Tag Archive for public private development

EB-5 Program – Creating Foreign Investment With Visas

In the interest of fair and balanced reporting, we thought this April 15, 2012 New York Times article by Ann Lee of Demos on “Visas-for-Dollars” is deserving of everyone’s attention.  As our firm intends to be in the market later this year and into next year raising EB-5 funds for a portion of the financing of a new hotel and conference center for a California city, we want to do what we can to draw attention to the need for transparency in all transactions.

Making Visas-for-Dollars Work

By ANN LEE as posted in The New York Times
Published: April 15, 2012

EB-5 Program Creating VisasAMONG the most popular tools for attracting foreign investment to the United States is the EB-5 program. It seems like the perfect win-win: any foreigner who invests between $500,000 and $1 million here, and creates at least 10 domestic jobs from that investment within two years, gets a green card.

Given how many high-worth investors are clamoring to enter the United States, the EB-5 program could have a significant effect on American unemployment. Indeed, it has brought in some $1 billion over the last fiscal year, and the President’s Council on Jobs and Competitiveness has called for the EB-5 program to be “radically” expanded over the next few years.

Unfortunately, the program is so rife with fraud and corruption that it could actually have the opposite impact and deter investment. To regain its credibility, the program must make a number of changes to enable more transparency and demand more competence from its operators.

The most egregious problems with the EB-5 program can be found in its 218 regional centers, which work with private-sector brokers to identify local investments and direct foreign participants to them. Examples abound of centers and brokers playing down risky investments and misrepresenting how the program works, including a promise that EB-5 investments are guaranteed by the federal government — when the government in fact does nothing of the sort. Many investments have failed to create the required 10 jobs and even gone bankrupt, leaving the investor without his money or his green card.

While many EB-5 regional centers have solid records, a disturbing number have directed investor money to risky projects and companies that pay little to no return, overseen by brokers who get a commission regardless of how the investment plays out.

Aside from accusations of outright fraud, there is also a clear lack of understanding among government administrators about how to manage an investment program. As a result, they often approve businesses that are simple to understand, like a condo development or a grocery store, but whose business models don’t generate enough profit to hire workers, while rejecting more sophisticated businesses that stand a greater potential of generating profits and jobs.

For the time being, these problems haven’t turned the tide of interest in the EB-5 program. But that could change: recent high-profile investigations by Reuters and Businessweek, as well as a warning against fraudulent brokers by the Chinese Supreme People’s Court, could start having a significant deterrent effect, especially since other countries, like Canada, are following America’s lead with their own versions of the program.

Fortunately, the solutions are straightforward. The federal government needs to rein in freewheeling brokers with heavier penalties for misrepresenting investments, hire more business-savvy administrators and make the entire process more transparent, so that applicants know why their money was accepted or rejected.

The EB-5 program has a lot of promise to reduce unemployment, and the White House is right to call for its expansion. Rather than end it, let’s fix it.

Ann Lee is a senior fellow at Demos and the author of “What the U.S. Can Learn From China.”

If you would like to see how Garfield Traub Development can help you get your essential developments financed with the EB-5 program, please contact us.

Durham Performing Arts Center (DPAC) Proves Big City Benefits Once Again

Durham Performing Arts Center (DPAC)

Durham Performing Arts Center - Durham, NC

If you were reading the Garfield Traub Public Private Partnerships blog recently you would have seen our last article titled, “Dallas Convention Center Hotel Development Brings Big Benefits to City.” There we explained how convention center hotel developments are boosting city revenue and bringing in new visitors and business in large numbers. Additionally, you may have read towards the end of the article about performing arts centers allowing cities to reap similar benefits. A press release from the Durham Performing Arts Center (DPAC) was released yesterday titled, “DPAC Gets Ready to Celebrate 3 Monumental Years,” reinforcing our point even more.

The DPAC press release cited that the Durham Performing Arts Center is celebrating multiple achievements in the month of November, including being named once again in the top 10 theater venues in attendance in America, the New York Times Travel section recognizing the DPAC as “an integral part of the city of Durham’s continuing success,” and the celebration of the DPAC’s 3rd Anniversary on November 30, 2011.

In a previous article titled, “Garfield Traub Development DPAC Proves Skeptics Wrong” we noted that trade publication Pollstar named DPAC #2 in the U.S. for attendance, and #4 internationally in 2011 Pollstar’s Top 100 Theater Venues for ticket sales. The DPAC has stated that, “In the U.S., DPAC is on the heels of the Coliseum at Caesars Palace in Las Vegas- a theater often referred to as the home of the greatest entertainers of the world, and the legendary Fox Theatre in Atlanta. Trailing DPAC is #4) Nokia Theatre L.A. Live , LA, CA #5) Beacon Theatre, NY, NY #6) Broward Ctr. Au-Rene Theater, Fort Lauderdale, FL, #7) Radio City Music Hall NY, NY, #8) Verizon Theatre at Grand Prairie, Grand Prairie, TX, #9) Orpheum Theater, Omaha, NE and #10) Dreyfoos Theater, West Palm Beach, FL.”

With a new theater development like the Durham Performing Arts Center being built in a down economy, like the Dallas Convention Center development, taxpayers and some city officials were skeptical. However, as time has proven again and again, it is these developments that, if planned well, can make the difference how a city weathers and how quickly a city recovers from a down economy.

Durham Performing Arts Center Representative Reginald James Johnson was recently asked by KCPW radio station, Utah’s first and only 24-hour commercial-free news and information radio station, if there was an economic benefit to building the DPAC. Mr. Johnson replied by saying, “The Durham Performing Arts Center opened in bad economy in 2008, and when the DPAC first opened they sold out and restaurants surrounding it were thriving despite others in most other cities plummeting in sales.” And Schuster Center Representative

Schuster Center

Schuster Center Dayton, OH

Ken Neufeld answered that same KCPW question by saying, “Dayton, Ohio was behind the scene and needed to be put in a favorable position to recruit businesses and people. Statistically, arts amenities are one of the top three things people are looking for when moving or coming there. Over half of ticket sales for the Lion King Broadway show were made up of those who had never been to theater before, thus bringing in new customers for all businesses located around the Center. Performing arts centers are an infrastructure that smart cities have to have, and it has paid off for Dayton a lot.”

If you would like to know how you might be able to get a Performing Arts Center like the DPAC developed in your city contact Garfield Traub.

Utah Performing Arts Center Development Case Strengthened By City Successes

During a recent interview with KCPW, Utah’s first and only 24-hour commercial-free news and information radio station, three theater experts from Denver, Durham, N.C. and Dayton, Ohio discussed why theaters such as the proposed Utah Performing Arts Center in Salt Lake City are vital to the success of a City in a down economy and over the long term. The cost estimate for the proposed Utah Performing Arts Center is approximately $100 million, but other big theaters have made up for their initial cost in tenfold benefits to their cities.

A yearlong study commissioned by the Redevelopment Agency of Salt Lake City and conducted by Garfield Traub Swisher, the Utah-based company selected by the RDA in October 2009 to develop the theater, identified a bevy of cultural and economic benefits the proposed Utah Performing Arts Center would bring to the capital city.

Here is a sample of what each expert had to say about their Performing Arts Center experiences:

Ken NeufeldSCHUSTER CENTER  REPRESENTATIVE KEN NEUFELD, President and CEO of the Victoria Theatre Association, operator of the Benjamin and Marian Schuster Center, the Victoria Theatre, and the Loft Theatre in Dayton, Ohio

KCPW: How did your community pay for your facilities?

Ken Neufeld: Public Private Partnership

  • $40 Million in Philanthropy
  • State, County and City Supporters
  • Regional Transit Authority with Federal Money
  • Bonds

KCPW: Was there an economic benefit to building your Performing Arts Center?

Ken Neufeld: “Dayton, Ohio was behind the scene and needed to be put in favorable position to recruit businesses and people. Statistically, arts amenities are one of the top three things people are looking for when moving or coming there. Over half of ticket sales for the Lion King Broadway show were made up of those who had never been to theater before, thus bringing in new customers for all businesses located around the Center. Performing arts centers are an infrastructure that smart cities have to have and it has paid off for Dayton a lot.”

KCPW: Did the new performing arts center take away from the other local arts facilities and are you just ticket shifting or actually getting more visitors?

Ken Neufeld: “There is no crossover. We know from studying our audience what other kinds of venues they go to and are engaged in. When we did “Wicked” the Symphony actually captured more buyers as new subscribers from the “Wicked” audience then we did. So, it actually went in the reverse and we developed more of an audience for them. Our market is very different from others.”

KCPW: You mentioned you have an historic theater already. Why invest in a larger theater if you already have a theater that can bring touring productions into town?

Ken Neufeld: “The idea of having a retrofitted old theater is never really an acceptable option. It is like a city that looks at their sewer system and says, “We can patch up those cast-iron pipes, they will last another 10 years.” But that is really not the smart idea in the long run. You really have to look at these buildings as part of a city’s infrastructure, and these arts centers are a part of a smart modern city’s infrastructure in order to attract businesses and people to move to the community. These amenities help people to do this.”

KCPW: Final advice as to whether the Utah Performing Arts Center should be built in this economy.

Ken Neufeld: In times of a recession you can benefit at getting a facility at a better budget point. In 30 years when everyone is still enjoying this facility and it is doing everything it should be doing, I don’t think anyone is going to be talking about the $100 million bond issue at that point. They are going to be slapping themselves on the back saying ‘wasn’t that a great decision?’”

 

Reginald James JohnsonDURHAM PERFORMING ARTS CENTER REPRESENTATIVE REGINALD JAMES JOHNSON, Interim Director of the Durham, North Carolina Department of Community Development

KCPW: How did your community pay for your facilities?

Reginald James Johnson: Public Private Partnership

 

  • $30 Million in certificates of participation paid by hotel occupancy taxes
  • Naming Rights Partnerships
  • Duke University provided $7.5 million

KCPW: Was there an economic benefit to building your Performing Arts Center?

Reginald James Johnson: The Durham Performing Arts Center opened in bad economy in 2008, and when the center first opened they sold out and restaurants surrounding it were thriving despite others in most other cities plummeting in sales.”

KCPW: You mentioned you have an historic theater already. Why invest in a larger theater if you already have a theater that can bring touring productions into town?

Reginald James Johnson: “Because we did not have one that could actually hold a Broadway play in Durham. Stage requirements did not accommodate all the equipment a Broadway theater needs in the historical theater and we wanted to have a Broadway play come to Durham.”

KCPW: Is this the right time? The economic climate is not great, as we all know. If you had to make this choice again in your respective cities, would you do this now?

“We can’t pull back in a down economy. Everything can’t just come to a halt. We have to keep moving forward regardless. We in Durham look toward the future and we have visions of what we want the quality of life to look like. And even now, we are doing the largest revitalization project we have ever done. We need to move forward in times like these because life goes on, and our children and our children’s children need to have something to benefit from.”

 

Randy WeeksDENVER CENTER FOR PERFORMING ARTS RANDY WEEKS, President of the Denver Center for the Performing Arts

KCPW: How did your community pay for your facilities?

Randy Weeks: Public Private Partnership

 

 

  • Naming Rights Partnerships
  • Bond Issues
  • Facilities Development Admission Tax (FDA) – This tax comes from each ticket sold to service bonds, this tax has paid for the facility two times over

KCPW: Did the new performing arts center take away from the other local arts facilities and are you just ticket shifting or actually getting more visitors?

Randy Weeks: “The vibrancy of the local theater scene is really quite incredible and flourishing. We are feeding the cultural economy. The more exposure people have to an art form the more they want it.”

KCPW: Is this the right time? The economic climate is not great, as we all know. If you had to make this choice again in your respective cities, would you do this now?

Randy Weeks: “The main advice I would give is you should have done it 10 years ago, and putting it off more is just going to cost more. With the older structures and little amenities people just don’t want to go downtown anymore.”

In order for this state-of-the-art theater to be completed, the Utah Performing Arts Center needs to have the support of sponsors like you who would like to add their name as a “UPAC Playbill Partner” and receive regular project reports, upcoming UPAC Newsletters and exclusive, partners-only opportunities!

To see how other existing Performing Arts Centers have benefited their cities, visit the Utah Performing Arts Center website.

Garfield Traub Public Private Development Group Growing Fast

The term Public Private Development is quickly rising in popularity due to the success of those using Public Private Partnerships to obtain much needed funds to renew government infrastructure, improve transportation, and construct new projects that state, local and Federal governments could not afford before due to budget constraints.

Due to the importance and rapid growth of using Public Private Partnerships in today’s developments, Garfield Traub Development decided to create a Public Private Development group within LinkedIn, the world’s largest professional network. The group specializes in helping public/private sector decision makers involved in building developments to network with others in both the decision making and facilitation process of their developments.

“I am extremely happy with what our Public Private Development LinkedIn group has accomplished thus far. The quality of material that has been posted by members has exceeded my expectations,” said Mr. Garfield. “This has turned into such an impactful tool for those like me who are involved in the development process and for those looking for others to assist them in their developments.”

The group was started by Garfield Traub six months ago and already has more than 550 members comprised of public and private sector decision makers specializing in site identification and acquisition, zoning and entitlement, financing, investment, design and construction, leasing, management and asset management, as well as professionals such as general contractors, architects, engineers, specialty consultants, investment bankers, mortgage brokers, lenders and investors.

“Our goals are for professionals to get answers to their questions and for them to have the ability to give answers and suggest resources to help each other to succeed. This is especially important in this economic environment where constrained government budgets have made financing and development of essential facilities quite difficult,” said Mr. Garfield. “It is more important than ever for us to find ways to come together as we emerge from this recession and help each other and our clients succeed.

If you or anyone you know are involved in any part of the commercial real estate development process and would like to contribute or ask questions involving public private partnerships, you too can join Garfield Traub’s Public Private Development group on LinkedIn today for free. For more information on how you can get your public developments financed and completed, please visit the Garfield Traub website.

Study: Downtown Salt Lake City theater would attract 123K new visitors to Utah

Broadway Theater Rendering in Salt Lake

A cutaway view, looking north, of a plan for a Broadway-style theater along Main Street in downtown Salt Lake City.

By Jared Page, Deseret News

SALT LAKE CITY — A theater capable of hosting first-run touring Broadway shows would attract more than 123,000 new visitors to Salt Lake City each year and serve as an economic catalyst on Main Street, according to a study released Tuesday.

The yearlong study commissioned by the Redevelopment Agency of Salt Lake City identifies a bevy of cultural and economic benefits the proposed Utah Performing Arts Center would bring to the capital city.

The study was conducted by Garfield Traub Swisher, the Utah-based company selected by the RDA in October 2009 to develop the theater.

The developers say the Utah Performing Arts Center would meet the pent-up demand for first-run touring Broadway productions in Utah. Currently, space and scheduling limitations prevent Salt Lake City from attracting such shows until their seventh, eighth or ninth runs.

“The Lion King,” for example, came to Utah 13 years after it opened on Broadway, according to the study. The show was a huge hit, running for seven weeks and grossing $8 million in sales. It also generated more than $500,000 in sales-tax revenue, $500,000 in stagehand job wages, $200,000 in local musician job wages and another $500,000 in facility rental income.

Garfield Traub Swisher estimates a $200 million to $500 million one-time economic boost during construction of the 148,000-square foot performing arts center. The developers also estimate $9.4 million a year in ongoing economic output from the theater.

In October 2008, Salt Lake City Mayor Ralph Becker announced plans to build the Utah Performing Arts Center at approximately 135 S. Main. The project, which will feature a 2,500-seat theater, is estimated to cost between $88 million and $98 million.

The complete report can be downloaded at www.slcrda.com.

Public Private Partnerships (P3s) Solving Government Budget Deficits

Public Private Partnerships (P3)As Government budget deficits continue to climb for state, local and federal Governments, you will hear much more about the utilization of Public Private Partnerships, also known as, “P3s” or “PPP” to solve this problem. P3 projects are quickly rising in popularity due to the success of obtaining funds to renew Government infrastructure, improve transportation, and construct new projects that they could not afford before.

Public Private Partnership (P3) projects involve a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP projects, the cost of using the provided services is given exclusively by the users of the service and not by the more traditional method of using the taxpayer.

But why would a private company assume such a huge risk?

Like any investment with large risk, there is a great opportunity for an invested private business to make a lot of money. With Public Private Partnerships (P3s), revenues can be in the form of either a fee for service, paid by government, or fees collected from users, as in the case of highway tolls, automatically ticketed red lights, or hotels attached to convention centers.

One example of a development company successfully using Public Private Partnerships structured to benefit various parties, is Garfield Traub Development. Garfield Traub Development has developed over 40 hotels using primarily P3 funding. One example specifically is the Overton Hotel and Convention Center located in Lubbock, TX. This 303-room hotel with a 47,000 gross square-foot conference center is located across the street from Texas Tech University and Jones AT&T Stadium in Overton Park, the largest private redevelopment project in U.S. history, to date.

The hotel was financed with private debt and equity. The conference center was financed with City bonds to be repaid by site-specific occupancy taxes and property taxes. The capital plan also included naming rights, room licenses and nonprofit foundation grants.

The City now leases the conference center on a long-term basis to the hotel owner who operates the entire property. In addition, the hotel also partnered with Texas Tech University’s Restaurant, Hotel, and Institutional Management (RHIM) program to provide hands-on laboratory experiences in a variety of areas that will truly benefit the RHIM students, giving them the opportunity to become successful professionals in the hospitality industry.

With P3s solving Government budget deficits and successfully creating development projects like these, it is no wonder that they are on the rise. It really is a win-win situation for everyone involved and creates a solution to a big problem.

If you want more information on how Public Private Partnerships (P3s) might help you, visit http://www.garfieldtraub.com or e-mail Garfield Traub.

Use Public/Tax-exempt Structure or Public/Private Structure?

Should you use Public/Tax-exempt Structure or Public/Private Structure when developing a big convention center hotel? Catherine Holmes, Partner at Jeffer, Mangels, Butler & Mitchell LLP, highlighted in a previous discussion of ours on our LinkedIn group, “Public Private Developments,” about how great the City of Dallas did in getting the Omni Dallas Hotel approved and financed. We would like to branch off her discussion as a Dallasite, and thank Catherine Holmes and everyone involved in getting the Omni Hotel under construction.

Without a headquarters hotel, Dallas had lost its ability to compete for conventions. Booking activity at the convention center since the hotel groundbreaking has been at recent historic highs. But Dallas’ structure was a Public finance structure (not Public/Private) using tax-exempt bonds and Build America Bonds (no longer available) with city guarantees. Indeed, it is our opinion that to finance a 1,000 room hotel development today, it must be a publicly owned and sponsored hotel.

One notable exception is the Omni Hotel getting ready to break ground in Nashville. Why? Omni brought a “deep pocket” and a “Brand, Owner-Operator” very aggressive approach in order to capture that assignment, an assignment previously awarded to another development/design/flag team that could not get the facility financed. Omni’s approach was more aggressive than 99% of the competition has been willing to do in the past for this type of development. Even with the larger equity and debt guarantee commitments, we have it on good authority that the City of Nashville contributed to Omni the land and infrastructure approximating $25 million in value, plus a 20 year tax abatement for 2/3′s of hotels taxes, itself valued at $100 million. That’s a heck of a subsidy for municipality to provide to a private developer. One has to ask the question of whether the City would have been financially better off in the long run to “own” the hotel like Dallas, Houston, Denver, Baltimore, Sacramento, Omaha, Overland Park and the dozen or so other cities who have made that public vs. public/private comparison and chose the former.

The traditional Public/Private financing structure used for hotels that support convention centers, conference centers, university or hospital campuses or airports, brings private equity and conventional debt and combines it with a public bond to complete the capital stack. Since banks were out of the lending business for new full service hotels until just recently, lately we’ve seen bank underwriting criteria showing a Loan to Cost constraint at 50% limited by big Debt Service Coverage ratios of 1.7X to 1.8X, yielding a true loan to cost of 35% to 40% or even less!

Additionally, the amount banks will loan on any one new hotel development is still volume constrained so that getting a bank syndicate together to bring much more that $50 to 60 million in a first mortgage is problematic. Trying to raise $150 million in bank debt for a 1,000 room hotel development is, at the moment, highly unlikely. If anyone knows differently, please comment. So I think that the “sweet-spot” for Public/Private hotel developments today is for smaller communities seeking 250 to 500 keys, while the larger hotels need to trend to the Public structure.

We were also asked by another fellow member, “Do you see municipalities moving in the select service direction–targeting multiple locations using municipal properties–to reduce cost while simultaneously adding to room count?”

Municipalities considering Select Service Hotels as a magnet for more tourism and the economic development it brings, are usually smaller communities where the cost of a Full Service Hotel is prohibitive. There are some excellent examples of Marriott Courtyards, Hilton Garden Inns and Hyatt Places which are connected to conference centers in the suburbs of major municipalities. Around Dallas, Garland, Allen and Lewisville have such properties which serve a vital community purpose.

But for those major communities that require a Full Service, First Class Hotel to support their convention center, they must first insure that an adaquate number of Full Service rooms exist in order to be able to optimally recruit conventions and compete with those cities that have everything Group Planners demand. Case in point is Pittsburgh where new Select Service hotels have opened near the David L. Lawrence Convention Center but haven’t increased booking to a measurable degree. The city has, for a decade, hoped to attract a developer to finance and build a Full Service headquarters hotel, to no avail. They need to learn from your own hometown of Baltimore, just how to support that sort of development. We hope you’ll agree that the Hilton Headquarters hotel has been a major draw for the improved success at the Baltimore Convention Center. 

We agree it makes sense to develop Select Service products in the shadow of a successful convention center or other event centers. Indeed, no less than 5 Select Service hotels began development once we broke ground on our Overland Park Sheraton and Convention Center outside of Kansas City, and today they provide a competitive lower price point for convention attendees. But it’s the City’s Sheraton that “seals the deal” to bring the conventions.

Our member was also correct in stating that construction lenders today are much more receptive to the Select Service model than a Full Service hotel. They’re simply more affordable and therefore less risky. But a danger point is the very fact that they are easier to finance and therefore that product can become overbuilt in an area, creating too much competition, lower rates and lower occupancy!

To see full discussion or more discussion like this one you can visit our LinkedIn group call Public Private Developments.

New Broadway-Style Theater to be in Downtown Salt Lake City

It wasn’t a standing ovation or a glowing review in The New Yorker, but the reaction of the Salt Lake City Council to a proposed $100 million Broadway-style theater was the next best thing: None of the purse-string-clutching members objected.

And for an encore Tuesday, Salt Lake County Mayor Peter Corroon and his deputy said they would be receptive to managing the proposed playhouse.

“It’s what we do best is managing arts and cultural facilities downtown,” Deputy County Mayor Nichole Dunn said. “It would be a natural fit.”

A newly released city-commissioned report by Garfield Traub Swisher (GTS) strongly endorses a new theater at 135 S. Main St. The consultants also urge that the county manage it, saying that such expertise could result in an annual profit of $2.4 million after the first five years.

The City Council will be asked in June to pass a resolution formally endorsing the theater. Such a vote would also direct the Redevelopment Agency of Salt Lake City to pursue a funding strategy, which the GTS report envisions as a combination of sales-tax bonding, federal tax credits and cash from naming rights.

“As long as I’ve been on the council, this section of Main Street has always been a challenge,” said four-term Councilman Carlton Christensen. “I see this as a real changing element for downtown, and I’m pretty excited.”

If Broadway’s “Book of Mormon” ever tours, Councilman J.T. Martin quipped, “maybe we could get the first booking.”

Such a road show seems likely, given that the unexpected hit has been nominated for 14 Tony awards.

No council member voiced reservations about the theater’s price tag or whether the project could siphon dollars and devoted patrons from other arts venues.

For his part, Corroon said he has “some concerns” about how a Broadway-class theater might affect downtown’s Capitol Theatre. County estimates suggest the Capitol could lose as much as $600,000 a year if the new theater comes to town.

Is a new facility something that is nice to have? Yes,” Corroon said. “It would be great for Salt Lake to have a large, Broadway-style theater that allows shows to come here that otherwise wouldn’t come, or would wait for 10 years to come.

As for the county running the theater, Corroon said, “It makes absolute sense.”

The yearlong study, which cost $741,000, argues that Utah audiences only see the seventh to ninth run of touring Broadway shows because of the dearth of a first-rate facility. It notes a major playhouse was recommended by the Salt Lake Chamber as early as 1962 as part of the so-called Second Century Plan. And the report, which outlines the economic benefit theaters have brought similar-size markets, projects a Main Street theater would boost Salt Lake City’s coffers by $9.4 million a year.

What’s more, an adjacent 20- to 25-story office tower, proposed by Hamilton Partners’ Bruce Bingham, would increase the city’s annual take to $14.8 million, the report says.

But a question remains on whether the theater should be located midblock, at 135 S. Main St., or on the southeast corner of 100 South and Main Street. Bingham, city officials and the consultants would have to decide soon whether to design the project with the tower on the corner and the theater midblock or vice versa.

“The juxtaposition with City Creek [Center] is interesting,” Bingham told the council. “You want to be close, but not too close.”

Councilman Luke Garrott noted that a theater on the corner could maximize its exposure with multiple street fronts. Even so, the consultants stress that a midblock theater would also engage multiple sides, with a planned midblock walkway and an entrance fronting Regent Street immediately east of Main Street.

Helen Langan, senior adviser to Salt Lake City Mayor Ralph Becker, said either building arrangement could work, noting that the city will continue to work with the consultants and architects before making a decision.

“We want to create the most successful project for the city,” Langan said. “We’re going to do it right.”

Arts groups are mostly skeptical of — if not outright opposed to — the project. They argue Utah still gets most Broadway runs — if a little later — and insist a mega-playhouse would squeeze their audiences and bottom lines.

Others say the benefits, particularly as the city sees a downtown renaissance, far outweigh the risks.

“It is important that Salt Lake City remain the cultural core of the region. … No matter how or when the theater comes into existence,” said Salt Lake County Councilman Arlyn Bradshaw. “I am definitely a supporter of it.”

It it wins approval, the theater would take three years to design and build. The office tower, though it may not be built simultaneously, would also take three years.

Tribune reporter Jeremiah Stettler contributed to this story.

Top Factors in Choosing an Event Location – Garfield Traub

Part of excerpt taken from Jim Butler of the Global Hospitality Group® Hospitality Lawyers | Authors of www.HotelLawBlog.com

Founder of Garfield Traub Development provided a wealth of information as one of the “top experts in public-private financing for hotel developments” on a panel for JMBM’s Global Hospitality Group®. The panel was for hotel developers, governmental entities and educational institutions about the feasibility and economics of building a hotel using a variety of public and private financing.

To view Ray Garfield’s presentation, see the easy download link at the end of his summary.

Ray GarfieldRay Garfield
Principal
Garfield Traub Developments LLC
972-716-3838
rgarfield@garfieldtraub.com
Ray Garfield and his company, Garfield Traub Developments, specialize in turn-key development of hotels, conference centers and entertainment venues for municipalities, airports, college campuses and hospitals. These developments can bring hundreds of thousands of people into the communities in which they are located to spend money and generate sales tax, without burdening schools or other public resources.

Ray points out that the number one factor for group meeting planners in selecting a location for a conference is the number of suitable hotel rooms nearby the meeting facility. So, if a city is in the convention center business, it has to be in the hotel business in one form or another.

Ray noted that with loan underwriting much more conservative today than it has been in the past, there is a significant gap between the equity that private developers are willing to invest and the debt that private developers are able to raise to develop a new hotel. Public-private financing is often the only way to fill the gap – without it, a hotel development will very difficult to build in today’s financial environment.

Ray has developed some innovative ideas for piecing together a variety of sources of financing for his projects. For example, Garfield Traub recently completed a $67 million, 303 room, independent hotel in Lubbock, Texas across from Texas Tech University, using a combination of two-thirds private funds and one third public funds. In collaboration with the University’s Restaurant-Hotel-Institutional Management school at Texas Tech, Garfield Traub designed a classroom in the city’s conference facility, and raised $11 million in grants to the city to help with the financing for the facility. The city also sold $11.4 million in bonds for the project. The combination of grants and bonds helped to fill the gap between the total cost of the project and the private equity and first mortgage loan.

See below to view or download Ray’s presentation at Meet the Money® 2010, where he shared with some of the information he provides to cities considering hotel development.

Top Factors in Choosing an Event Location

 

JMBM’s Global Hospitality Group® Perspective


Jim Butler

Our Perspective. We represent hotel lenders, owners and investors. We have helped our clients find business and legal solutions for more than $60 billion of hotel transactions, involving more than 1,000 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or 310.201.3526.

Jim Butler is a founding partner of JMBM and Chairman of its Global Hospitality Group®. Jim is one of the top hospitality attorneys in the world. GOOGLE “hotel lawyer” and you will see why.

JMBM’s troubled asset team has handled more than 1,000 receiverships and many complex insolvency issues. But Jim and his team are more than “just” great hotel lawyers. They are also hospitality consultants and business advisors. For example, they have developed some unique proprietary approaches to unlock value in underwater hotels that can benefit lenders, borrowers and investors. (GOOGLE “JMBM SAVE program”.)

Whether it is a troubled investment or new transaction, JMBM’s Global Hospitality Group® creates legal and business solutions for hotel owners and lenders. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.

Developing with Public and Private Partners

Overton Hotel and Conference Center

Overton Hotel and Conference Center, Lubbock, TX

As Seen in Lodging Hospitality

For Ray Garfield, the principal of Garfield Traub Development, the Overton Hotel and Conference Center in Lubbock, TX is a prime example of how well developing with public and private partners or public-private partnerships can work.

The 303-room full-service independent hotel opened last September and is privately owned by Garfield’s company and owner/operator 1859 Historic Hotels. The 20,000 square feet of meeting space is owned by the city of Lubbock, and operated by 1859. Together the two sides are helping bring state and regional conferences to the city and ultimately driving economic growth, Garfield says.

His real estate development services firm has been specializing in public and public-private projects since 1997. Fifty percent of his business comes from hospitality projects like the one in Lubbock, and the other half range from sports facilities to performing arts complexes to government and municipal buildings.

Garfield took some time to discuss the often-complex nature of public projects and the new development in Lubbock.

So your company specializes in publicly funded developments and private-public partnerships?
We absolutely do, almost since our first day in 1997. We devised a methodology that works. This is just something we felt there was a real need for years ago and it’s proven to be a correct assessment. The role we play is as development services orchestrator.

Tell us about your most recent project, the Overton Hotel and Conference Center in Lubbock, TX…
The two-story conference portion is owned by the city and the (15-story) hotel tower is owned by the independent equity group we assembled. It’s one of the smaller hotels we’ve done—303 keys, 25,000 net square feet of meeting space, all in one building—with separate ownership.

How did the financing of the project work?
It was $67 million total and I think about 66 percent of that was private funds and 34 percent public funds. Each of these developments is a unique structure, every one a little different. In Lubbock we got a little more than a 50-percent loan, a $35-million first mortgage and what makes this unique is it’s right across from Texas Tech University and they have a great restaurant and hotel majors program (Restaurant/Hotel & Institutional Management). We actually, in collaboration with the department at Texas Tech, designed a classroom in the city’s conference facility, with separate locker rooms for the students who use (the complex) as a laboratory for their studies. As a consequence, two foundations in the state contributed $11 million in grants to the city to help with the financing. And the city sold $11.4 in bonds and we brought $8.8 million of equity in the project.

How does a strictly publicly financed project work?
Like in our Overland Park, KS project (the Sheraton Overland Park at the Convention Center), we helped the city set up a not-for-profit entity that owns the hotel. While it has debt on it the city backs those tax-exempt bonds with a pledge of hotel occupancy receipts as a backstop for when the net operating income can’t totally cover the debt service.

How do you overcome the typical reaction that a city shouldn’t be involved in owning or operating a hotel?
I’ve heard this my entire career, and my answer may sound glib, but it’s true: If you’re in the convention business, you’re in the hotel business. It’s all about maximizing tourism and economic development.

Back to Lubbock, it seems odd the big full-service headquarters hotel doesn’t have a flag flying on it. Will that change?
It’s the first unbranded hotel we’ve done, but the reason is this is a unique market and there’s no other full-service product to speak of. We designed the hotel to take any major flag, in terms of size, room layout, meeting space. The hotel can carry a Marriot, Hilton or Sheraton flag and we’d probably go in that direction once the first real competitor goes up in the market. We were able to save some money by not having a franchise agreement and in an unproven market without a full-service hotel, we spent so much to design and build this, we tried to manage the bottom line as best we could. It was the decision of partner 1859 Historic Hotels and the community. We’ve had such fantastic response from those who have gone to the hotel, I think it will remain independent if a Hilton, Marriott or Sheraton doesn’t come into the city and build another full-service hotel.

How did you find partner 1859 Historic Hotels?
It was a needle in a haystack for Lubbock. I knew of them from previous discussions and they had great interest in coming to Lubbock and probably accepting less investor type returns than any Wall Street investors we would have brought in. They are an outstanding hotel company, even if they’re not as well known as the big ones. They’re local to Texas (based in Galveston) and it’s incumbent on the development services company to access the smartest money for the city to mitigate the municipal risk.

Do you expect this avenue of development to continue growing?
We do. West Palm Beach (FL) is building a new hotel for their convention center, there’s ongoing competition in Virginia Beach for a new hotel at their convention center, competition in Pasadena, CA, Portland and Albuquerque, NM … I could go on and on. All these future deals are in the immediate future or the next two to three years and we’ll continue to see that. Maybe in another 10 years this may have played out, but thankfully we just opened a performing arts center for Durham, NC, and did a municipal courthouse and the other half of our business (isn’t hospitality). It’s nice to have a broader footprint.

To see more about this project click here.

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