Tag Archive for public private financing

Public Private Partnerships in the Travel Industry

What makes a city great? What sets a city apart from others in attracting new industry, new growth, civic pride, and robust economic development? We have found over and over that the magnet that draws business and tourism is most often found in the heart of the city, its convention center. Although the travel industry, like so many other facets of an economy, is vulnerable to the economic cycles that periodically impact the nation, it is vital for a city to be able to constantly attract conventions, association meetings, exhibitions, leaders of industry, and tourism in general.

Top Factors in Choosing an Event Location

Source: 2006 Meetings Market Report, Meetings and Conventions Magazine

Certainly, being located in an inviting climate and an accessible part of a region and the nation is important to a city’s success. So, too, is having modern infrastructure and attractions, such as museums, performing arts centers, sports, and entertainment activities to enhance the allure for business associations, as well as the casual traveler. Keep in mind also that the first introduction to a city for prospective business leaders who might decide to relocate headquarters or establish regional offices in your city may be their experience when they attend a conference or convention at your convention center.

When reviewing the top reasons for choosing a particular event location, group planning experts determined some years ago that second only to a city having a modern convention center with the available meeting space needed by its group,
is the number of quality hotel rooms attached or adjacent to the convention center. If your city has no modern and attached or adjacent headquarters hotel with “room blocks” available for a majority of convention delegates, planners are likely to select another city that offers that critical combination. This is supported by numerous exit interviews of groups that cite the lack of a dedicated onsite hotel as the reason they selected one convention destination over another.

Approximately 50 cities have successfully built, expanded, or modernized their convention centers and developed connected headquarters hotels over the past decade, and about half of them have used public private partnerships to accomplish those developments. Surprisingly, about another 50 cities have tried
and failed to develop the headquarters hotels so essential to ensuring the success of their convention centers. Those cities that succeeded in completing their developments have several characteristics in common, just as those that have failed have very similar stories about why they are still on the outside looking in. What separates success from failure in funding this vital economic engine for a city?

First, this undertaking can be highly politicized and controversial. The public must be informed as to the benefits to the city of the development, and all-too-common disinformation campaigns by narrow interests opposing such a development should be addressed head-on. There is room for debate about the right approach for a city to take in funding, developing, operating, and maintaining the facilities given political, legal, and economic factors, but there is no denying the benefits of having competitive, modern public assembly facilities and related headquarters hotels. Those cities that have recognized this and value their ability to “sell” their city as a convention destination, know they must build and maintain their public assembly facilities, which must include a headquarters hotel, to be successful.

Tangible benefits of such a development include tens of thousands of new annual visitors, who stay two or three days in the city and spend money on hotels, transportation, dining, entertainment, and shopping. Millions of dollars in annual visitor spending creates jobs, generates substantial tax revenue, and stimulates development of related, private mixed-use development. The incremental travel-related tax revenue is more “profitable” than property taxes, due to the limited burden of visitors on city infrastructure—like police and fire departments, schools, and hospitals—when compared to community residents. Increased tourism-related tax revenue bolsters other revenue to operate the entire city and reduces reliance on resident property taxes.

Returns to the public from a development of this nature are real and substantial—but public investment is required to realize the benefits. Too many cities, however, have failed to recognize or have tried to deny the obvious—the substantial cost of designing and constructing a full-service, first-class headquarters hotel including all the extra meeting space required, versus the limitations on adequate revenue to pay the mortgage and provide an appropriate return to the owner. Those cities too often succumb to the “best sounding” solution—the promise of little to no public financial support asked by developers,
who hope to be selected and to amend their low-budget targets by asking the
city for more money once plans and pricing show the real costs. The loss of time associated with a failed procurement alone hurts the city immeasurably when conventions are lost for three, five, or ten years. But the loss of confidence in civic leadership can be even more devastating through dashed community hopes and aspirations and broken promises to develop those facilities.

Overton Hotel and Conference Center

Overton Hotel and Conference Center, Lubbock, TX

Two recent examples of public private partnerships that have been boons to their cities are the Overton Hotel and Conference Center in Lubbock, Texas, and the Durham Performing Arts Center in downtown Durham, North Carolina. The Overton in Lubbock is that city’s first full-service, first-class conference hotel, situated across University Boulevard from Texas Tech University. It not only serves as Lubbock’s modern conference center, but is also the teaching facility for one of Texas Tech’s restaurant hotel investment management classes. The project financing included grants funded by foundations supporting Texas Tech, a Lubbock city bond issue, plus equity and debt raised by the private development team.

Since the Overton Hotel and Conference Center opened in August 2009, Lubbock has been able to attract associations that have either never hosted an event in Lubbock, or have not done so in many years. Examples of these groups are the Texas Apartment Association, the Texas Payroll Conference, and the Texas Hospital Association. In Fiscal Year 2010-2011, 17 of the top 20 room night-producing events hosted in Lubbock used the Overton Hotel and Conference Center as their headquarters facility. The Overton Hotel and Conference Center has allowed the Visit Lubbock staff to provide decision-makers with more options in facility space and facility features. Lubbock is also seeing an increase in repeat business from groups that experienced the first-class service provided
by the Overton staff.

Durham Performing Arts Center (DPAC)

Durham Performing Arts Center - Durham, NC

Similarly, the Durham Performing Arts Center, or DPAC, is a public private partnership in which the capital necessary to finance the facility included Durham city bonds amortized by revenue from a portion of citywide hotel occupancy taxes, a grant from Duke University, and naming rights Theater operations and promotion of events and talent are handled by a private sector theater operator. Profits are shared between the operator and the city, with the operator guaranteeing a minimum number of annual events and no operating loss risk for the city. This award-winning touring Broadway Theater was ranked number 9 in attendance among U.S. theaters by Pollstar in 2010, and number 4 in 2011, and generates $28 million in annual economic impact to the City of Durham.

Financing public assembly facilities and related hotels is an activity that mayors and city councils, even city managers, may undertake only once in their public lives. The costs of designing and building these facilities are significant, and the economics of operating and paying for these facilities is complex to grasp. Hence the need for public private partnerships and the selection of well-qualified developers, consultants, and other specialists to help lead the city in understanding these facilities and their financial structures and to help ensure their successful completion. We are aware of a number of Texas cities that are wisely taking these steps in considering or planning public assembly facilities and headquarters hotels, following the example of cities like Lubbock and Durham.
Ray Garfield is a principal of Garfield Traub, a development services firm focused exclusively on essential public facilities. For more information, please visit www.garfieldtraub.com or e-mail rgarfield@garfieldtraub.com.

Click here for the original print out as seen in the April Edition of Texas Town and City Magazine: Private-Public Partnerships in the Travel Industry

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.

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.

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 Hotels Using Stimulus Dollars

Sheraton at the Overland Park Convention Center

Sheraton at the Overland Park Convention Center Overland Park, KS

Many cities are currently in the process of selecting a hotel development team to deliver their essential meeting facilities and hotels and are analyzing the appropriate methodology for development financing. Therefore, it is essential to understand all available federal, state and local financial programs and economic incentives available to provide the turn-key delivery program that is expected by public-sector clients.

First and foremost, municipalities should be aware of Build America Bonds (BABs), which have been available since February 2009. This program was created by the American Recovery and Reinvestment Act of 2009, commonly known as the Stimulus Act.

The Stimulus Act provides an alternative method for municipalities to finance capital costs for essential new facilities.  Besides BABs, the Stimulus Act creates Recovery Zone Economic Development Bonds, Recovery Zone Facility Bonds and other initiatives, but only BABs are not subject to volume caps and allocations.

One of the best local stimulus approaches is to attract more tourism. The associated local spending and tax revenues generated by annual convention visitors can number from tens of thousands to millions depending on a city’s size. In recent years, cities with convention facilities not supported by modern, connected headquarters hotels have sought to renovate and enlarge or build new convention and meeting facilities, essential to drawing group business to their communities, and many have and are developing the essential, adjacent hotels to ensure success in recruiting groups and events.

BABs currently provide for a federal rebate equal to 35 percent of taxable bond interest payments to a municipal issuer, providing significantly less expensive borrowing than traditional tax-exempt municipal debt, resulting in a more financeable project.  Two municipalities have issued BABs for hotel development financing of their convention center headquarters hotel developments within the past year – Dallas, TX and Franklin County (Columbus), OH.

In order to make Dallas’s new 1,000–room Omni Hotel at the Dallas Convention Center more affordable, it was a goal of the City to achieve a financing rate below 5.5 percent.  Of their $479 million bond offering lead-managed by Citigroup, $388 million was BABs issued at a taxable interest rate of just over 7 percent. However, with the federal 35 percent interest rebate, the net effective interest cost to the City is approximately 4.5 percent.  The use of BABs saved the City of Dallas 150 basis points (1.5 percent) on its then current tax-exempt borrowing rate for comparable maturities, enabling the new headquarters hotel to provide much less taxpayer risk in future operations and debt service costs.

BABs can be utilized not only for public hotels, but for any public facility capital costs which could ordinarily be financed by tax-exempt municipal bonds. The Stimulus Act now provides a vital and meaningful tool allowing municipal governments to access a larger and more efficient bond market to make their own local economic stimulus projects a reality.

Ray Garfield is Principal of Garfield Traub, the nation’s leading development services firm focused exclusively on essential public facilities. Garfield Traub acts as the lead coordinator for all public and public/private project development needs, including financing, design, construction and asset management.  For more than 35 years, Garfield Traub and its principals have financed more than $11 billion in debt and equity and developed more than 30 million square feet of all property types, nationally and abroad.

***IMPORTANT UPDATE: Although the American Recovery and Reinvestment Act expired at the end of 2010, Garfield Traub is second to none in providing turnkey financial and development solutions for public/private partnerships (PPP or P3) and public developments using a variety of advantageous funding and financing programs.  For more information on how Garfield Traub can create a hotel development team that will help you quickly deliver your essential development within schedule and budget, call us at 972-991-5200 or e-mail us.

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