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Economic Impacts Discussion –

Fort Monroe Federal Area Development Authority

September 19, 2008

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Today’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

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Incorporate revised infrastructure cost estimates into the Fort Monroe financial model

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Refine and update fiscal impacts (revenues and expenses)

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Identify business decisions related to municipal services:

• • • • Who owns system/provides service?

Who operates?

What standards?

Whose cost?

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

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Fort Monroe Capital Requirement

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

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

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Public and Private Funding

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

Private

• Infrastructure (partial) • Historic rehabilitation & adaptive reuse • New Construction • Cultural facilities • Infrastructure (partial)

Public

• FMFADA seed capital • Infrastructure (partial) • But to attract private investment and charitable contributions, the Commonwealth must make an initial investment.

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Potential Public Investments

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

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Acceptance of Fort Monroe roads for VDOT funding

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

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

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Specific dollar estimates will be prepared this fall

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Need for Strategic Real Estate Plan

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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 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?

• 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 Francisco

Quick 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 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 Partnerships

• 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 Results

• Under NPS management by the end of 1997: • 1.3 million sq. ft. leased • $7 million in total revenues U.S. Army Thoreau Center Presidio Golf Course Gorbachev Foundation USA • Under Trust management, in 2008: • • 4+M sq.ft. leased $60 million in total revenue Presidio Residences ($36M) Non-residential ($17M) SDC/Other ($7M) (ex. Appropriations) Letterman Digital Arts Center SF Film Society Bay School (HS) Disney Family Museum

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NASA Research Park

Quick 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 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 Partnerships

• 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 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 Cruz Bloom Energy Apprion Inc.

U.S. Army (Wind tunnel) Airship Ventures Inc .

N211 Hangar LLC Mars institute

Total NRP Revenue

$8.0

$7.0

$6.0

$5.0

$4.0

$3.0

$2.0

$1.0

$0.0

FY04 FY05 FY06 FY07

Total Revenue

FY08 FY09 (est.)

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Observations

Infrastructure

• • 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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Observations

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 trouble” fear of “getting in • 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 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