Hellooo South Carolinians, PPPers and those of you who consider yourselves Beasts of the Southern Wild!
Consider today's post a shot across the bow at one of my most beloved urban regeneration tools:
The public-private partnership -- often called a "PPP" or "P3".
Here's the rub: The most effective tool for neighborhood regeneration and placemaking going forward will be P5s not P3s. The threats and opportunities facing our most challenged places - be they inner-city neighborhoods or former Rust Belt cities -- require nothing less. We will need the additional resources and capabilities of P5s to sustainably transform communities and build vibrant places in the future.
I've spent a lot of time with P3s - "some of my best friends are P3s" but let's talk more about P3s here in my last blog post since this post is about P5s.
To start, P5s are not just an evolved version of P3s.
New Players, Resources and Know-How...
As you can see from the diagram above, the P5 adds three critical players to the equation:
- The Philanthropic sector
- The Non-Profit sector
- The People
The integration of these players into placemaking and the regeneration of neighborhoods results in a more complex beast which requires distinctly different business models, financing mechanisms and management strategies. P5s are organized differently and funded differently. The new players have different goals. The leaders and players in a P5 must be fluent in new languages - "Does anybody here speak Philanthropic?" and navigate the perspectives of business partners who have unique resources and differing requirements for success.
Creates a New Species
The result is that P5s are their own species -- they are not the offspring of P3s but more like a distant, more complicated cousin -- and are capable of surpassing the groundbreaking feats of P3s. The limits of a P5/P3 comparison are akin to comparing Michael Jordan, Kobe Bryant and LeBron James. Some argue that Kobe is an all-time great but is still just a new-age version of Michael Jordan. But LeBron...LeBron is a whole different animal -- not just a new version of Jordan.
P5s are to P3s what LeBron James is to Michael Jordan.
So...why should you care about the emergence of the P5? If you are fighting in the war to regenerate our neighborhoods, towns and cities, you care because:
- You're going to need new weapons. Some of the old tools will work but you'll also need some new arrows in your quiver. What financing sources, mechanisms and strategies work best in a P5 world? For example, will New Market Tax Credits become a more understandable and efficient player in the future? Are there opportunities to innovate and create new financing tools and joint venture structures that will work better in a P5 world?
- You'll need a new army (or you'll need to re-train your current one). Your Private Sector Partners. What type of developer partner you need changes if the deal is a P5. They have to deal with more people, speak more languages, and their capital -- well it needs to be more patient. Your private sector partner can't just be used to dealing with "the City" but doesn't know how to work with a philanthropic organization or local non-profit who is a financial partner in the project. As a matter of fact, just because your private sector partner is facile in dealing with local government doesn't mean they are ready or willing to deal withHUD NSP or HUD's Strong Cities, Strong Communities funding program ("SC2" as they call it)!
Your staff, management team and Board need to be different and work differently as well. Can they talk New Markets and PRIs as well as they can talk NOI and IRRs? Do they understand who should lead and what will be their new roles? Do they have the authority and tools to work with parties that have conflicting objectives or that want different project outcomes?
Your Consultants and Advisors.
Who you will need to engage, educate and empower changes too. There will now be more residents and non-real estate professionals to talk to throughout the process -- Can your current advisors help you create innovative community outreach, engagement and empowerment structures? Can they help you reach the people (E.g. Millenials, business owners, and low-income residents) who don't usually show up to any of your meetings? Are your consultants leaving behind sustainable prototypes, on-going capacity and laying out a roadmap for future participants? Your army needs to change to fight these battles and best navigate a P5 world!
Let's keep going on this!
Stay tuned for my next blog post on P5s where we'll continue to discuss these reasons (and more!) that show that P5s change everything. I'll also briefly discuss a P5 that is often mislabeled as a P3 (Hint: It's a "Line" and it is "High") and also talk about what potentially will be the new platinum standard for P5s - the Detroit Future City project.