Archive for Case Studies

Creative Financing to Build a Theater a City Demands

Durham Performing Arts Center Stage

Durham Performing Arts Center Stage

Garfield Traub Theater Development Case Study

The Need: A high-quality downtown performing arts center had been a goal of the City of Durham for many years when Garfield Traub and its team were selected by the City to develop the center. Independent studies identified substantial market demand for touring Broadway musicals, concerts and other entertainment.  Downtown momentum was already building with the redevelopment of the American Tobacco Historic District, The Durham Bulls Athletic Park and other signature projects.  Duke University had an older arts facility it wanted to demolish for building new campus facilities, and Duke and the city wanted to preserve Durham as the headquarters for the American Dance Theater which needed new facilities.

The Challenge: Durham’s downtown development activities were very enterprising, but the City was insisting that the private sector invest in and share risk and responsibilities with the City.  Furthermore, the historic 1,000-seat Carolina Theatre of Durham and its Board of Directors and community supporters were very concerned what a new theater would do to this beloved local institution and its future.

The Risk:  While recognizing that the ownership and capital financing of a new performing arts center would fall primarily to the City, the City did not have the desire or the resources to operate or accept the associated risks of operating and promoting a performing arts center.

Durham Performing Arts Center Walkways

Durham Performing Arts Center Walkways

The Opportunity: With both the City and Duke and some influential civic leaders seemingly ready to contribute and move forward, and the city having engaged two theater specialists to assess the marketplace, the missing piece was to add a development and finance leader to the effort.  Garfield Traub in concert with a local design firm, Szostak Design Inc., was selected to lead the team that would deliver the DPAC.

The Solutions:

  1. Financing – The DPAC was funded primarily by low-cost City financing that did not require a voter referendum.  Sources of funding included taxable Certificates of Participation repaid by a portion of Citywide Hotel Occupancy Tax, facility naming rights, a Duke University grant, an operator loan and philanthropic sponsors.    Furthermore, Garfield Traub led a selection effort that resulted in the City negotiation of a public/private partnership between the City as facility owner and Nederlander Organization and Professional Facilities Management to be the operator and promoter of the Durham Performing Arts Center (DPAC).  The operator submitted a proposal to operate the DPAC, assume the risk of operating losses, and guarantee theater activity to ensure that City economic impact goals would be met.  Those goals included (1) Pedestrian activity and downtown vitality, (2) Construction and permanent job creation, (3) Increased property valuation and taxes in the vicinity of the theater, (4) Increased city visitation, including hotel room nights, dining, retail and transportation spending, and (5) Inducement of adjacent, private investment and business activity.
  2. Delivery – With Design-Build not being allowed as a form of delivery within North Carolina at the time, the team recommended and the City agreed to use a Construction Manager At Risk (CMAR) contract to ensure a predictability of on time and on budget success.  The DPAC was completed ahead of schedule and under budget.
Durham Performing Arts Center (DPAC)

Durham Performing Arts Center (DPAC)

The Result:  The ambitious initiative led to the opening of the DPAC.  It is owned by the City and The DPAC has exceeded the original projections of attendance, surplus cash flow and economic impacts by multiples of original projections, and has contributed greatly to the development of many new restaurants, retail, office, and other related mixed-use developments, in spite of the recession in full force upon the opening of the theater in 2009.  Five new downtown restaurants opened in the first two years of DPAC operations, despite the national recession. The DPAC produces $28 million in annual economic impact according to the Durham Convention & Visitors Bureau, and was rated #1 by trade publication Pollstar as the top-selling theater in the U.S. and #2 in the world for the first half of 2012.  Projections for surplus cash flow after operations were originally conservatively estimated at $400,000 per year, with approximately $160,000 (40%) going to the City. The actual results have exceeded the original, purposefully conservative projections by a factor of ten! This year the DPAC reported a net income of more than $4.5 million in fiscal 2011-12, with $1.8 million of these funds going to the City of Durham.

Co-promotion and joint marketing activities have proven that “a rising tide raises all ships” for a properly planned arts venue.  As evidence, in spite of early concerns that the DPAC would be competitive with the historic 1,000-seat Carolina Theatre of Durham, less than three years after the grand opening of  DPAC, it was announced that the Carolina Theatre was ranked among the top 100 theaters in the world in attendance for the first time in its history.   This Garfield Traub-led venture proves what smart partnering of the public and private sectors can accomplish.

To find out how your City can successfully build a performing arts center or any other public development to meet your City’s needs contact Garfield Traub.

Get the Hotel Financing Your City Needs for Development

Garfield Traub Hotel Case Study

Overton Hotel and Conference Center

Overton Hotel and Conference Center, Lubbock, TX

The Need:  Lubbock, Texas, a community of 200,000 population and a trading area of 750,000 located in the high plains area of west Texas and home to Texas Tech University and its student population of 35,000, lacked a full service hotel and a modern convention center to attract business meetings and tourism.  Significant tourism was being sacrificed and the city itself lacked quality meeting and support facilities for its businesses and its citizens.  Texas Tech had a Majors Program for Restaurant, Hotel and Institutional Management and no appropriate property in the community for its students to utilize for their laboratory experiences.

The Challenge: Historic hotel economic data would not support the private financing of a full-service hotel and conference center, creating a demand for public financial support in order to ensure the successful financing for the development.  Three attempts by private developers had been attempted with no success over more than half a decade leading up to the selection of Garfield Traub Development.  Texas Tech’s leadership had other priorities ranked above this initiative.

The Risk: The city had been led each time in the past to believe that the level of municipal financial participation to accomplish the successful financing of such a development was less than reality.  The real number was in excess of what the city wanted to contribute, so a gap existed that needed to be filled, and the city leadership had a great need to be schooled in the realities of hotel finance and operations.  Texas Tech might not be able to exert its influence in assisting.


Overton Hotel and Conference Center Tech View

Overton Hotel View from Texas Tech Stadium

The Opportunity: The city was ready to be taught and to be more collaborative because of the previous disappointments.  Texas Tech now had a new Chancellor and a desire to collaborate with the city.  The Lubbock CVB and EDA were ready to help, and the economy was advancing with tourism ripe to attract to Lubbock.  Importantly, the largest mixed use redevelopment in the nation, a 325 acre land development stretching from Texas Tech’s front door of University all the way east to downtown was advancing in its evolution and had planned for a hotel and conference center to be located within this Tax Increment Financing Zone.  The time was right.

The Solutions:

  1. Financing – A capital stack was created using a Public/Private Joint Venture with the City.  The financing consists of an equity investment by the hotel owner/operator totaling 10% of cost, a bank loan totaling 53% of cost, a city bond totaling 17% of cost, Foundation Grants to the City totaling 17% of costs, and Naming Rights and Room Licenses totaling 3%.  Because of the City’s investment, it owns the conference facility and the land underneath, and leases the facility to the hotel owner and operator for a period of 80 years.  The City’s bonds are amortized by its traditional revenues, but are enhanced by new property taxes, hotel occupancy taxes, enhanced sales tax revenues from new tourism, and do not lien the new facility.  The Foundations justified their generous contributions as enhancing the Texas Tech curriculum and enhancing the infrastructure of the community.  The new hotel designed and constructed within the conference and hotel facility separate spaces for the use of students, a new classroom, teachers office and locker facilities for weekly training.  Finally, the Naming Rights and Room Leases were geared to the alumni and friends of Texas Tech and done in concert with the Alumni Association.  Similar to stadium seat license agreements, for a onetime fee to the hotel development fund, an alumnus could purchase the rights to a room for every Friday and Saturday night for every home football game for a period of ten years.
  2. Delivery – Design-Build was utilized by the City for the conference center utilizing a fast-track, best qualifications competition allowed by Texas legislation.  The facility was delivered on time and on budget.


Overton Hotel Conference Ballroom

Overton Hotel Conference Ballroom

The Result:  Garfield Traub delivered a 303-room, full-service hotel with a 22,000 square-foot conference center. The Overton Hotel and Conference Center is located across University Boulevard from the Texas Tech University campus and Jones AT&T Stadium.  As mentioned above, the hotel was financed with private debt and equity and the whole development with a classic Public/Private Partnership.  The facilities offer convenience for hotel guests attending conferences, business meetings, weddings and many other social events. Guests are greeted by a stunning lobby and enjoy the expansive first class facilities and amenities. This innovative public/private partnership has produced the finest hotel and conference center in Lubbock and the region. The Overton is the only hotel in West Texas to receive the Four Diamond Award from AAA.  In Fiscal Year 2010-2011, 85% of the top room night-producing events hosted in Lubbock utilized the Overton Hotel & Conference Center as their headquarters facility. Because of the development of the Overton Hotel the increase of jobs, tourism and citywide visitor spending, sales and use taxes all took place as well as reduced pressure on residential property taxes.

To find out how your City can successfully build a hotel and conference center to meet your City’s needs contact Garfield Traub.

Build a Challenging Municipal Courthouse for Your City

City Court of Atlanta

Lenwood A. Jackson, Sr. Justice Center

Garfield Traub Courthouse Case Study

The Need: Build a new, secure municipal courthouse to meet the needs of the city for the future.

The Challenge: Mayor unable to place the request for new bonds for a new courthouse before the voters for a period of 4 years due to other established priorities.  Solve the problem of having to wait for the public referendum so that the courthouse development could proceed on a much earlier schedule.  Utilize a design-build and best value selection to ensure a predictable good result in the on-time, on-budget delivery of the new courthouse.

The Risk: Judges residing in a 46 year old, overcrowded and unsafe environment, exposing themselves, staff and citizens to possible injury and harm.  Time was of the essence.  Waiting 4 extra years would expose the city to significant inflation on the budget.

The Opportunity: To work with city staff, judges and courthouse staff in planning a modern and safe facility, connected to the new jail and resolving the financing dilemma.  The door was opened to city introductions by the contracting firm already building the new jail.

The Solutions:  

  1. Financing – Recommending the use of excess city revenues coming from “fines and forfeitures” revenue as a source for amortizing new bonds sold to design and build the new courthouse.  This historic revenue source had a history of generating $25 million per year, 5 times the amount needed to amortize the $60 million price tag for the new courthouse, therefore ensuring the ability to gain Investment Grade Ratings for the new bonds without a needed referendum approving the sale of General Obligation Bonds.
  2. Delivery – By avoiding the necessity to award a referendum approved bond offering in the prescribed design-bid-build method to the “lowest bidder”, and suffering the exposure to the poor results endemic in such a process, the city was able to compete and award the assignment to the design-build team deemed best qualified with the best value option for the city.
Atlanta Courthouse Court Room

Lenwood A. Jackson, Sr. Justice Center Court Room

The Result:  The new 208,000 square-foot, six-story Municipal Courthouse of Atlanta, now known as the Lenwood A. Jackson Justice Center, replaced the 46-year old, 46,000-square-foot building that ran out of space a decade prior to this new project.  The new City Court was designed to fulfill all the City’s space requirements for 25 years.  Garfield Traub’s innovative, low-cost, tax-exempt financing solution, utilizing a 25 year AAA Rated Certificate of Participation and backed by an Atlanta 25 year Annual Appropriation Lease commitment to be appropriated from the city’s “fines and forfeitures” revenues,  did not require the City’s general obligation and taxing authority.  As a result, the development was able to proceed without the need for a public referendum.  Ground breaking was achieved by a “fast track” process within nine months from project award.  The facility was delivered under a design-build agreement, a month ahead of schedule and approximately $1 million under budget, five years sooner than it could have been completed under the traditional procurement process.  This facility was designed to deliver up to 15 courtrooms, administrative offices, conference spaces, secure parking for the judges, an underground sally port to the new city jail, secure access controls and separate circulation for inmates, judges and the public.

To find out how your City can successfully build a courthouse to meet your City’s needs contact Garfield Traub.

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