agencies possess, it literally
stands on its own merits as a vehicle through which the urban fabric can be
renewed and enhanced. Transportation agencies cannot be profitable, but they can
be organized more efficiently, if given the resources to practice value capture.
The Massachusetts Bay Transportation Authority (MBTA) is the second largest
landowner in the entire Commonwealth, yet the vast majority of its assets are nonperforming.5 A public-private partnership (P3) was necessary in order to manage
the authoritys real estate assets, as the internal department had to maintain the
tenant ledger, collect rents, negotiate lease agreements, sell surplus properties,
and respond to requests from developers6. The T did not have the necessary
resources, expertise, or profit motive in order to conduct these processes, so it
contracted Transit Realty Associates (TRA), a consortium of firms, in order to
outsource the Ts real estate division in 1996. Firms included: AW Perry,
specializing in ownership, management and permitting; K.C. Donnelley and
Company, specializing in brokerage; The Development Group, specializing in public
property development and financing; and, Antrum Management, an engineering
firm specializing in parking garages7. According to Buzz Constable, a principal at
TRA, the TRA had to organize hundreds of lease agreements, many of which dated
back to the early 1900s, and were not cataloged at all.8 80 percent of the Ts leased
assets were non-performing; indeed, the T did not even have the time to collect
rent or update property agreements, one of which dated to 1910.9 The TRA
instituted market procedures and marketed properties for new lease opportunities,
Monty, Joseph. Value Capture Transit-Oriented Development: The MBTA Story. Thesis.
Tufts U, 2014. Print.
6
Flier, Richard A., Clare C. Conley, and Lisa A. McCallum. Outsourcing of Real Estate
Management and Development in the Public Sector. Boston: Transit Realty Associates, 1997
7
Ibid.
8
Ibid.
9
Ibid.
5
14
15
allowing for the MBTA to receive, from $3.5M per year in 1996, to $14M per year in
2014.10 While this is a marginal impact and the T is still deeply indebted11, the TRA
was nevertheless relatively successful. And, according to Joseph Monty, a Tufts
University alumni who wrote his thesis on the MBTAs joint development practices,
the potential for value capture to significantly offset operating and/or capital deficits
of transit systems is not lost on most transit agencies:
A U.S. Government Accountability Office (GAO) report found that 32 of 55
transit agencies surveyed had used some form of joint development as a
source of funding and the bulk of these developments were concentrated on
mature systems which operate heavy rail transit such as the Los Angeles
Metro, Washington Metro, and Metropolitan Atlanta Rapid Transit.12
Furthermore, the GAO (2011) characterized agencies likely to utilize value
capture as those which have formal joint development policies, real estate
expertise, and developable land holdings.13
Yet even if U.S. systems cannot be profitable in our political economy, TOD
(literally) stands on its own merits, as it creates more dynamic places for people to
live, work, and play, and supports sustainable livelihoods by reducing emissions.
Still, often, accessibility to transportation improves the value of real estate, and
agencies themselves do not capture this value. When an agency develops its
property in coordination with a private developer to build and own or lease
shopping centers, offices, and apartments, it is termed joint development, a form of
value capture, which is, itself, a form of transportation finance.
To begin, there are various tools and techniques that can be used in order to
implement value capture.14 Special assessment districts levy an additional tax on
land parcels that receive a direct benefit from transit. Transportation utility fees are
fees assessed on beneficiaries of transit infrastructure based upon how likely these
beneficiaries will be using transit, thereby, for instance, reflecting the buildings
density or parking capacity. Tax increment financing is a tax policy that captures
the incremental difference in tax revenue after construction of transit facilities, in
order to pay for the financing costs. Development impact fees are one-time fees
Ibid.
Kane, Brian. "Born Broke: How the MBTA Found Itself With Too Much Debt, the Corrosive
Effects of This Debt, and a Comparison of the Ts Deficit to Its Peers." MBTA Advisory Board.
Massachusetts Bay Transportation Authority, Apr. 2009. Web. 9 Dec. 2012.
12
Government Accountability Office. Public Transportation: Federal Role in Value Capture
10
11
Strategies for Transit is Limited, but Additional Guidance Could Help Clarify Policies.
Washington, D.C.: United States Government Accountability Office. 2010.

13
Ibid.
14
Levinson, D., Z. Zhao, and M. Iacono. 2009. Value Capture for Transportation Finance:
Technical Research Report. University of Minnesota: Minneapolis Center for Transportation
Studies.
15
16
assessed to developments, and are determined formally through policy. Negotiated
extractions also are one-time fees assessed to developments, but they are
negotiated on a case-by-case basis. Joint development is a public-private
partnership between a developer and a public agency. And, last but not least, air
rights are the sale or lease of air rights above a transit facility. Often, these tools
and techniques are used together in order to complete a project; for instance, a
developer may be using tax increment financing in order to practice joint
development, while using air rights in order to increase density bonuses.
Unfortunately, transit agencies have little ability to partake in TOD because they do
not control zoning and land use, and because they are controlled by onerous
financial regulations. Public transportation accessibility can dramatically improve
the value of land, which rarely benefits these transportation operators directly.
Perhaps the increased property taxes will be siphoned back to the transportation
agency, but more often than not, developers benefit the most, and municipalities
divert the increased property tax revenue from the agency that made it all possible.
Indeed, landowners and developers may even be charged impact fees and taxes by
the municipality for future development; however, according to the U.S.
Government Accountability Office (GAO), since most transit agencies do not have
taxing authorities, it is usually difficult for the agency to capture the value imparted
on surrounding properties by their facility.15
This is not a sustainable practice, because most of our public transportation
agencies are deeply indebted and cannot build, enhance, and expand. Yet TOD can
increase agency revenue, increase its ridership, and improve its assets. It can
improve air quality, decrease traffic congestion, increase the supply of housing,
create jobs, and increase tax revenue. Still, while state agencies do not need to
follow municipal regulations, public agencies nevertheless do not have a profit
motive and they are controlled by transportation boards, with members appointed
by politicians who are swayed by NIMBYists. Ideally, municipalities should provide
(joint) developers with generous floor-area-ratio (FAR) bonuses if the developers
renovate the station platforms below their buildings, and integrate them.
IV. Ownership and Roles for Other Parties

The MBTA will continue to own the property as a transit-oriented, transit-owned
development. The MBTAs Office of Real Estate and Asset
Development Department, whose mission is to provide for the efficient
management of the MBTAs real estate assets and the production of non-fare
revenues to support the MBTAs operations, will work with Massachusetts Realty, a
real estate consulting firm contracted to the MBTA, in order to develop and lease
15
Ibid.
16
17
the site to Trader Joes. Upon approval from the MBTA Board and the Federal
Transit Administration (FTA), the project will commence, and the Davis Action
Group (DAG), an advocacy organization, will be involved in the process as it is
formed of neighbors, business owners, and visitors who are interested in the longterm vitality of Davis Square.
This project will be a quintessential public-private partnership (P3), which requires
immense resources, which are difficult to synergize.16 It is important to recognize
that often, the public sector does not know how to regulate the private partner, and
the private partner cannot think in political terms.17 Once public agencies took over
the private and formerly profitable railroad assets, it became difficult to coalesce
opportunities; numerous regulations made it mutually disadvantageous to form
public-private partnerships.18 According to the Wall Street Journal:
For decades, city and county transit agencies have leased out kiosks or small
storefronts in their rail stations to businesses such as newspaper stands and
coffee shops. Now, agencies are far more ambitious, developing large-scale,
rent-producing developments, including hotels, apartment buildings and
shopping malls, around their rail hubs. Transit officials expect real estate to
become an increasingly important revenue source, amid stagnant federal
funding and rising costs of upkeep for aging systems.19
When the development process involves a public agency, with limited expertise and
resources, and with transportation as a core business, P3s clearly become
paramount. They allow for the expertise and efficiencies of the private sector to be
juxtaposed with the public sector. A small public transportation agency, for
instance, may contract out its operations to a private operator, theoretically
because the private sector brings skills that the public agency cannot provide at
similar costs. The agency would regulate the private operator, making sure in its
contract that it does not cut service to cut costs. According to Perry Davis, author of
Public-Private Partnerships: Improving Urban Life, language is extremely important
in order to craft an effective PPP, which are not a new phenomenon. In fact, one
hundred and fifty years ago Alexis de Tocqueville cited extra-governmental
associations as Americas legacy to democracy.20 These partnerships can be
Enoch, Marcus. "Recouping Public Transport Costs from Gains in Land Values." Traffic
Engineering and Control 43.9 (2002): 336-40. Scopus. Web.
17
Davis, Perry. Public-Private Partnerships: Improving Urban Life. Vol. 36, No. 2. New York:
16
Academy of Political Science, in conjunction with the New York City Partnership, 1986. Print.
18
Keefer, L. E. Joint Development at Transit Stations in the United States. Transportation
12.4 (1985): 334. Print.
19
Dulaney, Chelsey. "Transit Agencies Fast-Track Rail-Hub Properties." Wall Street Journal,
17 Oct. 2014. Web.
20
Davis, 1
17
18
implemented for public transportations sake because a crumbling social
infrastructure just like a deteriorating physical infrastructure makes a poor
environment in which businesses and business markets can thrive.21 Yet as
partnerships require novel business approaches to civic needs, so does government
require a fresh view of its role.22 Arthur Nelsons Foundations of Real Estate
Development Financing: A Guide to Public-Private Partnerships further elucidates
the challenges of P3s.
Even though redevelopment generates higher rates of investment return to
investors, numerous obstacles have to be overcome. Some of these involve
changing planning and development codes to be more responsive to
redevelopment opportunities. Others are expensive in the near term because
infrastructure has to be upgraded - though it would probably have to be
upgraded eventually anyway. Many involve land assembly brownfield
remediation. Still others are related to the complexity of modern real estate
financing, especially when it involves multiple land uses23.
Public-private partnership models should be being implemented throughout the
U.S., but people continue to fear density and displacement, and zoning and land
use policies have become 20th century artifacts. Cities need to streamline joint
development procedures, allowing for developers to build if they contribute funds
towards renewing, enhancing, and expanding the systems that benefit their bottom
lines. If affordable housing requirements and parking requirements make decking
unfeasible, they should be exempt from these rules. But these changes require
tackling NIMBYists so that transportation agencies can take on risk without being
booed away from development. According to Arthur Nelson, a P3 for joint
development would involve each party contributing what it does best, such as:
For the public sector, this can include planning and zoning activities that can
recast the overall development vision of the area, upgrading infrastructure,
expanding mobility options through sidewalks, bikeways, road improvements,
and transit, as well as acquiring property and preparing it for redevelopment
and assisting with financing. For the private sector, it can include market
analysis, construction financing, construction management, procurement of
long-term financing, and project leasing, as well as property management.24
Davis, 2
Ibid.
23
Nelson, Arthur C. Foundations of Real Estate Development Financing: A Guide to PublicPrivate Partnerships. Washington, DC: Island Press, 2014. 4.
24
Nelson, Arthur C. Foundations of Real Estate Development Financing: A Guide to PublicPrivate Partnerships. Washington, DC: Island Press, 2014. 5.
21
22
18
19
Moreover, according to Vukan Vuchic, UPS Foundation Professor of Transportation
Engineering and Professor of City and Regional Planning at the University of
Pennsylvania, the main goal of the public agency should be providing services the
city and its residents need, rather than focusing only on optimal financial results.25
There are ample risks and ample rewards in a P3. For the public sector, perceived
or real conflicts of interest, alongside a fear of the misuse of funds and resources,
are compounded by land use conflicts (such as dislocation, relocation, or fair
market value disagreements), public opposition, and worries that the private
partner may fail.26 Meanwhile, the private sector is often concerned about excessive
costs, time-consuming regulations, and accusations from the public; moreover,
concerns that changes in key public or political leadership will derail partnerships
are often concerns, alongside fears of market failures.27 Yet there are also plenty of
rewards. For the public sector, of course, a P3 can provide for economic
development, increased tax revenue, and improved public infrastructure and quality
of life, whilst creating jobs and advancing the citys image; perhaps, politicians
would also be reelected.28 For the private sector, a P3 allows for resources to
sustain their organization, and hopefully, the P3 is profitable, creating value, whilst
enhancing their reputation and building their niche.29
The public sector can alleviate most of its concerns by following five rules: first,
establishing a jurisdictional constitution; second, separating the analysis,
evaluation, administration, and oversight agencies; third, ensuring that the bidding
process is competitive; fourth, maintain caution, especially for projects with long
life cycles, due to contract renegotiation concerns; and fifth, avoid stand-alone
private sector shells with limited equity.30 All of these rules are essentially about
effective communication and trust, which can be aided by transparency. This
commits partners to the project terms, be it private partners that would otherwise
seek to limit their responsibilities, or public partners that would otherwise waver
under political pressure.31
Vuchic, Vukan R Urban Transit: Operations, Planning and Economics. Hoboken, N.J: J.
Wiley & Sons, 2005. Print. 433.
26
Monty.
27
Ibid.
28
Ibid.
29
Monty.
30
Siemiatycki, Matti. Implications of Private-Public Partnerships on the Development of
Urban Public Transit Infrastructure: The Case of Vancouver, Canada . Journal of Planning
Education and Research. 2006.
31
Ibid.
25
19
20
V. Economic Development Connection & Estimation of Economic

Development Benefits
Revenue for MBTA
In recent years, the MBTA has struggled financially32. This transit-oriented, transitowned development would provide much needed (albeit marginal) revenue to the
MBTA in a time when it is undergoing significant financial troubles and the Green
Line Extension is being threatened. Indeed, the Davis Square rental market is very
strong and comparable commercial rental space is going for $50-65 per SF33. With
a 10,000 square foot development, that could mean as much as $500,000-650,000
per year in rental revenue a year for the MBTA. Seeing as the MBTA is the lifeline
for many of the regions low-income residents, many of whom do not own vehicles,
additional revenue for public transit is a significant gain for various sustainable
community economic development initiatives from job accessibility to reducing
emissions and improving public health. Our site may be in Somerville, but the
revenue provided by Trader Joes will serve the T throughout the commuter region.
Livable Wage Jobs

Bringing Trader Joes into to Somerville will bring 30-50 livable-wage jobs34. In fact,
Trader Joe's is known for offering above-market wages and benefits.35 According to
MITs Living Wage Calculator, an adult in Middlesex County needs to earn at least
$13.43 an hour to meet their monthly expenses36. Moreover, according to
Glassdoor.com, the average pay of a Trader Joes crew member is $13.86 an hour;
while a manager on average earns $23.6037. By bringing Trader Joes into Davis
Square, more people with have access to livable wage jobs in this community.
Trader Joe's also offers a range of benefits, including healthcare, retirement
benefits, paid vacation, employee discounts and management training.38 The
company thus has a reputation for employee satisfaction, and experiences lower
turnover than its competitors.39
Jack Lepiarz, M. E. (2015, February 10). Understanding the MBTA's Financial Problems.
WBUR. Retrieved from http://radioboston.wbur.org/2015/02/10/transit-woes
33
See Appendix E
34
See Appendix G
35
Hendricks, David "Employee Benefit Boosts Help Companies, too" San Antonio Express
News. November 24, 2015
36
MIT Living Wage Calculator for Middlesex County.
http://livingwage.mit.edu/counties/25017
37
Trader Joes. Glassdoor.com. https://www.glassdoor.com/Hourly-Pay/Trader-Joe-sHourly-Pay-E5631.htm
38
"Careers at Trader Joe's: http://www.traderjoes.com/careers
39
Hendricks
32
20
21
Increasing Access to High-Quality Goods

Trader Joes is known for providing high-quality goods at an affordable price.40 The
closest grocery store to Davis Square, Star Market, is providing groceries at a
higher than average cost; and is, in fact, the most expensive grocery store in
eastern Massachusetts according to an August 8th, 2014 study41. Trader Joes, by
comparison, offers low-cost, high quality goods42. Therefore, Trader Joes would fill
a need for this community that is currently not being met.
Induced and Indirect Job Creation

In addition to the direct jobs created by bringing Trader Joe's to Davis Square,
there will also be induced and indirect jobs created by this development. According
to a 2014 study done by King Institute for Regional Economic Studies, 26.4 indirect
and induced jobs were created for every 100 direct jobs created in the Retail Trade
sector and Food Services and Drinking Places sector43. The study only focused on
the effect on employment of bringing retail jobs in Virginia rather than
Massachusetts, but this evidence from Virginia suggests that more jobs will be
created by this development than just the forty direct positions.
VI. Market Analysis

Davis Square lacks a major grocery store despite the fact that it is densely
populated and nearly one quarter of the households in Somerville lack an
automobile. Also, this location would be very attractive to Trader Joes since the
demographics of Davis Square match well with Trader Joes typical customers.
Proposed Tenant Customer: Trader Joes

Amongst all of the regional supermarket chains, Trader Joes is clearly the best
tenant candidate for this project. The proposed grocery store is going to be no more
than 10,000 square feet, which would put it into the small grocery store category.
While most grocery store chains do not specialize in operating locations of this size,
Olster, S. (2010, August 23). Inside the Secret World of Trader Joe's. Fortune Magazine.
Retrieved from http://fortune.com/2010/08/23/inside-the-secret-world-of-trader-joes/
41
WCVB News. "Who's the cheapest?" August 8, 2014. Web.
http://www.wcvb.com/news/whos-the-cheapest-comparing-boston-area-supermarketprices/27382944
42
Olster
43
King Institute For Regional Economic Studies. (2014, April). Evaluating the Job Creation
of Large Scale Retail Development in the Tri-Cities.
40
21
22
Trader Joes typically operates stores of between 8000-12000 square feet.44 This
development would be within their average range. On the other hand, the other
local grocery chains in this area do not specialize as small supermarkets and would
likely not be interested opening a store in this location; for example, the regionally
popular discount grocery store, Demoulas Market Basket, has an average store size
of 80,000 square feet45, while Shaws, the chain which operates the store closest to
Davis Square, typically operates stores in the range of 20,000-70,000 square feet.46
In terms of space requirements, Trader Joes makes complete sense.
Potential Target Customers for Trader Joes

On top of the space requirements, there are other reasons why a Trader Joes
might be interested in this location. Davis Square is a densely populated urban area
complete with enough residents to support a small supermarket. The City of
Somerville has an estimated population of 78,80447 as of 2013. Additionally, some
Cambridge and Medford residents will likely be customers. In addition to that
market, according to an MBTA survey done in 2008-2009, 2,281 passengers arrived
at the Davis Square MBTA station every day, along with an additional 6,348
passengers who departed from the station. As the tenth busiest station on the
MBTA, this location gets a lot of foot traffic, providing enough customers to support
the proposed supermarket. Additionally, areas to the northeast of Davis Square
have the lowest supermarket access in Somerville, and for many residents this
would be the closest supermarket. (See appendix C)
Olster, Scott. (2010, August 23). Inside the Secret World of Trader Joe's. Fortune
Magazine. Retrieved from http://fortune.com/2010/08/23/inside-the-secret-world-of-traderjoes/
45
Zeynep Ton, T. A. (2015, March 23). We Are Market Basket. MIT Sloan School of
Management. Retrieved from
https://mitsloan.mit.edu/LearningEdge/CaseDocs/14.160.Market%20Basket.Ton.Kochan.FI
NAL.pdf
46
JDA. (n.d.). Shaw's Supermarkets: Stay on Top with JDA Portfolio Space Management
Solutions. JDA.com. Retrieved from
http://www.jda.com/FILE_BIN/CASESTUDIES/SHAWS.PDF
47
U.S. Census Bureau: State and County QuickFacts. Data derived from Population
Estimates, American Community Survey, Census of Population and Housing, County
Business Patterns, Economic Census, Survey of Business Owners, Building Permits, Census
of Governments
44
22
23
Demand Analysis
According to the Bureau of Labor Statistics (BLS), the total demand in Somerville
for foodat-home is $128,933,160. Moreover, according to the investment firm
JLL, the average Trader Joes generates $1,734 per square foot48. With a 10,000
square foot store, this Trader Joes could expect to generate nearly $14 million
dollars in total sales annually, or 10.7% of the total food-at-home.
Also, the residents of Davis Square match up well with the typical Trader Joes
consumer. A comprehensive 2004 study of Trader Joes business model
summarized the typical Trader Joes customer as being over-educated and
underpaid. Below is a table of a typical Trader Joes shopper profile created from
data collected from a 2004 survey of its shoppers, along with a second table
outlining the most recent demographics of the City of Somerville from the US
Census:
Median Age
Median Household Income
Married
White
Female
Attended College
White Collar
No Kids At Home
Shopper Profile
for Trader Joes49
44
$64,000
54%
83%
55%
83%
54%
66%
Demographics of Somerville50
31.4
$67,000
34.1%
73.9%
50.9%
67.7%
55.1%
80.9%
Table 2: Trader Joes Somerville Market Demographics
Lutz, A. (2014, October 7). How Trader Joe's Sells Twice As Much As Whole Foods.
Business Insider. Retrieved from http://www.businessinsider.com/trader-joes-salesstrategy-2014-10
49
Coriolis Research Ltd. (2006, May). Understanding Trader Joe's. Retrieved from
http://www.coriolisresearch.com/pdfs/coriolis_understanding_trader_joes_final.pdf
50
U.S. Census Bureau. Retrieved from
http://quickfacts.census.gov/qfd/states/25/2562535lk.html
48
23
24
The shopper profile listed above clearly matches with the demographics of
Somerville. In general, Somerville has a high percentage of educated, white-collar
households without children, which matches up Trader Joes target market. If one
adjusts for inflation, the median household income of Somerville is below that of
the typical Trader Joes customer, but this is still far above the national median
household income of $51,939; and, nearly half of its 31,000 households (14,235 as
of 2013) have median incomes in excess of $75,000, so there should be plenty of
urbanites with enough disposable income to support the grocery store.
Customers
Moreover, as stated earlier, there is ample reason to believe that the residents of
Davis Square would patronize a Trader Joes at the Davis Square train station.
Besides the fact that the residents of Somerville match well with the typical
consumer of Trader Joes, there are other reasons why having a supermarket in this
location would benefit the residents of this location.
The first is the sheer number of residents who lack automobiles in Davis Square.
According to information from the US Census, 7710 households51, nearly one
quarter of all Somerville residents, do not have an automobile. Certainly it would be
an added convenience to these residents to have a supermarket in that location.
Somerville is one of the most bicycle-intensive cities in the US, among the top 5
cities in terms of bicycling commuters.52
Another is the fact that Davis Square residents want a supermarket. On November
15th, 2015, we conducted a survey of 50 Davis Square residents, of whom, 96%
stated that they would shop at a Trader Joes located in Davis Square. Many of the
people with whom we spoke said that they have been waiting for a grocery for quite
some time and were happy to hear that Trader Joes was the store that was being
considered for the project.53 Additionally, several of the respondents we spoke to
cited traffic as a major inconvenience to getting to the two other closest grocery
stores that offered similar products as our proposed supermarkets: The Whole
Foods at 200 Alewife Brook Parkway and Trader Joes at 219 Alewife Brook Parkway
in Cambridge. This survey data provides further evidence that Somerville would be
an excellent location for this transit-oriented development, both for the residents of
Somerville and Trader Joes. (See Appendix B)
U.S. Census Bureau, 2009-2013 5-Year American Community Survey.

http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF
52
City of Somerville: "Somerville #1 in New England, #5 in the Nation for Bike Commuting"
Press release, November 4, 2014 http://www.somervillema.gov/news/somerville-1-ne-5nation-bike-commuting
53
See Appendix B
51
24
25
Competition
There are no supermarkets in Davis Square, with the closest supermarket
approximately 0.9 miles away by vehicle in Porter Square (0.6 miles walking). This
is not considered a walkable distance from Davis Square. Moreover, one of the
complaints about the Porter Square Star Market is that their prices are too high and
they lack fresh foods54. The products at Trader Joe's, on the other hand, are
typically less expensive than their competitors and they specialize in offering high
quality foods55. Therefore, this grocery store will bring high-quality products at an
affordable price, to an area that could certainly use them.
Residents to the North and East of Davis Square have some of the worst
supermarket access in Somerville56. This area has some of the lowest supermarket
density in the Boston/Cambridge/Brookline/Somerville area. Additionally, we
believe that the proximity to other stores is acceptable for Trader Joe's' siting, since
the Davis Square location would be a similar geographical and transit distance from
the nearest existing Trader Joes (1.2 mi) at Coolidge Corner, Brookline.
VII. Marketing Plan
Our marketing plan is two-fold, consisting of an analysis of Trader Joes' potential
market, and our ability to attract the company to move into our location. On the
customer side, the demographics and location are appealing, and our market
research and first-hand survey indicate a high degree of interest in a Trader Joe's
located in Davis Square. Our analysis of Trader Joes' siting criteria also fits well
with our proposed property. However, Trader Joe's is a privately-held company, and
its internal operations, including its rubric for expanding to new locations, are
closely guarded. Management at Trader Joe's has been called "obsessively
secretive", offering no information about its internal business operations.57 Thus,
attempts to get information from the company produced limited results; however,
we were able to get first-hand knowledge that Trader Joe's has an aggressive store
expansion model, and uses population density, area income, neighborhood growth,
customer feedback, and area store performance to analyze whether to expand to a
new location (See Appendix D). Thus, a remaining challenge to our project is
figuring out the strategy to approach Trader Joe's. A version of this report, along
with our survey data, would serve to provide Trader Joe's with preliminary
information about the market, the neighborhood, and the location.
Review by Sarah M. on Yelp. http://www.yelp.com/biz/star-market-cambridge-3

Kelsey Kennick "15 Fun Facts About Trader Joe's" Popsugar. July 17th, 2015.
http://www.popsugar.com/smart-living/Trader-Joe-Facts-36086654#photo-36086675
56
See Appendix C
57
Kowitt 2010
54
55
25
26
Moreover, during the renovation and redevelopment of the eastern entrance to the
T station, banners and advertisements for Trader Joes will be liberally placed along
construction scaffolding. Trader Joes will also place advertisements in the station,
working with Massachusetts Realty in order to develop an ad campaign.
VIII. Staffing and Management Requirements
The MBTA has already contracted Massachusetts Realty, a real estate consultant
firm to the MBTAs Office of Real Estate and Asset Development Department. Our
project will involve these state stakeholders, Somerville Office of Strategic Planning
and Community Development, the City of Somervilles duly constituted
redevelopment authority.
Figure 7: MBTA Real Estate Stakeholders

IX. Operations Analysis
Our site will require the approval of the City of Somerville and the MassDOT Board,
comprised of 11 members appointed by the Governor, which oversees MassDOT
operations including the Massachusetts Bay Transportation Authority (MBTA),
Highway Division, Mass Transit, Aeronautics, the Registry of Motor Vehicles (RMV),
Office of Planning and Programming and the Office of Performance Management
and Innovation. Our site will also need to be ADA compliant, with adequate
ventilation for the bus and loading depots.
26
27
Loading
Trader Joe's will need a convenient location to unload shipments, of which, two
typically come in in the early (pre-commute) hours and one in the mid-evening.58
The MBTA property already has ample excess space within its dedicated bus
roadway (See SketchUp Images). Trader Joe's uses multiple trucks per store, so
the shipping logistics regarding their evening shipping time will be subject to the
companys internal management decisions.
Parking
While the new construction has a technical requirement to provide parking spaces,
the development will be eligible to request a variance on the grounds that it is a
transit-oriented development (TOD). Expanding multi-modal access has been
extoled as a priority for both the City of Somerville, and the MBTA, and placing a
supermarket atop an MBTA station in a dense urban area, with substantial bike and
pedestrian access, fits in the model for Somerville's development under the city's
comprehensive plan, SomerVision, released in 2012.59
X. Budget and Financial Analysis
Building costs are approximately $6,000,000, and this figure was developed in
consultation with Transit Realty Advisors (TRA), a firm that assisted the MBTA with
real estate development from 1996 to 2014, bringing in $14M per year in 2014 for
the T, from $3.5M in 1996, prior to the commencement of their contract.
Francis DeCoste, Chief Operating Officer of Transit Realty Advisors, noted that a
good range for retail construction is $250 to $300 PSF. In addition, we would need
to add a premium for the escalator and elevator, and the MBTA may also require
fire suppression and ventilation for the buses that idle at that spot. Since our
building is a square at 100 SF x 100 SF, totaling 10,000 SF and two stories (20,000
SF), our building costs are approximately $6,000,000. This is based upon the upper
range for retail construction ($300 PSF), due to escalator, elevator, and ventilation
costs. At 20,000 SF, this is approximately $6,000,000. Additionally, for insurance,
the MBTA will use Railroad Protective Liability (RRP) insurance, which, according to
Travelers, is required of contractors performing work nearby railroad-owned
property.
Hank's Truck Forum. "Who Hauls Trader Joe's?" October 26-27, 2011. Web.
http://hankstruckforum.com/htforum/index.php?topic=56758.0
59
City of Somerville. "Somervision 2030." April 19, 2012. Web.
http://www.somervillema.gov/sites/default/files/SomerVisionComprehensivePlanAdoptedApr
il-19-2012.pdf
58
27
28
Revenue
An analysis of commercial rental space in the Davis Square area has indicated that
a conservative estimate for the lease rate for a large property in the neighborhood
is $35-50 per square foot (See Appendix E). This figure may be skewed, however,
since the vast majority of properties examined were not newly constructed, and
some were located a substantial distance from Davis Square (See Appendix E).
Since the Trader Joe's space will be in a uniquely attractive business location,
attached to the eastern Davis Square station entrance, this lease estimate appears
to be a conservative one.
Trader Joe's prefers to lease rather than purchase its properties. The company is an
attractive tenant because it requires very limited, if any property management
responsibilities.60 Furthermore, the company typically pays lease rent with a
capitalization rate of 5.5-7%,61 and since their typical arrangement involves a
triple-net-lease, and the property in question, due to being owned by the MBTA, will
likely be exempt from property tax62, this project will be a more financially
attractive arrangement than a typical Trader Joe's lease agreement.
Development Budget
Hard Costs
Building Costs
Contingency (10%)
Total Hard Costs
$6,000,000
$600,000
$6,600,000
Soft Costs (Construction)

Soft Costs 30% of Hard Costs
Soft Cost Contingency (10%)
Total Soft Costs
$1,800,000
$180,000
$1,980,000
Total Development Cost
$8,580,000
Table 3: Development Budget
Net Lease Advisor. "Aldi Net Lease Advisor Overview".Web.

http://www.netleaseadvisor.com/tenant.php?t=44
61
Ibid.
62
Boston Redevelopment Authority. "Tax Exempt Properties in Boston." Web.
http://www.bostonredevelopmentauthority.org/getattachment/f0ce585f-6943-4cfe-9ac020126ad5f14c
60
28
29
Funding Sources
Construction of the project will need to be approved by the Massachusetts Board of
Directors for the Department of Transportation funded entirely through the MBTA
Capital Improvement Plan (CIP). The CIP receives a substantial amount of its
capital funding through federal formula grants and other appropriations. The MBTA
also receives roughly 1/3 of its funding from the annual state budget. Since the
funding mechanisms for this project are non-traditional, calculating MBTA liabilities
and drawing up a balance-sheet for the project is different than for a typical
community development project. However, if we assume an "effective" debt rate,
by overlaying the funding profile of the MBTA with our project costs, we can arrive
at a reasonable amount of debt service to compare to our lease revenue.
FUNDING SOURCE
$8,580,000
% 0f total
Federal Sources
Annual Apportionment
Carryover
Earmarks and Small Parts
New Starts
ARRA
Department of Homeland
Security
MBTA Sources
Revenue Bonds for Fed
Match
Non-Fed Revenue Bonds
State Sources
State Funding
$3,929,640
$2,162,160
$712,140
$51,480
$823,680
$145,860
$34,320
45.8%
25.2%
8.3%
0.6%
9.6%
1.7%
0.4%
$1,853,280
$1,012,440
21.6%
11.8%
$840,840
$2,797,080
$2,797,080
Total
$8,580,000
9.8%
32.6%
32.6%
100%
Table 4: Funding Sources

Operating Budget Pro Forma
The tables below are various income and expense pro formas based on four
separate rent projection. Thus, the project's break-even point is in year ten at a
rent of $21 per square foot. It is very likely that this project's rental lease will be
far higher than that based on the area's current rental market.
The increases in our expenses for "General Merchandise" and "Infrastructure
Merchandise" were indexed to the projected percentage increase in the consumer
29
30
price index from the IMF63. The 5% increase in years five and ten for the MBTA
Property Contractor were the suggested increase contractor fees from the ALDIs
profile from Net Lease Advisor, an online directory of information for those
interested in the net lease market64. ALDIs is the parent company of Trader Joes.
The project begins to reap substantial earnings for the MBTA from rental fees
starting at $40 per square, which is at the lower end of the Davis Square
commercial retail market. At $60 per square foot, a number that is on the upper
end of the Davis Square retail market, the project is projected to generate over
$400,000 in added revenue by the tenth year.

IMF World Economic Outlook: CPI Projections 2015-2020
http://knoema.com/IMFWEO2015Oct/imf-world-economic-outlook-weo-october-2015
64
Net Lease Advisor: ALDI http://www.netleaseadvisor.com/tenant.php?t=44
63
30
31
31
32
XI. Conclusions and Assessment
This proposal establishes a significant potential for expanding the retail space at
Davis Square Station and housing a Trader Joe's supermarket. Our financial
analysis suggests that the project is financially feasible under various rates of rental
revenue, with a break-even point at half of our expected revenues. In fact, at the
upper end of the Davis Square rental market at $60 per square foot, this project is
projected to generate in excess of $400,000 a year in revenue for the MBTA. Even
at $40, which is at the lower end of the market, this development should generate
at least $200,000 in revenue by the tenth year.
Our market analysis suggests that the customer base is viable and that the leasing
rate would be competitive for the neighborhood, while bringing significant
community benefit in the form of multi-modal grocery access with lower automobile
dependence and an improved transit experience, an increased customer base for
other Davis Square businesses, and stable added employment.
Moreover, ideally, this structure should be more than one additional story, complete
with even more retail or offices, making it even more feasible. However, for the
purpose of this project, the Trader Trains development team has focused on one
change for Davis Square.
Even with this one change, given strong community support, as illustrated by our
survey, by conversations with the Davis Action Group, and by the City of
Somerville's infill plans for Davis Square, our team is confident that the strengths
far outweigh the weaknesses of our project. The MBTA would receive ample
revenue, with reasonable rent for a break-even point, and, most importantly, the
market exists for a supermarket.
Of course, the complicated nature of our site, including aspects related to P3
redevelopment procedures, adds an element of complexity. The MBTA's willingness
to renovate their property, alongside the City's willingness to negotiate parking and
permitting laws, as well as the opaqueness of Trader Joe's practices, could impede
necessary communication efforts for the public-private partnerships. But the site
would be improved, commanding high rents, and providing the MBTA with
additional revenue. Given that the Green Line Extension is facing budgetary
concerns, any additional revenue definitely counts.
Nevertheless, it is important to recognize threats towards the project, such as
competing supermarkets, such as Roche Brothers, and the concerns of small
retailors, as well as valid worries that outsiders would be hired. Trader Joe's will
need to work with the community to hire locally.
32
33
The project team's recommended next steps include hiring a contractor to organize
inventory items that would need to be replaced over the next five-ten years, using
this information for a capital reserve account. The team also suggests hiring the
Bureau of Economic Analysis (BEA) to use their RIMS II tool to find the direct-effect
employment multipliers, and setting up a meeting with the Davis Action Group to
discuss community needs and desires for this project. Our developer will also need
to recycle materials and hire green contractors in order to maximize LEED criteria.
Moreover, the group advocates that the MBTA include the Davis Square project in
an application to the FTA for the next round of federal Transit-Oriented
Development Planning grants. The program expended $20M of projects in the
previous fiscal year, mainly for urban transit systems across the country to develop
plans to increase commercial development geared towards multi-modal transit.65
Politically, the stars may be aligning for these transit-oriented, transit-owned
projects. In addition to our primary arguments for the need for the development,
the larger political landscape may provide an opening for the project to move
forward. Somerville has put forth a comprehensive plan to expand transit-oriented
development, create a more "walkable city," expand bicycle infrastructure, redesign
its major commercial centers, and reduce auto dependence. The Green Line
extension into Somerville has in recent weeks become jeopardized, potentially
freeing up millions in infrastructure commitments to the City of Somerville and the
region. Additionally, as the US continues its commitments to reduce greenhouse
gas emissions, there may be a renewed commitment to green infrastructure
projects like Trader Trains. And Governor Baker has sought ways for creative
approaches to transportation finance, such as value capture and joint development.
Yet it will be important to remember that this is not a transportation finance project
as much as it is a community economic development initiative. After all, Americas
public transportation agencies cannot be profitable. There are not enough riders to
offset the high costs of maintenance and operation, and furthermore, Americas
political economy limits the real estate potential of these agencies, which,
nevertheless, have limited assets. The countrys formerly private, profitable
passenger railways had to compete with vehicular transportation and airlines, and
they could no longer stay afloat. Public transportation agencies today lack the real
estate expertise and the incentives to develop. Zoning and land use restrictions also
inhibit public-private development. Our project seeks to bridge the gap and involve
transportation agencies in community economic development initiatives once again.
US Federal Transit Administration. "Recipients for Pilot Program for Transit-Oriented

Development (TOD) Planning Awards." Web.
http://www.fta.dot.gov/grants/15926_16564.html
65
33
34
Appendix A: Case Studies
PART I
Why are the two MBTA Red Line station entrances at Davis Square in Somerville,
MA each only one-story tall, when surrounding buildings are at least a few stories
tall, with ground-floor retail, and office space on the upper floors? Couldnt the
MBTA use the (relatively marginal) extra real estate revenue, and wouldnt it also
enliven the area further, allowing for more places to live, work, and play? Couldnt
developers help to pay for station maintenance, if they partook in a public-private
partnership joint development process?
We are exploring four joint development case studies, all of which are within the
United States. New Yorks Metropolitan Transportation Authority (MTA) has recently
completed the Fulton Center, a retail complex in Lower Manhattan. In Atlanta, the
Metropolitan Atlanta Rapid Transit Authority (MARTA) has been practicing ample
joint development, including the Resurgens Plaza at Lenox Station. Meanwhile, the
a W Hotel has been built atop a Los Angeles Metro station in Hollywood, and the
Chicago Transit Authority (CTA) has partnered with Apple in order to renovate and
redevelop the North and Clybourn Red Line Station in Chicago. These are some of
the best examples within the United States, even though transit-oriented
development is more practiced in other countries.
PART II
Ideally, the MBTA should sell its Davis Square properties, and the City of Somerville
should provide the new developer with generous FAR bonuses if the developer
renovates the station platforms below their buildings, and incorporates the station
entrances into their two sites. This public-private partnership model should be being
implemented throughout the U.S., but people continue to fear density and
displacement, and zoning and land use policies have become 20th century artifacts.
At the CTA North and Clybourn Red Line Station in Chicago, the station entrance
was completely renovated and an Apple Store was placed on the property. Here in
Somerville, an Apple Store could be placed on the property, either entirely on the
ground-floor or on two levels, and the T entrance could be combined into this
structure. Indeed, our group has decided to emulate the case study for the North
and Clybourn Red Line CTA station in Chicago. This study has plenty of information
regarding joint development, and it also is located amidst a similar typology to
Davis Square in Somerville, MA. Both neighborhoods are not the densest, yet they
are up-and-coming, surrounded by residential communities.
The redevelopment of this parcel will make the area more dynamic, attracting more
people for shopping, which will spill over into other businesses, creating local jobs
34
35
and opportunities. It could also increase ridership for the T, thereby improving air
quality, reducing greenhouse gas emissions and traffic congestion, saving energy,
and decreasing reliance on foreign fossil fuels.
Of course, this project will need to approximate the additional number of shoppers
that would come for the Apple Store, but since there is no nearby Apple Store, it
could be substantial. But is it substantial enough for Apple to want to contribute
funds to renovate the station? How much is needed? Going forward, these are some
of our basic questions.
Case Study Summaries
CASE STUDY 1: New York Metropolitan Transportation Authority (Fulton Center)
1. Name and Location: Fulton Center, New York City

2. Program/Project Description: The most prominent example of the MTAs joint
development practices is the Fulton Center, which opened in 2014 in Lower
Manhattan, across the street from architect Santiago Calatravas World Trade
Center PATH Hub. These two hubs will be interconnected by underground
passageways lacking retail, but the hubs themselves contain shopping
opportunities. Westfield, a real estate developer, will be maintaining retail
properties at the $1.4 billion Fulton Center
3. Background Issues: At the time the proposals were getting underway, the World
Trade Center had just been attacked, debris will still being hauled out of Ground
Zero, and the real estate market in Lower Manhattan was plummeting; even today,
35
36
the rebuilt World Trade Center remains largely vacant. While the underground retail
at the World Trade Center had been one of the highest profit per square foot
revenue generating properties anywhere, no one knew that Lower Manhattans real
estate market would bounce back, let alone survive with a semblance of profitability
at all. Also, according to Robert Paley at the MTA Real Estate Department, if the
MTA were to build up at the Fulton Center and then struggle with vacancies, the
tax-payer funded structure would receive heavy criticism.66
4. Operating Characteristics: According to Daniel Peterson, one of the designers of
the Fulton Center, the MTA intentionally wanted to build a civic structure, which
was a project given from the start, resulting in a humble structure. Designs were
put forward that lost the light and lost the circularity, and they spent years on
this problem moving from the design side to the valuation of the rights and working
those into a deal that made sense for everybody.67 Mr. Peterson states that
important transit stations have a tradition of open space and striking light, and
that commercial exploitation has given us the numbing warren that is todays
expression of Penn Station.68
5. Target Community/Beneficiaries: The Fulton Center is projected to serve
300,000 customers daily, making it the busiest transit hub in Lower Manhattan. 85
percent of all Downtown Manhattan trips are made by public transit and the Fulton
Center is the hub of the area, which is the second largest CBD in the United States,
after Midtown Manhattan.
6. Economic Development Connection: The Fulton Center is literally an economic
development connection, providing enhanced accessibility and mobility to jobs and
other opportunities. It also has a grand public space for the local community.
7. Economic Development Benefits: The Fulton Center will have over 65,000 square
feet of retail and commercial space. This additional revenue for the MTA will assist
with the maintenance of the facility, and positively impact the continuing
renaissance of Lower Manhattan.
8. Management and Staffing Requirements: Westfield is managing the retail at the
Fulton Center, under a public-private partnership agreement with the MTA.
9. Project Financing: Mr. Paley also stated that the Corbin Building, a historical
structure integrated with the Fulton Center, is being lobbied into a landmark so as
to sell eligible air rights to a developer. Once a developer acquires nearby parcels, a
zoning lot merger could take effect so the MTA to transfer development rights.
66
67
68
Paley, Robert. Personal interview. October, 2015.

Peterson, Daniel. Personal interview. October, 2015.
Ibid
36
37
Multiple other sites are also being considered, and many have already been
developed in exchange for improvements to MTA infrastructure vis--vis transit
bonus funds.
10. Lessons Learned: The Fulton Center is in the heart of Lower Manhattan, and it
is only four stories tall. In the future, the MTA should build taller, and work with the
City of New York in order to streamline zoning and land use, so as to allow taller
buildings in the central business district. Perhaps housing could have been built,
further increasing revenue and ridership for New York City Transit
__________________________________________________________________
CASE STUDY 2: Resurgens Plaza - Atlantas Lenox Station
1. Name and Location: Resurgens Plaza - Atlantas Lenox Station
2. Program/Project Description: Resurgens Plaza is a 27-story mixed-use, transitoriented development, consisting of 400,000 sq. ft. of office space and a parking
garage, connected to the Metropolitan Area Transit Authority (MARTA) Lenox
Station, in northern Atlanta.
3. Background Issues: MARTA began seeking out transit-oriented-development
(TOD) in order to spur cluster development around MARTA stations.69 MARTA had
built much of its current transit infrastructure throughout the 1970s, but it didnt
spur the development the city had hoped for.
Much of the downtown TOD development of Atlanta in the 1980s was a result of
zoning changes there that allowed major development opportunities in the city, and
this model was brought out to less-developed areas like the Johnsontown area
which included Lenox Station. Lenox Station and other similar developments aimed
at increasing office space development in the Atlanta area to retain professional
talent.70
4. Operating Characteristics:
MARTA entered an agreement with Resurgens Plaza Company (RPC) in 1984 for
joint development of Lenox Station. Resurgens Plaza opened in 1988: a 27-story
mixed-use office building including 400,000 sq. ft. of office space above a 10-story
parking garage, and a $218,000 annual Ground Rent agreement paid to MARTA.71
Lefaver, Scott. Public Land with Private Partnerships for Transit Based Development
Mineta International Institute for Surface Transportation Policy Studies. May 1997
70
Ibid
71
MARTA Joint Development Program 2015 Conference Report:
http://www.fta.dot.gov/images/photos/TRO_4/5.13.1345_MARTA_TOD.pdf
69
37
38
5. Target Community/Beneficiaries: Resurgens Plaza provides mobility services for
area workers, while offering convenient business space in a city that needs to retain
its business class Customers will be small-to-medium sized Atlanta area businesses
at risk of flight to nearby communities. Atlanta had seen significant flight of whitecollar workers in previous decades72, and the midtown area of Atlanta was largely
developed. Transit-Oriented Development projects like Resurgens Plaza serve to
bolster business cluster development, while generating revenue for MARTA and the
city. Development of the property required displacement of thirty-nine families in
the Johnsontown neighborhood parcel, however those families had joined together
under the Johnsontown Community Development Corporation, negotiating a highly
profitable buyout by MARTA for their properties.73 Tenants were pleased at being
paid $8/sq. ft. for properties valued at $.30/sq. ft.
6. Economic Development Connection: Development of the Commercial space,
parking provision and connection to mass transit was intended to spur and grow an
accessible business cluster in a new less-developed part of Atlanta, after the
downtown approached saturation. This development did the following:
Retained and attracted businesses and the professional class of a major

American city that had been losing its professional talent to suburban
communities.
Lowered costs of office space for area businesses, improved transit
accessibility for tenant workers
Increased neighborhood accessibility through increased parking within the
station
Increased area residents accessibility to the city by offering convenient
intermodal transportation (car-to-train).
7. Economic Development Benefits: By developing above Lenox Station, and

providing parking resources, MARTA and Resurgens Plaza Company have helped
foster a business hub in the Lenox area, which by 1997 had increased its share of
Atlantas office space to 10% from 5% in 1980.74 Additionally, MARTA receives
$218,000 in rent payments per year. Tenant pays an additional estimated $1.2
Million per year in Real Estate Tax75.
8. Management and Staffing Requirements: Tenant provides staffing and
management requirements; existing MARTA staff monitors usage and agreements.
Lefaver, Scott Pubic Land with Private Partnerships

Witherspoon, Roger Profits out of thin air in Johnsontown. Black Enterprise: December
1982
74
Lefaver, Scott. Public Land With Private Partnerships
75
Atlanta Real Estate Management: Costs of Leasing Real Estate
http://acreteam.com/default.asp.pg-LeasingAdvisor
72
73
38
39
9. Project Financing: RPC is the private developer who built the project at a cost of
$50 Million, with a $3.5 Million renovation project in 2013 by the new owner.76
MARTA receives $218,000 annually in rent payments from the tenant.
10. Lessons Learned: MARTA brought to this agreement the following: a property in
ripe for development, access to and integration with mass-transit, and ability to act
as a hub for negotiations with other governmental bodies.
It received return as part of agreements: lease revenue, infrastructure investment,
retention of jobs within the city limits as part of the creation of a business cluster,
jobs with increased transit access, and increased ridership on MARTA.
This and other MARTA TOD initiatives inform our project because they are an
iteration of a simple principle: leverage government power and property rights to
spur privately funded projects that enhance communities and their local economies.
The main goal of our project will to be to extract the most community and public
benefit out of the economic development project.
__________________________________________________________________
Case Study 3: West Hollywood Hotel at Hollywood/Vine Red Line Station
1. Location: Los Angeles, California
Sams, Douglas. $3.5M renovation on tap for Resurgens. Atlanta Business Chronicle:
April 5, 2013
76
39
40
2. Program/Project Description: This was a project completed in 2009 by the LA
Metro's Joint Development Program. The LA Metro's Joint Development Program
encourages transit-oriented Development in Los Angeles. This particular project
developed a 2.3 acre plot of land on top of the Hollywood and Vine subway station
to be used for commercial purposes; in addition, a 2.35 acre plot of land was also
developed for housing purposes. Today, the W Hotel, along with several restaurants
and buildings, including supermarket Trader Joe's, restaurants Delphine and Wood
& Vine, and upscale clothing retailers Upromo and Movieland Hat Designers, reside
on the commercial property. In addition, 78 affordable housing apartments were
built along with 297 market-rate apartments on the housing property.77
3. Background Issues: The original motivation behind this project was to increase
tax revenue for the City of Los Angeles, provide affordable housing and jobs for
local residents, reduce traffic in the area, and provide private funding for local
community health, educational, and job initiatives.78
4. Operating Characteristics: Retailers, landlords, and the owners of the W Hotel
pay rent to the developers.
5. Target Community/Beneficiaries: The particular community that this joint
development project seeks to benefit are low to moderate income residents of
Hollywood. 79
6. Economic Development Connection: The economic development connection in
this project is that it seeks to create jobs for local residents, improve local
infrastructure, and increase access to quality goods for local residents.
7. Economic Development Benefits: The project created 78 affordable housing
units. It also provided $30,000 to fund community outreach programs for the
Health insurance Trust Fund. A $500,000 endowment was also given to Hollywood
High School Performance Arts. In addition to these local benefits, the project also
increased tax revenues for the City of Los Angeles. A tax assessment study done in
2007 concluded that the development would generate $167 million dollars in
additional tax revenue for the City of Los Angeles by 2036.80
Camino, F. (2010, January 28). Transit Oriented W Hollywood Hotel Opens Today.
Retrieved from thesourcemetro.net: http://thesource.metro.net/2010/01/28/transitoriented-w-hollywood-hotel-opens-today/
78
LA Metro. (2007, February 12). Developers Break Ground on Major Joint Development at
Hollywood & Vine Metro Red Line Station. Retrieved October 12, 2015, from
https://www.metro.net/news/simple_pr/developers-break-ground-major-jointdevelopment-ho/
79
Ibid
80
Ibid
77
40
41
8. Management and Staffing Requirements: Tenants provide staffing and
management requirements
9. Project Financing: The project was financed by a joint public/private partnership
between two private developers, Gatehouse Capital Corporation and Legacy
Partners, and two public partners, the Los Angeles County Metropolitan
Transportation Authority, and the Community Redevelopment Agency for the City of
Los Angeles (CRA/LA). The total cost of the project was $600 million.81
10. Lessons Learned: As of 2015, the Hollywood/Vine Hotel Joint Development
Program Project seems to be a great success. According to the LA Metro, it is the
most successful project that the Joint Development Program has undertaken so
far.82
One criticism of the program is that it has actually increased traffic, not reduced it.
One reason for this is that the developers built an enormous parking garage at the
location. In fact, The W Hotel advertises that it has the best parking in Los Angeles,
while it barely mentioned that it is close to public transit.83
Another problem is that the apartments that were built in the location have been
plagued by poor management. Many residents have complained that the
apartments lack proper security, are noisy, and the grounds are filthy.84
The last common criticism of the project is that it didn't create enough affordable
housing units. Besides the 78 affordable housing apartments, most of the other
units that were created were luxury condominiums whose price ranged from
$800,000 to $6 million.85
LA Metro. (2007, February 12). Developers Break Ground on Major Joint Development at
Hollywood & Vine Metro Red Line Station. Retrieved October 12, 2015, from
https://www.metro.net/news/simple_pr/developers-break-ground-major-jointdevelopment-ho/
82
Margaronis, S. (2013, October 31). LA Station "Crown Jewel" Development: Mayor
Garcetti. Rebuild the United States. Retrieved October 14, 2015, from http://rbtus.com/launion-station-crown-jewel-development-mayor-garcetti/
83
(Camino, 2010)
84
Ibid
85
Ibid
81
41
42
Case Study 4
Appendix: CTA Joint Development (Apple Store)
42
43
Apple invested up $3.897 million for station improvements in Chicago.

Apple designates about $27 million a year to high-profile stores for brand
marketing and promotion.
As of 2009, Apple had seven stores in Chicago suburbs and one store in the
city. Apple had been looking for the site of its next retail store within
Chicago. When determining store placement, Apple most likely checks its
registration database to determine where existing customers live and buy
and examines purchase records from both Apple stores and authorized
resellers. Other factors include the presence of universities, overall
education, and economic conditions.
Apple could have chosen the Block 37 location on State Street, but the slow
pace of the project may have prevented Apples full commitment. Apple could
have also picked from five vacant properties in Lincoln Park that met its
15,000 square foot minimum criteria. The property on 2214 North Lincoln
Avenue with 25,000 square feet is priced at $28 per square foot. Instead,
Apple chose to pay about $38 per square foot for the North and Clybourn
property. The location was likely chosen because it is in a rising shopping
district, close to high-end stores like Crate and Barrel. The median household
income within a mile of the area in 2009 was $80,110. Consumers spent
$192.486 million on entertainment within a mile radius of the area.
Additionally, certain Apple stores serve as a brand lighthouse. The
triangular site will serve as a giant Apple billboard.
Apples investment in the CTA investment aligns with its goals of crafting a
superior retail experience. In San Francisco, Apple funded the extension of a
tunnel connection between a BART station and the exit stairways; Allen
acknowledges that this change was modest, but definitely supportive of the
BART system. Apple routinely fixes the exterior of their street-level stores,
including removing existing sidewalk, planting trees, and moving kiosks, fire
hydrants, mailboxes, benches, and other obstructions. Apple had a strong
stake in the station because its future store is adjacent to the stop. With the
deal, Apple gains considerable control over the aesthetics of the whole
triangle and the retail experience of its customers. Secondary benefits
include increased foot traffic, good publicity, and advertising or naming rights
Apple, with $40 billion in cash, has enough financial capital to commit to the
project and approached the CTA and the city, which indicates their interest,
initiative and willingness to commit.
43
44
Appendix B: The Public Perspective: Survey on Davis Square
On Sunday, November 22nd, 2015, we surveyed fifty residents on the platform
level of the Davis Square Subway Station in order to gain insights on local
residents' shopping habits for groceries; and secondly, to measure local support for
bringing a supermarket to Davis Square.
The tables below give the results of the November survey:
Question 1:
Would you regularly shop at a Trader Joe's at the Davis Square Subway Station?
Would you shop?
Number of Votes
Yes
No
48
2
96
4
Total
50
100
Question 2:
Where do you currently do the bulk of your grocery shopping?

Number of Votes
Market Basket (Somerville Ave)
Star Market (Porter)
Stop and Shop (McGrath Hwy)
Whole Foods (Alewife)
Trader Joe's (Alewife)
*Several places
*Other
Total
10
14
7
5
3
9
2
50
20
28
14
10
6
18
4
100
*Several places - nine residents, including 2 new residents and 2 students.

*Other - two persons. One answered farm share and other woman mentioned
that she do her shopping by her job.
62% of grocery shopping occurs outside of Somerville.
44
45
Consumer Feedback
One respondent stated that the current closest Trader Joe's and Whole Foods are
not easy to get to for residents with cars and that this development would benefit
his community.
Another respondent did not have an automobile and he really thought development
would help people like him out.
Another respondent stated that she would only support the project if there were
sufficient parking. She said that the Trader Joe's at Coolidge Corner is a "mess"
because it lacks enough parking. She also then stated she thought it was too
crowded so this might help.
Another respondent stated that he currently shopped at Whole Foods because he
liked the product selection but complained about the high prices. He preferred
Trader Joe's because it was less expensive but offered similar products as Whole
Foods.
Interestingly, several residents said that they've been waiting for a supermarket to
come to Davis for some time; a couple respondents even cited that they were
disappointed that Roche Brothers did not come to Davis because they felt that their
neighborhood really needed one.
One final point: Many of the people we spoke to stated that they did not live in the
area. Perhaps as many as two out of every three. We're not sure whether or not
this was true or they just didn't want to take a survey. We got the impression that
the residents of Davis Square receive more than their fair share of petitioners and
solicitors.
45
46
Appendix C: Supermarket Access and Saturation in Somerville and the Boston Area
Below we have mapped out the supermarkets in the Davis Square proximity,
marked with 1/2-mile radius circles. The red circle is the Alewife Trader Joes, and
the green is our proposed location. We learned that Davis Square and the area to
the northeast are an underserved for supermarkets, and that Somerville
supermarkets have a considerable amount of overlap, regularly located within 1/2
mile of each other.
46
47
The mapping of current Trader Joe's locations shows that they operate in areas with
considerable supermarket options, and that the geographic relationship between
our proposed location and the Alewife location is similar to the relationship between
the Cambridge and Brookline locations (which were the first Trader Joe's locations
on the East Coast). Significant presence of existing locations indicates that supply
chain issues for the company will be minimal.86
Kowitt, Beth. "Inside the Secret World of Trader Joe's" Fortune Magazine. August 23,
2010.http://archive.fortune.com/2010/08/20/news/companies/inside_trader_joes_full_versi
on.fortune/index.htm
86
47
48
Appendix D: Trader Joe's Corporate Office Interview- October 15th, 2015
Although corporate management was not forthcoming with information about the
company's process for expanding their locations, an October 15 contact with two
management employees revealed the following:
Trader Joe's uses a 2-year planning process for store expansion
Their current goal is to expand by 25 stores per year.
Population density, area income, neighborhood growth, customer feedback and
area store performance are major measurements they look at when considering a
new location.
Appendix E: Davis Square Commercial Lease Survey

Location
Size(sf) Proximity(ft)
Price
(sf)
Characteristics
240 Elm
14,000
600
50
17 College
500
100
42
246 Elm
227 Summer
318 Highland
3000
3934
7,040
600
1200
2,400
65
40
$3.98M
(sale)
Second floor; pedestrian

artery
2nd floor; office space
(small)
1st floor; restaurant zoned
Part of 18,000 SF building
Mixed use, ground floor
commercial
48
49
Appendix F: Evaluation of MBTA Funding and Siting Process
The MBTA is a public entity with independent bonding authority that does not fund
capital projects in the traditional way that private industry or non-profits do. The
MBTAs capital program is funded by federal grants, revenue bonds, state
infrastructure funds, pay-as-you-go capital, project financing, and other sources.
The MBTA finances maintenance, upgrades and new construction through its Capital
Investment Program (CIP). S1.05 Billion in funds have been allocated for FY2016,
CIP). The funding sources for the CIP can be grouped into three general categories:
$479 million (45.8%) in federal government funding through federal formula funds,
flexed federal highway funds, small starts, new starts, the Department of Homeland
Security, and ARRA (the American Recovery and Reinvestment Act)
$225 million (21.6%) in bonds supported by MBTA revenues, project financing
(borrowing through a federal loan program), the capital maintenance fund (cash-inhand), and reimbursements
$342 million (32.7%) in state funding for Commonwealth projects authorized in
legislation (the MassDOT CIP authorizes $396 million for MBTA projects; the
difference is represented by projects that the Highway Division is doing on behalf of
the MBTA)87
Thus, the MBTA finances its new construction with a combination of grant funding,
zero-interest loans and higher interest debt, and internal revenue. Understanding
the complexity of the MBTA borrowing and funding streams, we have decided to
present capital costs to the MBTA on a sliding scale of effective interest rates,
ranging from zero to seven percent annually.
Additionally, MBTA debt and income are fluid and long-term: the Authority can
review cost and revenue outlays over a longer timescale, and thus we present
rental revenue as an average over a 20-year lease.
MBTA "Capital Investment Program FY2016". Web.

http://www.mbta.com/uploadedfiles/About_the_T/Financials/FY16CIP.pdf
87
49
50
SOURCE: MBTA CIP 2016
The MBTA prioritizes capital projects based on the following criteria:

Impact on the Environment
Reduce Pollution and Consumption

Promote Mode Shift (walking, biking, and public transit)
System Preservation.
Upkeep (maintaining a "state of good repair")

Lifecycle Management
Reduce Environmental Vulnerability
Financial Considerations
Impact on Operating Costs

Impact on Operating Revenue
Operations Impact
Improve Customer Experience

Number of Riders Affected
Operational Sustainability (impact/benefits of the project are sustainable)
Legal Commitments
Environmental regulations; ADA and other Federal mandates)88
88
Ibid.
50
51
Appendix G: NAICS Profile of Trader Joe's on Memorial Drive

Below is a copy of the NAICS profile89 for the Trader Joe's on Memorial Drive in
Cambridge. It is a similar size to the store we're proposing.
Corporate Name:
Trader Joes Company
Tradestyle Name:
Trader Joes 502
Point of Contact:
Ms Denise Hutzel
Address:
748 Memorial Dr Cambridge MA
02139-4614
Telephone: (617) 491-8582
Latitude: +42.357845
Sales Volume: $0
Employees on Site: 40
Line of Business: Grocery Stores
NAICS 1: 445110
Title:
Manager
NAICS 2:
SIC 1: 54110000
SIC 2:
Longitude: -071.115146
Supermarkets and Other Grocery

(except Convenience) Stores
SIC 1 Description: Grocery stores
SIC 2 Description:
US Business Directory North American Industry Classification System

http://www.findnaics.com/paid.aspx
89
51
52
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52
53
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1

December 14, 2015

II. Description of Proposed Program or Project

III. Community and Project Concept and Background Issues

IV. Ownership Roles and Roles of Other Parties

V. Economic Development Connection and Benefits

VI. Market Analysis

VII. Marketing Plan

VIII. Staffing and Management Requirements

IX. Operations Analysis

X. Budget and Financial Analysis

XI. Conclusion and Assessment of Critical Risks and Opportunities

Appendix A: Case Studies

Appendix B: Davis Square Survey

Appendix C: Supermarket Access and Saturation

Appendix D: Trader Joes Corporate Office Interview

Appendix E: Davis Square Commercial Lease Survey

Appendix F: MBTA Funding and Siting Process

Appendix G: NAICS Profile of Trader Joe's on Memorial Drive

Figure 2: Massachusetts Turnpike Air Rights

Figure 3: Davis Square Eastern MBTA Red Line Entrance

Figure 4: City of Somerville Zoning Process and Map

Figure 5: Site Dimensions

Figures 6.1-6.9: SketchUp of Proposed Development

Figure 7: MBTA Real Estate Stakeholders

Table 2: Trader Joes Somerville Market Demographics

Table 3: Development Budget

Table 4: Funding Sources

Table 5: Pro Forma at $21 per SF

Table 6: Pro Forma at $40 per SF

Table 7: Pro Forma at $50 per SF

Table 8: Pro Forma at $60 per SF

Figure 1: Logic Model

II. Description of Proposed Project

Figure 2: Massachusetts Turnpike Air Rights

Figure 3: Davis Square Eastern MBTA Red Line Entrance

Figure 4: City of Somerville Zoning Process and Map

Minimum lot area/dwelling unit for 1-9

Minimum lot area/dwelling unit for 10

Table 1: Central Business District Zoning Requirements (MuniCode.com)

DeCoste, Francis. Personal interview. November 2015.

Figure 5: Site Dimensions (100 feet x 100 feet)

Figure 6.1: SketchUp of Proposed Development

Figure 6.2: SketchUp of Proposed Development

Figure 6.3: SketchUp of Proposed Development

Figure 6.4: SketchUp of Proposed Development

Figure 6.5: SketchUp of Proposed Development

Figure 6.6: SketchUp of Proposed Development

Figure 6.7: SketchUp of Proposed Development

Figure 6.8: SketchUp of Proposed Development

Figure 6.9: SketchUp of Proposed Development

III. Community and Project Concept Background Issues

Washington, D.C.: United States Government Accountability Office. 2010.

IV. Ownership and Roles for Other Parties

V. Economic Development Connection & Estimation of Economic

Livable Wage Jobs

Increasing Access to High-Quality Goods

Induced and Indirect Job Creation

VI. Market Analysis

Proposed Tenant Customer: Trader Joes

Potential Target Customers for Trader Joes

Table 2: Trader Joes Somerville Market Demographics

U.S. Census Bureau, 2009-2013 5-Year American Community Survey.

Review by Sarah M. on Yelp. http://www.yelp.com/biz/star-market-cambridge-3