federal real property exchanges association of defense communities(adc); installation innovation 16...
TRANSCRIPT
Federal Real Property Exchanges
Association of Defense Communities(ADC); Installation Innovation16 March 2015
Marc WaddillSenior Vice President, Public InstitutionsJLL
2
Agenda
I. Introduction to Federal Real Property Exchanges
II. Federal Exchange Authorities
III. Example Projects
IV. Exchange Participants
V. Sample Timeline
VI. Exchange Financing
VII. Exchange Financial Feasibility
3
Introduction to Federal Real Property Exchanges
What is an Exchange?• Exchange of title to Federal real property for constructed assets
• Exchange of title to Federal real property for in-kind consideration, including but not limited to:o Design and construction services for renovation of propertyo New construction of a replacement building
Why pursue an Exchange?• No Federal funds required• Acquire new facilities, improve space utilization, and dispose of underutilized
assets (not excess) in furtherance of the goal of reducing the Federal footprint• No screening process associated with traditional disposal
4
Federal Exchange Authorities
Department of Defense (DoD)• Acquisition Exchange: 10 U.S.C. § 18240 authorizes the Secretary of a military
department to acquire a facility, or addition to an existing facility, needed to satisfy military requirements for a reserve component by carrying out an exchange of an existing facility / land under the control of that Secretary through an agreement with a State, local government, local authority, or private entity
General Services Administration (GSA)• Exchange for Services: Section 412 of PL 108-447, 118 Stat. 2809, 3259 authorizes
GSA to exchange real property for in-kind consideration, including construction services on other GSA property
• Exchange for Acquisition: 40 U.S.C. § 3304 and 40 U.S.C. § 581(c) authorize GSA to acquire real property by exchange where GSA is providing real property and other consideration
• Exchange for Disposition: 40 U.S.C. § 543 authorizes an executive agency designated or authorized by GSA to dispose of surplus property by exchange
5
Example Project: Camp Parks (Dublin, CA)
• Current status:o Exchange agreement signed in 2011o Groundbreaking 6 March 2013o As of March 2015, first phase of the project
was complete and acceptedo An example of how the Army, local municipality, and private-sector developer
can work together for a win – win – win
Phased transfer of a 172-acre parcel in Dublin, CA to occur as each new project is completed
and accepted
Government Received from Exchange Partner
New phased construction of six projects approx. 150k SF, plus
infrastructure on adjacent Government-owned land
Exchange Partner Received from Government
Example Project: Boston (MA)
• Current status:o Proposed exchange announced
September 2008o Property is still under control of the
Army Reserve
13 land parcels totaling 8.1 acres in Boston’s Seaport district,
including 620k SF office building
Government Will Receive from Exchange Partner
Construction services on Devans RFTA, MA
Exchange Partner Will Receive from Government
620,000 SF Office Building at 495 Summer Street, Boston
6
• Current status:o RFI released late 2012, responses
were due early 2013o Phase 1 RFP released
December 19, 2014, responses due February 10, 2015
o Expected award in May 2016
Example Project: FBI Building (DC)
Existing FBI facility – J. Edgar Hoover Building
Existing FBI facility (J. Edgar Hoover Building) and associated land, totaling approx. 2.8M GSF
and 6.6 acres
Government Will Receive from Exchange Partner
New construction of a 2.1M RSF FBI facility for11,000 personnel in one of three possible locations: Springfield, VA; Greenbelt, MD;
or Landover, MD
Exchange Partner Will Receive from Government
7
Example Project: Denver Federal Center (CO)
• Current status:o GSA is in negotiations with the
City of Lakewood regarding the exchange
60-acre parcel located north of the RFD Federal Station Center
in Lakewood, CO
Government Will Receive from Exchange Partner
Construction services on the Federal Center - upgrades in an
existing building on GSA site
Exchange Partner Will Receive from Government
Proposed Exchange Parcel, Lakewood, CO
8
9
Example Project: DOT Volpe Center (Cambridge, MA)
• Current statuso Government issued a Request for Information (RFI) on August 26, 2014 o Stage 1 of the solicitation process will consist of a Request for
Qualifications (RFQ)o Stage 2 will follow and consist of a Request for Proposals (RFP) o City of Cambridge introduced the potential re-zoning of the Volpe block to
the Planning Board on January 6 and a follow-up discussion is planned for January 27
Portion of the 14-acre Federally owned property in Kendall
Square, including associated buildings
Government Will Receive from Exchange Partner
New construction of a 390K GSF state-of-the-art research and
office facility for the Volpe Center with associated parking
Exchange Partner Will Receive from Government
10
Participants
1. Government (Direct)• Strategic planning used to identify potential exchange parcels; Government to
make appropriate parcels available if vacant or consolidate operations if underutilized
• Receives new and/or upgraded facilities
2. Private sector (Direct)• Constructs new and/or upgraded facilities in exchange for land to be developed
for private-sector use• Earns appropriate risk-adjusted return on investment
3. Local Jurisdiction (Indirect)• ‘Partner’ with both Government and Private-Sector in the development process• Entitlements (land use restrictions, zoning, permitting): significant impact on value
of exchange parcel
11
Sample Timeline
• Government receives services (i.e., construction, renovation or other) in advance of Exchange Parcel(s) being conveyed to private sector
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
EXAMPLE PROJECT TIMELINE
Services Period: Construction, Renovation, and Other Services
Capital Investment
Conveyance to Private Sector
Value of Asset is Realized by Private Sector
Private Sector Ownership
Financing
12
Capital Financing Sources
Government Loans/Grants/Tax Credits
Tax Increment Financing (TIF)
Investment Grade Debt
Junior (Subordinate) Debt
Mezzanine Debt
Equity (Retained Earnings or Stock Offering)
Private Equity
Cost of Capital
Low Risk High Risk
Example 1 (Financing @7.5%)
Example 2 (Financing @15.0%)
Example 3 (Financing @22.5%)
$-
$100
$200
$300
$400
$500
$600
$700
$800
$500 $500 $500
$62 $132 $212
Financing CostsScope of Work
Total Cost ($ millions)
Financing (cont’d)
13
Financing Cost Sensitivity: Holding Scope of Work Constant
Example 1 (Financing @7.5%)
Example 2 (Financing @15.0%)
Example 3 (Financing @22.5%)
$- $50
$100 $150 $200 $250 $300 $350 $400 $450 $500
$445 $396 $351
$55 $104 $149
Financing CostsScope of Work
Total Cost ($ millions)
Financing (cont’d)
14
Financing Cost Sensitivity: Holding Exchange Parcel Value Constant
Financial Feasibility
15
Valuation Considerations
What Government Receives What Exchange Partner Receives
• Site and Infrastructure Costs• Hard Costs• Soft Costs• Contingencies• Security Restrictions• Sustainability Requirements• Government Involvement & Review
Process during Design & Construction (i.e., risk of delays and change orders)
• Environmental Conditions• Title• Facility Condition• Entitlements• Timing of Conveyance• Market Conditions
Financial Feasibility (cont’d)
16
What Exchange Partner
Receives
What Government
Receives
If Value Received is less than Conveyed Asset Cash Equalization Payment by Private Sector
If Value Received is more than Conveyed Asset Scoring Implications
EXCHANGE PARCEL VALUEFair Market Value of Exchange Parcel Less Market Risk Associated with Future ConveyanceLess Financing Costs for New Facilities
EXCHANGE PARCEL VALUE
VALUE RECEIVED BY GOVERNMENTDesign CostsPlus Exchange Partner Soft CostsPlus Construction Hard and Soft CostsPlus Cash Equalization Payment (if any)VALUE RECEIVED BY GOVERNMENT