MarketFront Financing PDA Council Meeting February 26, 2015

MarketFront Financing

• City Funding - $34 million• PDA Equity - $3 million• WSDOT - $6 million• Housing Grants - $9.2 million• Philanthropy - $2.1 Committed, $3.9 million remaining*• State Grants - $2-2.5 million*• NMTC - $4 million*• PDA Debt - $8.5 - $18.9 million (short and long term)

(See MarketFront Project Flow of Funds Chart)*indicates funding not yet secured

MarketFront FinancingFunding Sources

• PDA Debt History from 1999 – 2015 and projections through 2022

(see PDA Debt History and Financing Capacity Chart)

MarketFront FinancingPDA Debt History

• 1st & Pine Loan and Bond – To be refinanced – current interest rate of 5.4% and 5.12% – Projected interest rate for refinancing below 4%

• Garage Bond – $2.2 million callable now and note due to City of $680,692 to be paid from bond reserves of $441,166 and $2,299,526 from the CRRF. Remaining CRRF Balance after payment - $8,418,769

• Series 2009 Bond – Current annual debt service of $472k – paid off in 2021

MarketFront FinancingPDA Debt – Refinancing and Retirement

• Current interest rate levels – Still historically low below 4%

• Options for debt – Direct Placement - variable loan (fixed for 7),

lower initial interest rate – Public Offering - Bond (fixed for 20), higher

interest rate

MarketFront FinancingCurrent Financing Market Analysis

Amortization: 20 YearsExpected Term: 7 Years

Projected Rate: 0.17% 1.83% 3.03%Current 10-Year Avg 20-Year Avg.

Base (67% 30-Day LIBOR) 0.11% 1.23% 2.03%Projected Credit Spread 1.50% 1.50% 1.50%

1.61% 2.73% 3.53%Annual Debt Service:

$18,000,000 $1,179,379 $1,269,721 $22,000,000 $1,441,463 $1,551,881

Pros:1) Fastest transaction completion timeframe2) Least transaction costs3) Greatest extraordinary redemption flexibility

Cons:1) Loan maturity expected to be less than full desired amortization term2) Interest rate expected to be variable

MarketFront FinancingFinancing Scenario – Direct Placement

Amortization: 20 YearsExpected Term: 20 Years

Projected Rate: RatingA- Baa-1

3.55% 3.74%

Annual Debt Service:$18,000,000 $1,265,750 $1,287,500$22,000,000 $1,545,500 $1,575,250

Pros:1) Rate is fixed for full term2) Full desired term

Cons:1) Decreased extraordinary redemption flexibility2) Greater transaction completion timeframe3) Increased transaction costs

MarketFront FinancingFinancing Scenario – Public Offering

• Assumptions– Current Garage Bond Paid off in 2015– 1st & Pine Loan and Bond refinanced

• Maximum capacity - $24 million – additional $500k approx. per year in debt service

• Medium – $22 million – does not include project alternates or TI Funds

• Low – $18 million – does not include above plus PDA carry on NMTC and portion of Philanthropy

MarketFront FinancingPDA Debt Capacity

• Summary of Expense and Revenue – from 2005-2021

• Modeled with $18, $20, $22 and $24 million in debt/refinancing

(See Financing Option – All PDA Charts)

MarketFront FinancingMarket Pro-Forma with MarketFront

• Total Project Cost - $73,205,983• Alternates - $1,192,923 million • TI Funds - $1.3 million• Contingencies – Construction Contingency - $4.5 million (10%)– Owner Contingency - $3.9 million (8.5%)

• Base Project without TI funds and Alternates - $71,763,250

(See MarketFront Total Budget Summary Chart)

MarketFront FinancingProject Cost

MarketFront FinancingProject Debt and Long Term Risk – Best Case

Best Case (Base project cost of $71,763,250)

City of Seattle $34,000,000

WSDOT $6,000,000

PDA Equity $3,000,000

Housing Grant $9,200,000

PDA Philanthropy $6,000,000

New Market Tax Credit $4,000,000

State and Other Grants $2,000,000

Subtotal $64,200,000

Long Term Debt $7,563,250

MarketFront FinancingProject Debt and Long Term Risk – Mid-Range

Mid-Range - assume no future philanthropy or grants (Base project cost of $71,763,250)

City of Seattle $34,000,000

WSDOT $6,000,000

PDA Equity $3,000,000

Housing Grant $9,200,000

PDA Philanthropy $2,000,000

New Market Tax Credit $4,000,000

State and Other Grants $0

Subtotal $58,200,000

Long Term Debt $13,563,250

MarketFront FinancingProject Debt and Long Term Risk – Worst Case

Worst Case - assume no future philanthropy, tax credit , or grants

City of Seattle $34,000,000

WSDOT $6,000,000

PDA Equity $3,000,000

Housing Grant $9,200,000

PDA Philanthropy $2,000,000

New Market Tax Credit $0

State and Other Grants $0

Subtotal $54,200,000

Long Term Debt $17,563,250

• Cooling Tower Relocation - $840,000 – (Upon notice from City of commencement of Overlook Walk)

• South Walkway - $540,000– (Part of future Heritage House Remodel – and informed by Overlook Walk)

• Retail space fronting Overlook Walk - $200,000– (Dependent on Overlook Walk)

• Vertical Green-scape infill on west face of garage - $350,000– (dependent on Overlook Walk)

• Shared responsibility for driveway connecting to new Alaskan Way - $400,000

• Signage Plan Integrated with existing Market Signage - $200,000

Total Future Related Costs - $2,530,000 ($1,930,000 dependent on Overlook Walk)

MarketFront FinancingFuture Related Costs

• Variable Loan vs. Long Term Bond– Recommendation - Pursue fixed rate long term Bond over variable rate

loan• Will take additional time to finalize. Potential short-term savings with variable

loan not significant enough to outweigh value of long term predictability.

• Total Amount of Debt Required– Recommendation - Total debt including refinancing of 1st & Pine

Loan/Bond not to exceed $24 million• Exercise all prudent project cost control efforts. Base project cost not including

TI funds and Alternates in favor of robust contingency during early work.• Secure corresponding debt required to bridge funding gap with early call

options for Philanthropy, Grants, and NMTC projected funding amounts and timing.

MarketFront FinancingKey Decisions and Recommendations