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Dome Site Development Term SheetVirginia Beach City Council
Directional Briefing
Deputy City Manager Ron Williams
January 8, 2019
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Resort Strategic Action Plan (Adopted 2008)
Development Strategies
Create great districts with distinctive identities
Improve transit and pedestrian connections between destinations
Create a transition from the resort area to the neighborhoods
Enhance visual access to the Oceanfront
Grow residential
Provide additional higher-quality hotels
Concentrate retail
Cluster office uses near Convention Center and Birdneck
Continue to focus on achieving a "YearRound Resort"
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VBDA Request for Letter of QualificationsFebruary 8, 2017
Responders were encouraged to demonstrate their ability to transform this site into a family-friendly unique multi-use destination to include features such as:
• Multi-block mixed use development
• Entertainment concepts
• Minimum 3,500 seat live entertainment performance venue
• Unique or new to market retail
• Unique or new to market authentic restaurants
• Residential but not as a primary use
• Year-round programming attractive to both locals & tourists
3Note: Dome Site & Treasurer’s Block Parcels Authorized for conveyance to VBDA in 2011 and 2013 respectively
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Venture Realty Group WM Jordan Company
Venture Realty Group 1, LLC John R. Lawson
Venture Waves LLC H2O Investments
Donna MacMillan Whitaker Joe LaMontagne
Michael A. Culpepper The Costen Companies
John L. Gibson, III Tim Costen
Elizabeth Matulenas Pharrell Williams
Matthew Lafler Bishard Development Corp.
Steven D. Green Steven W. Bishard
Fiona Sadler John K. Bishard
Robert A. Deacon
Venture Waves LLC - Principal Leadership Disclosures
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Architect: Oppenheim, Hanbury
Construction Contractor: WM Jordan
Engineer: WPL, Kimley-Horn
Legal: In-House
Real Estate Broker: Venture Realty Group, Madison Marquette, CBRE
Financing:
Property Owner:
TBD
Virginia Beach United Methodist Church
Venture Waves LLC - Service Disclosures
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January 2018 Public Engagement
250 Workshop Attendees
2500 Survey Responses
1400 Written Responses
Over 30 Civic & Stakeholder
Meetings
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Exclusive Dealing Period Feasibility StudiesDuring the Exclusive Dealing Period, Venture and the Authority, determined that equally sharing the expenses for studies and analyses was necessary to evaluate the proper scope and form of development which included:
1. Entertainment Feasibility StudyValidated market demand & affirmed recommendations for venue size
2. Retail Feasibility Study Validated market demand & affirmed recommendations for retail mix
3. Overall Economic Impact Analysis Forecast overall economic impact of entire mixed use development
4. Parking Feasibility Study Validated parking demand & recommended total # of spaces
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Fiscal Impact
Real Estate $2,227,400
Sales $ 683,673
Meals $ 2,300,623
Amusement $ 2,411,664
BPOL $ 546,400
Total Annual Taxes $ 8,169,760
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Amount to TIP $ 2,855,056
Amount to General Fund $ 2,816,508
Amount to Schools $ 1,912,897
Amount to other funds $ 585,299 Total Annual Taxes $ 8,169,760
Estimated Tax Revenues – Stabilized Year 1
Distribution of Tax Revenues
20-Year Impact$65 M to General Fund
$44 M to VB Public Schools
Source: Lambert Advisory Economic Impact Analysis
Economic Impact
3600 Jobs during construction
2000 Jobs once operating & stabilized
$147,592,000 Total Operating Impact
12Source: IMPLAN – Lambert Advisory Economic Impact Analysis
Alignment of Financial Principles & Recommendations
Project produces a net positive benefit to the City in 20 years
Project produces enough revenues to cover expenses
Project produces direct revenues to the General Fund and Schools
based on current policy and distribution formula
All project related expenses (debt service, incentives) are supported
by the TIP Fund
Annual Incentive of Tier 2 TDFP & Venture’s Tax Revenues Generated
for TIP
10% Return on Cost for Developer13
Tourism Investment Program (TIP) Fund
• FY 1992-93 Council established the Tourism Growth Investment Fund (TGIF)
• FY 2001-02 Council established Major Projects Fund
• Dedicated revenues for rebuilt Convention Center, Sandler Center and parking lot expansion for Aquarium.
• FY 2011-12 Council merged TGIF and Major Projects into TIP Fund
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TIP TAP
Open
Space
General
Fund EDIP TOTAL
Hotel Tax 5% / $1 1% / $1 - 2% - 8%
Restaurant/Meal Tax 1.06% 0.5% 0.44% 3.5% - 5.5%
Amusement Tax 10% - - - - 10%
Cigarette Tax (per pack) 5¢ - - 54¢ 16¢ 75¢
Notes: Flat rate of $1 per room/night for TAP, Additional $1 per room/night for TIP
Dome Site Development Process
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RFQ Review
& Interview
MAY
2017
Approval
of
Preferred
Developer
NOV
2017
Approval
of Cost
Sharing
Studies
DEC
2017
Public
Engagement
JAN
2018
Studies
Reported
AUG
2018
Term
Sheet
JAN
2019
Development
Agreement
JUN
2019
BUILD
2020 -
2023
Term Sheet Overview
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Page 1
• Provides overview of development agreement and background of selection process
• Provides definition of Term Sheet• An outline of terms
• Non-binding agreement
• Forms the basis for a transaction to commence negotiation of definitive document for development of the Dome Site
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Page 2
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1.Project Description• Ground lease for 60 years from VBDA for $1.00 per year with
two 20-year extensions
• Create a leasehold condominium regime
• Mixed-use development containing multiple buildings and uses
• Adjacent parcels may be considered for part of development
Elements of project include:a. Entertainment Venue
b. Parking Facilities
c. Commercial Facilities
d. Residential Facilities
e. Streetscapes
Page 2 (cont’d)
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2.Developer Obligation• The Developer will construct all elements of the Project.
• All components above are subject to mutual collaborative refinement.
• The Developer’s construction of the Project shall comply with the City Council’s Small Business Enhancement Program.
• Developer will acknowledge the City Council’s 10% minority subcontractor goal and will work with the City to identify and use minority subcontractors to the extent commercially reasonable.
Page 3
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3. City/Authority Participationa. Parking Facilities • Design, development and construction will be purchased from
Developer by Authority on a pay as-you-go basis.• Authority will pay actual costs based on a guaranteed maximum price
contract proposal obtained through a mutually acceptable competitive process, currently programmed for $30,000.00 per space with design and pricing to be finalized in the pre-development period
• Inclusive in the Authority’s costs shall be a Development Fee for the Parking Facilities equal to 2% of the total cost
• Authority shall operate and collect revenues from the parking facilities in the same manner as other publically-owned parking facilities at the Oceanfront.
• Authority shall grant to the Developer a mutually agreeable parking license wherein the Developer, or its successors and assigns, shall have the exclusive right to use a designated number of parking spaces throughout the Project, with the locations and cost of such Parking License to be established in the development documents.
Page 3 (cont’d)
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3. City/Authority Participationb. Entertainment Venue• Design, development and construction of a 3,500 person
capacity venue will be purchased from Developer by Authority on a pay as-you-go basis
• Authority will pay actual costs not to exceed $30,000,000 with pricing established by design and a guaranteed maximum price contract proposal obtained through a mutually acceptable competitive process
• Inclusive in the Authority’s costs shall be a Development Fee for the Entertainment Venue equal to 2% of the total cost
• Prior to completion of the Entertainment Venue, the Authority shall enter into a lease with Oak View Group (“OVG”) for the lease and operation of the venue
• OVG shall contribute a minimum of $5,000,000 to the cost of the Entertainment Venue with OVG’s contribution made pro rata throughout the design and construction period.
Page 4
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3. City/Authority Participationc. Streetscapes• Authority shall provide funding for Design, development and
construction of the Streetscapes on a pay as-you-go basis for actual costs not to exceed $7,500,000
• Developer shall agree that the Project will be subject to a special assessment established pursuant to a Special Services District (“SSD”), which will pay for certain enhanced services at the Project, and for maintenance and upkeep of all Streetscapes.
• SSD rate will be set by City Council after consultation with the Developer during the pre-development period
• The Developer shall reserve the exclusive right to service all areas of the Project for concessions, umbrellas, cabana service, food and beverage service, and all other vending or services comparable to the operation of a mixed-use development of this quality, subject to applicable permits and licenses.
Page 4 (cont’d)
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3. City/Authority Participationd. Incentive – TDFP + Performance Grant
• (i) Assist the Developer in qualifying for Tier II TDFP financing with the City’s additional ½ percent share coming from the TIP Fund
• (ii) Provide an annual performance grant in an amount when added to the TDFP sufficient to yield a total Incentive of up to $5,000,000 per year for twenty years based on the integrated project scope, with a development budget currently estimated at $227,500,000.
• Performance Grant will be payable solely out of tax revenues generated by the elements of the Project owned by Developer and otherwise payable to the TIP Fund.
• The Performance Grant will be payable quarterly in arrears.
Page 4 (cont’d)
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3. City/Authority Participatione. Performance Grant during first 3 years of stabilization
• First 3 years of stabilization means the first 3 years after substantial completion of the Project
• Developer may not generate sufficient Net Operating Income, which when combined with TDFP and the Performance Grant amount, to attain a Return on Cost of 10%.
• To address this potential shortfall, the parties will agree to increase the Performance Grant to achieve Return on Cost of 10% in stabilized years 1-3 with a corresponding reduction in the Performance Grant in the final three years.
• During this period, in addition to the revenues identified above, Developer shall receive credit for the value of all taxes paid at the Project, provided that such amounts shall be paid by the TIP Fund and not the General Fund.
Page 4 (cont’d)
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3. City/Authority Participationf. Performance Grant during first 3 years of stabilization
• To satisfy the expressed aspiration for a pedestrian-oriented cohesive development project, with the features described above, the City has authorized the transfer of title of the Project to the Authority.
• After approval of this Term Sheet the City and Authority will consummate that transaction and the Authority shall apply to the City for (i) the administrative reclassification of the use of the Eighteenth Street right of way between Arctic and Pacific Avenues, and (ii) conditional closure of Nineteenth Street between Arctic and Pacific Avenues.
Page 5
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4. Next Stepsa. Public briefing of Term Sheet on January 8th
b. Public Comment and City Council vote on Term Sheet on January 15th
c. Authority vote on Term Sheet on January 15th
d. Development of definitive, binding documents. Included in the documents will be a “pre-development period” where the parties will agree to jointly fund design of the Project to allow definitive pricing to be attained. At execution of definitive documents (which will follow additional public outreach and a vote by both City Council and the Authority) the parties will have agreed on guaranteed maximum price contracts and the Authority’s audit and cost verification rights for all elements of the Project being constructed and a competitive bidding process for the construction work paid for by the Authority. The parties will also agree on a plan of finance for the Project.
e. At the time of execution of the definitive documents, the Authority and City will enter into a support agreement whereby the City agrees to fund the Authority’s obligations for the Project.
Project Term Sheet – City Investment *
Parking Garages – 1934 spaces x $30,000 per space $58,020,000
Entertainment Venue $30,000,000
Common Spaces $ 7,500,000
Total Capital Investment $95,520,000
Potential Annual Incentive Payment - 20 Yr Term(Tier 2 TDFP + Performance Grant) $ 5,000,000
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* Does not include value of real estate property appraised at $37 M
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Program provides two different tiers of financing to compensate for a shortfall in project funding.
Commonwealth of Virginia Tourism Development Financing Program
TIER 1
TIER 2
Breakdown of Annual Incentive PaymentTier 2 TDFP & Performance Grant
Estimated $5,000,000 +/-
• $3,183,000 +/- generated by Tier 2 TDFP (1.5% from each participant)• $1,000,000 from City, $1,000,000 from State, $1,000,000 from
Developer
• $1,387,000 +/- by dedicating 100% of Admissions taxes generated by Venture’s condominium units (excludes Entertainment Venue)
• $430,000 +/- by dedicating 20% of Meals taxes generated by Venture’s condominium units (excludes Entertainment Venue)
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Outstanding Issues
• Terms for Church Block (Office tower with parking)
• Terms for Entertainment Venue
• Operating Agreement & Cost Participation to be finalized
• Terms for Norfolk Southern/Dominion Parcel & 18th Street
• Fee owned by Norfolk Southern, leased to Dominion for substation
• Relocation of substation opens block for vertical development
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Next Steps
1. VB Development Authority vote on Term Sheet January 15th
2. Public Comment & City Council vote on Term Sheet on January 15th
3. Negotiate Development Agreement for final approval in 2019
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