P3: A National Perspective

Transcription

1 1 P3: A National Perspective Presentation to the California State University Auxiliary Officers Association Presented by: Jim G. Short, Balfour Beatty Campus Solutions Mark White, Bostonia Partners Masood Sohaili, DLA Piper 1

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3 3 Case Studies Presented Bossier Parish Community College April, 2002 Georgia Perimeter College December, 2005 University of California at San Francisco March, 2010 Florida Atlantic University February, 2010 The Ohio State University June, 2012 New Campus Academic Building Neurosciences Building Innovation Village Apartments Monetization of Parking Facilities

4 4 Bossier Parish Community College New Campus 4

5 5 The Project Complete new campus for BPCC including infrastructure, buildings, parking, landscaping, furnishings and equipment Bossier Parish Community College 1

6 6 Background BPCC, founded in 1966 as a 2-year college serving northwest Louisiana (outside of Shreveport) Multiple campuses; enrollment over 4,000 in 2001 Fall enrollment in 2011 over 7,000 Objectives Get the main campus out of leased space Allow for growth New campus to include the BPCC administrative offices Accelerate delivery would have taken 7-10 years otherwise Bossier Parish Community College 2

7 7 Parties Ground lessor Ground lessee Issuer Facilities Lessee Consultant General Contractor Architect Underwriters Bond Insurer Bond Trustee BPCC (College) Campus Facilities, Inc. (Owner), a non-profit corporation formed for this transaction Louisiana Local Governmental Environmental Facilities & Community Development Authority (Issuer) (College) Rex Bryan CED (Consultant) Shreve Land Construction (Contractor) Slack, Alost, McSwain & Associates (Architect) Sisung Securities Corporation and Morgan Keegan & Company, Inc. (Underwriter) MBIA Insurance Corporation (Insurer) Regions Bank (Trustee) Bossier Parish Community College 3

8 8 Transaction Steps College engaged the Consultant to advise and coordinate the transaction Non-profit Owner was created College ground leased land to Owner Owner engaged Consultant, Underwriter, Contractor Contractor engaged Architect Issuer issued bonds in par amount of $45,000,000, with help of Underwriter, based on strength of ratings/insurer Issuer loaned bond proceeds to Owner Owner paid Contractor for design and construction Owner leased the campus to the College Lease term lines up with bond maturities Lease amount is the same as debt service, plus an amount for insurance, taxes, repair and maintenance Lease payment is subject to annual appropriation Bossier Parish Community College 4

9 9 Transaction Structure College Contractor Design Costs Development Costs Ground Lease Facilities Lease Non-Profit Owner Lease Payment Bond Proceeds Debt Service Consultant Issuer / Bondholders Architect College Bossier Parish Community College 5

10 10 Ratings At Financial Close Currently April 12, 2002 Moody s Aaa Moody s Baa2 S&P AAA (both on the strength of the ratings of MBIA) MBIA: Moody s Aaa S&P AAA Fitch AAA Bossier Parish Community College 6

11 11 Georgia Perimeter College Academic Building 11

12 12 The Project 95,000 square feet new building which included classrooms, offices, laboratories, and a student center, and related parking Georgia Perimeter College 1

13 13 Background GPC, founded in 1958 as a 2-year college serving the Greater Metropolitan Atlanta area Multiple campuses; enrollment over 20,000 in 2005 (almost 27,000 fall 2011) Had 1,500 students in leased space in Rockdale County Growth-minded president Community support for a new campus in Newton County; land and infrastructure funds provided (circa $3 million) Objectives Relocate the Rockdale students to the new campus; needed a building constructed Accelerate the timeline; typical capital funding process would take years. In general, GPC got one new building funded every 10 years Georgia Perimeter College 2

14 14 Parties Ground lessor Ground lessee Issuer Lessee Program Manager General Contractor Architect Underwriters Bond Insurer Bond Trustee Georgia Perimeter Foundation, Inc. (Foundation) GPC Foundation Real Estate Newton, LLC (Owner), a special purpose entity owned 100% by the Foundation Newton County Industrial Development Authority (Issuer) Georgia Perimeter College (College) Carter & Associates, LLC (PM) The Potts Company (Contractor) Lord, Aeck, & Sargent (Architect) Wachovia Securities (Underwriter) CIFG Assurance North America, Inc. (Insurer) Wachovia Bank, N.A. (Trustee) Georgia Perimeter College 3

15 15 Transaction Steps 100 acres of land donated to the Foundation The Foundation created Owner A portion of the land was leased to Owner Owner engaged all the transaction parties Issuer issued bonds in par amount of $22,695,000, with help of Underwriter, based on strength of ratings/insurer Issuer loaned bond proceeds to Owner Owner paid Architect and Contractor for their services Owner leased the new building to the College One-year lease, renewable annually Lease amount is same as the debt service, plus an amount for repair, maintenance, insurance and taxes Lease payment is subject to annual appropriations Additional security is a mortgage on the land and improvement Georgia Perimeter College 4

16 16 Transaction Structure Foundation Ground Lease General Contractor Architect/Engineers Development Costs Design Costs Facilities Lease Non-Profit Owner Lease Payment Bond Proceeds Debt Service Issuer / Bondholders College Georgia Perimeter College 5

17 17 Ratings At Financial Close Currently December 13, 2005 Moody s Aaa Moody s A3 S&P AAA (both on the strength of the ratings of CIFG) CIFG: Moody s Aaa S&P AAA Fitch AAA Georgia Perimeter College 6

18 18 University of California at San Francisco Neurosciences Building 18

19 19 The Project 237,000 square feet, 5-Story research and laboratory building that houses the UCSF Neurosciences Department and the Keck Institute University of California at San Francisco 1

20 20 Background UCSF is one of 10 campuses in the UC System It is the only campus that is dedicated to Health Sciences All students are graduate and professional level 2009 enrollment was 2,895 Objectives Construct a state-of-the-art neurosciences lab building Access private-sector capital Transfer price, schedule, and facilities risk to the private sector Accelerate the delivery time-line University of California at San Francisco 2

21 21 Parties Ground lessor Ground lessee Issuer Developer / Manager Sub-lessor Sub-lessee Space lessor Space lessee General Contractor Architect Underwriters Trustee University of California at San Francisco (University) Campus Facilities Improvement Association (Owner), a non-profit public benefit corporation California Infrastructure and Economic Development Bank (Issuer)) Edgemoor/McCarthy Cook Partners (Developer) Owner Developer Developer University Clark Construction Group (Contractor) Skidmore, Owings and Merrill (Architect) Barclays Capital and Wells Fargo Securities (Underwriter) New York Mellon Trust Company, NA (Trustee) University of California at San Francisco 3

22 22 Transaction Steps UC System created the Owner, a non-profit public benefit corporation University ground leased the ground for the new building to the Owner Owner sub-ground leased the ground to the Developer Developer leased the space in the building to the University Owner engaged the Underwriter and Trustee The Developer engaged the Architect and Contractor Underwriter placed bonds in the total amount of $207,670,000 $19,670,000 tax-exempt $188,000,000 of taxable Build America Bonds (BABs - effectively taxexempt after the 35% Federal subsidy) Owner make a portion of the bond proceeds available to the Developer to pay for the design and construction of the building Developer took on schedule & budget risk University of California at San Francisco 4

23 23 Transaction Steps (continued) Upon completion of the building: University pays Base Rent in the amount of the annual debt service to the Developer University pays Additional Rent to the Developer in accordance with approved maintenance expense and capital budgets; the operating expense includes a management fee to the Developer Developer takes on operating expense and capital cost risk University directly pays certain operating costs (insurance, utilities, etc.) Developer pays Base Rent in the amount of the annual debt service to Owner Developer uses the Additional Rent for operating expenses and capital costs University of California at San Francisco 5

24 24 Transaction Structure University Ground Lease Sub ground Lease Bond Proceeds Bond Proceeds Non-Profit Owner Debt Service Base Rent Issuer / Bondholders Architect Space Lease Developer University Base Rent Additional Rent Development Costs Contractor University of California at San Francisco 6

25 25 Ratings At Financial Close March 19, 2010 Moody s Aa2 S&P AA- Now Moody s Aa2 University of California at San Francisco 7

26 26 Florida Atlantic University Innovation Village Apartments 26

27 27 The Project 1,216 beds, 492,000 square feet mixed use residential complex in two buildings six and seven stories Florida Atlantic University 1

28 28 Background Founded in 1964 Now has 6 campuses Enrollment is over 29,000 About 22,600 on the main campus in Boca Raton Objectives Additional Student Housing Seed Money for Infrastructure Minimize Cost of Capital Avoid Direct Bond Issue by FAU Retain FAU Control over Residence Life Florida Atlantic University 2

29 29 Parties Ground lessor Ground lessee Developer General Contractor Architect Manager Underwriter Trustee FAU (University) FAU Finance Corporation (Owner) Joint Venture of Balfour Beatty Campus Solutions and Capstone Development (Developer) Balfour Beatty Construction (Contractor) Pierce Goodwin Alexander Linville (Architect) Joint Venture of Balfour Beatty Campus Solutions and Capstone On Campus (Manager) RBC Capital Markets (Underwriter) U.S. Bank National Association Florida Atlantic University 3

30 30 Transaction Steps The University board created a DSO Owner University leased the existing housing operation and the ground for the new housing to the Owner Owner engaged the Developer, Underwriter, Trustee and Manager Developer engaged the Architect and Contractor Underwriter placed tax-exempt bonds in the amount of $124,295,000 Senior issue of $120,930,000 (rated) Subordinate issue of $3,365,000 (unrated) purchased by Balfour Beatty All rents from the new housing project, and the net cash flow from the existing housing, are used to support the new bond issue The University manages residence life for all housing Manager manages operations and maintenance for all housing Florida Atlantic University 4

31 31 Transaction Structure Underwriter Trustee $12 m Ground Lease Development Agreement University Non-Profit Owner Trust Indenture Developer Ground Lease (New & Existing) $124.3 m Manager Series A Bondholders Balfour Beatty Property Mgmt Agreement Construction Contract Contractor A&E Contract Architect Florida Atlantic University 5

32 32 Ratings At Financial Close February 24, 2010 Moody s A2 S&P A Fitch A Currently Moody s A2 Florida Atlantic University 6

33 EXAMPLES OF UNIVERSITY MIXED-USE PROJECTS DEVELOPED VIA PPP STRUCTURES 33

34 University of Central Florida Knights Plaza completed Student Housing 2,000 Beds Retail 84,000 Sq. Ft. Parking Garage 1,400 Spaces New Arena 10,000 Seats Renovate Existing Arena 2,500 Seats UCF needed cash flow to support the cost of adding/renovating arena seats

35 Old Dominion University University Village completed TED Convocation Center Parking Retail/restaurants Hotel Residential Office and research space Old Dominion wanted to convert from a commuter school to a residential campus with a traditional college-town feel

36 Georgia Tech Tech Square completed Georgia Tech College of Management University bookstore Retail/restaurants Hotel/conference center Parking Garage Other Georgia Tech uses Georgia Tech connected the campus to the mid-town area and generated revenue to help pay for university buildings

37 37 The Changing World and the Americanization of P3s: Enter the Hybrid Model 37

38 38 Introduction to the Hybrid Model Under a hybrid model, public agencies could: (1) issue traditional long-term municipal debt to the maximum amount supported by the municipal capital markets for a particular project; (2) bid out the design, construction and maintenance of the infrastructure project (or long-term maintenance of an existing asset); and (3) look to investors that traditionally would have sought to obtain an equity interest to instead provide long-term (i.e. 50 to 70 years) subordinate mezzanine loans. The interest rate on the mezzanine securities would typically exceed the interest rate on the senior debt in order to compensate investors for the longer-term risk and subordination. Hybrid P3 Model 4

39 39 Introduction (Continued) Under the hybrid P3 model, the public agency would maintain an equity interest in the infrastructure asset and could either retain operations and maintenance or provide for a third party to operate and/or maintain the project. Investors (the mezzanine security holders) would hold a subordinate lien on project revenues until the public agency s senior municipal debt secured by the asset is paid. The mezzanine securities could, except as to issues related to the ownership of the asset, incorporate many of the provisions common to concession agreements for P-3s. For public law and tax purposes, mezzanine securities would be debt. In some possible iterations of this hybrid P-3, mezzanine securities could be issued as tax-exempt debt, subject to applicable legal requirements, or as taxable debt. Hybrid P3 Model 4

40 Pros and Cons of Using a Hybrid P3 Instead of a Traditional P3 Pros Public agencies retain ownership and tighter control over project assets, subject to any applicable management input covenants. There is no need to sell project assets or to enter into a long-term concession agreement. Limits potential political opposition and suspicion that a P3 represents a selling of public assets to either private individuals or foreigners to the detriment of US citizens. Mezzanine securities can have longer maturity terms than some other forms of governmental project debt while still taking advantage of preferential tax treatment. If a project performs very well financially, the public agency will typically stand to reap more of the benefit. Cons Mezzanine securities will typically have high interest rates, resulting in a large amount of money that must be paid back to the mezzanine security holders (unlike equity interests that are tied more closely to performance and that can be more easily wiped out if a project fails). Need to monitor and ensure that mezzanine security yields will not constitute equity or they may no longer comply with certain legal requirements. Must keep sufficient funds on hand, based on reasonable projections, to be able to pay back mezzanine security holders while also ensuring that the public agency has a residual equity interest. Rate covenants designed to ensure that mezzanine security holders are paid back may harm citizens. (I.e. increasing tolls/fees in order to make interest payments to mezzanine security holders). 40

41 41 The Project/Case Study Comparing Alternative Structures Monetization of Parking Operations and Maintenance The Ohio State University 1

42 42 Background Founded in 1870 Enrollment is over 64,000 About 55,000 students on the main campus in Columbus Objectives Monetize Parking Operations and Maintenance Totaling over 36,000 spaces Use money for funding academic programs, scholarships and bus service Minimize Cost of Capital The Ohio State University 2

43 43 Parties Lessor Lessee Investor Operator The Ohio State University (University) QIC Global Infrastructure/LAZ Parking QIC Global Infrastructure LAZ Parking The Ohio State University 3

44 44 Transaction Steps University leased the existing parking operation and the ground for the new housing to the Owner. 50 year lease to QIC and LAZ. Investor engaged the operator. University received upfront payment of $483 million which will provide an estimated $3.1 billion in investment earnings over 50 years. Potential parking-rate increases will be capped at 5.5% annually for the first 10 years of the lease, followed by annual increases of up to 4% or the rate of inflation. Manager manages operations and maintenance for all parking. The Ohio State University 4

45 45 Dialogue and Discussion What are the factors to consider when deciding between a traditional P3 or a hybrid P3? Use of proceeds Capital market options in municipal markets versus taxable markets Time and sophistication of financing team Type of project 45

46 46 Dialogue and Discussion What is a good procurement process for P3? Talk to the private sector to make sure the project makes sense.it costs you nothing Conduct a market study and feasibility analysis Conduct a prequalified list of developers system-wide RFP s are very time consuming and costly to the private sector. RFQ with a financial analysis works best. 46

47 47 Contact Information Jim Short Senior Vice President Direct Main Masood Sohaili Partner Direct Main 47