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Economic Impacts Discussion –

Fort Monroe Federal Area Development Authority

September 19, 2008

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Today’s AgendaToday’s Agenda

• BAE’s role in FMFADA/City of Hampton discussions.

• Fort Monroe Capital Requirements

• Need for Strategic Plan for Fort Monroe’s Real Estate Assets

• Lessons Learned from Presidio of San Francisco and NASA Research Park

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FMFADA/City of Hampton Work

Incorporate revised infrastructure cost estimates into the Fort Monroe financial model

Refine and update fiscal impacts (revenues and expenses)

Identify business decisions related to municipal services:

• Who owns system/provides service?

• Who operates?

• What standards?

• Whose cost?

The answers to these questions will guide how FMFADA and City of Hampton structure their relationship

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Fort Monroe Capital RequirementFort Monroe Capital Requirement

• Planning-level estimate of required capital to implement Fort Monroe Reuse Plan:

• These are preliminary “order of magnitude” estimates and will be refined and updated as the FMFADA continues its implementation planning.

$500 Million

• This includes:

• Historic rehabilitation/reuse ($126M)

• New construction ($223M)

• Infrastructure ($33M; ex. electrical system)

• Cultural facilities ($66M)

• Seed capital for FMFADA ($11M)

• 10% contingency

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Public and Private FundingPublic and Private Funding

• But to attract private investment and charitable contributions, the Commonwealth must make an initial investment.

• The bulk of required capital costs of Fort Monroe will be funded by the private sector:

Public

• FMFADA seed capital

• Infrastructure (partial)

Private

• Infrastructure (partial)

• Historic rehabilitation & adaptive reuse

• New Construction

• Cultural facilities

• Infrastructure (partial)

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Potential Public InvestmentsPotential Public Investments

Contribution to FMFADA’s operating expenses in early years, including pre-transfer period FY2009-2012

Acceptance of Fort Monroe roads for VDOT funding

Contribution to cover potential shortfalls in revenue to the City of Hampton. (FY2012 and next few fiscal years)

One-time investment in revolving capital improvement fund to invest in start-up of Interim Leasing and Residential Leasehold Programs. (FY2012)

Specific dollar estimates will be prepared this fall

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Need for Strategic Real Estate Plan

To implement the Fort Monroe Reuse Plan, the FMFADA needs to prepare a strategic real estate plan that:

• Formulates a strategy for management and development of Fort Monroe’s real estate assets

• Evaluates alternative business/legal relationships with master developer/manager

• Develops scope and process for selection of master developer/manager

• Identifies early capital requirements and sources

• Proposes a specific five-year series of goals and actions

• Happens parallel to and coordinated with Interpretive Master Plan

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Time is of the EssenceTime is of the Essence

• The scheduled date of transfer is in three years, September 2011

• During this time the FMFADA needs to:

• Work with the City of Hampton to establish a mutually agreeable partnership to support implementation and ongoing provision of public services

• Undertake a competitive process to engage one or more master developers/managers

• Identify marketing opportunities/prospective anchor tenants

• Formulate planning and permitting procedures

• Establish historic preservation guidelines

• Complete its Interpretive Master Plan

• Ideally, a master developer/manager will have at least one year prior to transfer to complete due diligence and its own projecting planning –critical to “hit the ground running.”

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What did the Presidio and NASA Do?What did the Presidio and NASA Do?

• There are “lessons learned” from experience with the Presidio of San Francisco and NASA Research Park (Silicon Valley)

• Both projects completed extensive strategic planning for the management of real estate assets at the Presidio of San Francisco and NASA Research Park, respectively.

• The following are BAE’s own observations about what the Presidio Trust and NASA have done and why.

Presidio of San Francisco

NASA Ames Research Center

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Presidio of San FranciscoPresidio of San FranciscoQuick Profile:

• Trust established by Congress in 1996 with seven member board

• Flexible authority to conduct business

• $25M annual appropriations; $50M Treasury loan authority

• Financial self-sufficiency by 2013

• 1,168 acres of Presidio total of 1,450 managed by Trust

• 5.6 million sq.ft. of existing and limited new development

• 470 historic structures, including 303 historic residences

• $585 million in capital required in 1994 dollars

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Presidio Implementation TimelinePresidio Implementation Timeline

• BRAC action announced in 1989

• Pre-transfer planning by National Park Service 1990-1994

• NPS General Management Plan Amendment for the Presidio of San Francisco adopted in 1994 with transfer from Army:

• NPS management 1994-1998

• Congress established Presidio Trust late 1996

• Trust Board appointed and convened in mid-1997

• Early 1998 Trust staff hired; housing management company engaged; Trust leasing under NPS GMPA

• 2000-2002 new Presidio Trust Management Plan adopted

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Presidio Approach to Public-Private Presidio Approach to Public-Private PartnershipsPartnerships

• Both the NPS and Presidio Trust adopted a mix of self-funded direct rehabilitation, property management contracts, and long-term leases with multiple developers:

• NPS and Trust have invested federal funds for historic building rehabilitation directly leased by corporation

• NPS and Trust managed RFQ/P processes to engage developers for specific building or clusters of structures

• Trust hired housing manager to lease existing housing in “as is” condition - rehabilitation later

• Trust ultimately hired CBRE to handle commercial leasing

• The NPS and Trust could do this because:

• Had access to federal appropriations

• Established large organizations

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Presidio Leasing and Financial ResultsPresidio Leasing and Financial Results

• Under NPS management by the end of 1997:

• 1.3 million sq. ft. leased

• $7 million in total revenues

U.S. ArmyThoreau CenterPresidio Golf CourseGorbachev Foundation USA

• Under Trust management, in 2008:

• 4+M sq.ft. leased

• $60 million in total revenue (ex. Appropriations)

Presidio Residences ($36M) Non-residential ($17M)SDC/Other ($7M)

Letterman Digital Arts CenterSF Film SocietyBay School (HS)Disney Family Museum

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NASA Research ParkNASA Research ParkQuick Profile:

• NASA Ames Research Center established by Congress in 1939

• Federal-to-federal transfer of Naval Air Station Moffett Field

• NRP concept: “World class shared-use R&D and education campus targeted to government, industry, academia and non-profit organizations.”

• NRP Business Plan mandates financial self-sufficiency

• 2,000 acres, including airfield and core NASA Ames campus

• 5.2 million sq.ft. of existing and new development in NRP

• Shenandoah Plaza National Historic District w/22 contributory structures, including Historic Airship Hangars 1, 2 and 3

• Over $2 billion in capital required in 2008 dollars

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NRP Implementation TimelineNRP Implementation Timeline

• BRAC action for NAS Moffett announced in 1989

• Pre-transfer planning as joint federal use facility managed by NASA

• Navy property transferred in 1994 with Moffett Field; Comprehensive Use Plan adopted

• Managed as joint federal property 1994-1997

• Air cargo controversy –Citizens Advisory Committee formed and identifies preferred uses of former Navy Property in 1997

• NASA Ames conducts feasibility study of proposed NASA Research Park concept 1998-1999.

• NASA Ames Development Plan and EIS formulated and adopted 2000-2002

• Enhanced Use Leasing legislation adopted for NASA in 2003

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NASA Approach to Public-Private NASA Approach to Public-Private PartnershipsPartnerships

• NASA adopted a mix of self-funded direct rehabilitation, and long-term leases with end users:

• “Pay as you go” historic building repairs and improvements

• Leasing focus on small technology start-ups

• Long-term leases with Carnegie Mellon and Google Inc.

• Now negotiating with University of California to select master developer for a 70-acre portion of NRP

• Leasing and property managed by civil-servants and on-site contractors (approx. 12 staff)

• NASA took this approach because:

• Had existing buildings in good condition and requiring minimal renovation

• Preference to transact with end users to achieve collaborative research goals

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NRP Leasing and Financial ResultsNRP Leasing and Financial Results

• FY 2004-2008 results:

• 625,000 sq. ft. leased - 50+ tenants

• 42.2 acres of land/1.2M office/R&D

• $7 million in total revenue (ex. appropriations)

Carnegie Mellon University UC Santa CruzBloom EnergyApprion Inc.U.S. Army (Wind tunnel)Airship Ventures Inc .N211 Hangar LLCMars institute

Total NRP Revenue

$0.0$1.0$2.0$3.0$4.0$5.0$6.0$7.0$8.0

FY04 FY05 FY06 FY07 FY08 FY09(est.)

Re

ve

nu

e i

n $

Mil

lio

ns

Total Revenue

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ObservationsObservationsInfrastructure

• Presidio: $90M Army - $100M environmental remediation

• NASA: $160M to be funded by end users/developers

• Land value issues

Asset Management

• Leasing existing buildings versus new development/full rehab

• Different economics

• Trade-off between # direct deals and size of organization

• Mixed-use projects need specialized real estate managers/developers

Marketing Experience

• Historic preservation and building “stories:” marketing plus

• The Presidio and NASA brands: powerful

• Keep your Post Office

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ObservationsObservations

Organizational Structure

• NPS: McKinsey recommendation to create “project office”

• NPS/NASA: Entrepreneurial spirit but “flat” federal organization results in too many decision-makers

• NPS/NASA: Hesitant to make decisions - fear of “getting in trouble”

• Trust: Opportunity to establish “mission and commercial” staff culture

• Trust: Board involvement in leasing double-edged sword

Planning

• NPS Presidio plan unrealistic and relied upon permanent federal support

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Lessons for Fort MonroeLessons for Fort Monroe

Adoption of a realistic, practical reuse plan

Strong support from stakeholders

Clear lines of decision-making authority

Adequate capitalization

Immunization against traditional ways of doing government business

• FMFADA must be independent, but accountable

• Must be able to make decisions quickly

• Capacity to respond opportunistically to market conditions

Ensure FMFADA staffing is adequate to implement plan

Utilize professional leasing and development services

Many pieces are in place to shorten start-up time