2 MB 29th Jan 2015 ALIS Presentation

Presentation to
America’s Lodging Investment Summit (ALIS)
Successful Public/Private Hotel Case
Studies & Tools in a Post-RDA Era
January 27, 2015
by:
Kosmont Companies
865 S. Figueroa Street, Suite 3500, Los Angeles, CA 90017
213-417-3300
www.kosmont.com
Public/Private Hotel Case Studies (post RDA)
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Case Study: City of Redondo Beach – Marine Ave. Hotels
The Challenge
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City desired to utilize area near Metro station
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Odd lot size & shape; multiple ownership; and vacant condition had deterred
private development
•
Developer proposed 147-room Hilton Garden Inn, 172-room Marriott Residence Inn
and 180 Room Extended Stay Hotel located adjacent to the Metro station
The Post-RDA Tools Used
Metro
Station
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Ground Lease / LeaseLeaseback

Site-Specific Tax Revenue
Pledge (Prop & TOT)
•
Mezzanine Reserve Fund
Case Study: City of Redondo Beach – Marine Ave. Hotels
The Outcome- Opened May 2014
• Without Site Specific Tax Revenue
project does get financed
• Will add over $3.5 million/year in
TOT & create ~150 jobs
• Brings quality hotel operations to
the City’s “front door”
• Hilton Garden Inn - 147 rooms
• Marriott Residence Inn - 172
• TOD project across street from
Metro Green Line station
• 3rd Hotel; Homestead Suites- 2015
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Case Study: Starwood Hotels - W Hotel, Hollywood
Funding Target:
$200M total project capitalization
$17.5M funding gap – funded by EB-5
Investment Level:
$500,000 per Investor
plus processing costs
Investment Placement:
Drai’s Restaurant and Nightclub
Delphine Restaurant
Job Creation Required: Minimum 10 jobs per $500,000
(established and validated by
economic study)
Repayment Period:
Five years
Status:
35 investors with EB-5 I-526 visa application in process.
Restaurant loans funded in mid-2011.
Permanent jobs created by end of 2012.
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Case Study: Starwood Hotels - W Hotel, Hollywood
EB-5 Basics
EB-5 Financing is a low cost source of financing for public & private
projects which can be combined with other forms of project financing:
• Funding ranges from $5 Million to $100 Million per project; can be
phased and financed with no minimum LTV
• Short-term; typically structured as a 5-year repayment program
• Flexible - will subordinate to other equity and debt
• Streamlined source of front-end money not burdened by “public
purpose” requirements (such as bonds)
• Compatible with City economic development goals to promote job
growth and private sector investment
• If City is involved, no general fund guarantees; can pledge tax
increment or site specific tax revenue to secure investor interest
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Case Study: Redondo Beach Waterfront Revitalization
The Challenge
•
Redondo Beach’s aging waterfront increasingly struggles to compete
in SoCal, especially with neighboring South Bay cities
•
Cost of deferred maintenance best paid for by new private investment
but needed control of “sub-leases” on ~ 15 prime waterfront acres
•
City acquired waterfront assets; used as collateral via lease/leaseback
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Case Study: Redondo Beach Waterfront Revitalization
International Boardwalk
Pier Plaza
Marina Properties
Add’l Properties in RFQ
The Post-RDA Tools Used & The Outcome
• Kosmont structured Lease-leaseback financing for 15 acres of
land acquisition to be paid back from tenant lease cash flow
• RFQ issued for 15+ Acres of Waterfront development
• CenterCal Development selected as Master Developer
• MOU executed & CEQA Process kicked off
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Case Study: Redondo Beach Waterfront Revitalization
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Potential P3: Camarillo Hotel & Conf. Center
The Challenge
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

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Deficiency of local hotels and sufficient demand for medium to large size
conferences and events
City proposed new 3 to 4 star hotel & ~ 10k to 20k sq. ft. conf. ctr.
Market support for ~ 200 or more rooms
12 acre site may also accommodate complimentary retail uses
Current Status

Site located on 101 Fwy at Ventura Boulevard and Las Posas Road (within
City’s Heritage Zone)
 Potential for infrastructure incentives to private developer
 City currently seeking development
team to implement project
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Tools & Incentives for Successful Hotel
Public / Private Partnerships
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ED Tools for CA Cities – Post RDA
Real Estate & Property
Joint Powers
Authorities (JPAs)
Enhanced Infr.
Financing Districts
(EIFDs)
Special Districts
(Tourism, BIDs,
Economic
Development
Real Estate
Project
etc.)
Rebate of Taxes /
Revenues
Land Use / Zoning
(Higher Density;
Parking)
P3 / Project Delivery
Methods
Theses tools often work best when used together
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New Rules: Types of Districts Expanding
Restaurants
Golf
Tourism &
Downtown
Districts
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Wineries
Auto
TID Characteristics
• Tourism Improvement Districts:

Funds raised through an assessment on lodging stays

Provides services directly benefitting businesses within district

As of 2013, there are over 50 local tourism improvement districts in CA
 Noticeable TID is San Diego; TID funds programs /events to attract
overnight visitors to San Diego Convention Center (i.e. Comic Con)
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New Tools: EIFDs – Summary of Key Terms
The Area
1. Enhanced Infrastructure Financing District
•
Governmental entity established by a city or county
that carries out a plan within a defined area to
construct, improve and rehabilitate infrastructure
2. Public Financing Authority (PFA)
•
•
The Team
Legislative body that governs the EIFD
Composed of participating governments
and members of the public
3. Infrastructure Financing Plan
•
•
Plan adopted by city or county. Describes public
facilities & development to be financed by the EIFD
Implemented by Public Financing Authority (PFA)
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The Strategy
Types of Projects New EIFD may Fund
Industrial Structures
Hotel / Mixed Use
TOD Projects
Wastewater/Groundwater
Light / High Speed Rail
Civic Infrastructure
Parks & Open Space
Childcare Facilities
Brownfields
Source: SB 628 – Bill Text
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EIFDs – Diverse Funding Approach
 Can finance ANY property with an estimated life of 15 years or longer!

Can use multiple funding sources with tax increment:
If Bond Issuance then 55% voter approval required

Funding Sources:
•
•
•
•
•
•
•
•

Potential to apply State funding sources:
•
•

Property tax revenue including RPTTF
Vehicle License Fee (VLF) prop. tax backfill increment
Development Agreement / Impact Fees
User fees
City / county / special district loans
Hotel TOT
Benefit assessments
Contribution from Special District
Levied by EIFD
Private investment
Proposition 1 bond funds
Cap-and-trade proceeds
Federal & State Grants
•
•
Greenhouse Gas Reduction Funds
Federal DOT/EPA/DOE funding programs
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EIFD
Fund
Forming an EIFD
Successor
Agency
Prerequisite
Receive Finding of Completion (FOC)
Certify no SA assets under litigation will benefit
Comply with State Controller’s asset transfer review
Identify infrastructure projects
Identify District Members
Appoint PFA Members
Participating legislative bodies
adopt resolution of intention to
establish EIFD
Define project area
Create
Public
Financing
Authority
(PFA)
Select vendor to prepare plan
Create
Infrastructure
Financing
Plan (IFP)
Conduct public hearing
Approve the IFP
Adopt resolution
proposing adoption of IFP
and formation of EIFD
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Schedule public hearing for IFP
Distribute to property owners and
affected taxing entities
Legislative
bodies adopt IFP
and resolution of
formation
creating EIFD
Los Angeles’ Economic Incentive Program
 Incentives Offered:
• Business tax incentives to incentivize office occupancy, spur
investment, attract “creative office”
• TOT incentives & occupancy tax to make physical improvements to
existing hotels, spur investment, lengthen stays & improve occupancy
• Site Specific Tax Revenue (SSTR) for Retail Centers
• Other incentives (per incentive list provided to Mayor)
 Eligible improvements related to incentives for existing hotels
• Façade / exterior / entryways and landscaping improvements
• Raising level within existing “flag” system – i.e., Hyatt to Hyatt Regency
• Improve/add restaurants, bars & retail – including access and visibility
• Upgrade technology to attract higher-end customer, i.e., Executive
Conference center
• Improve indoor air quality and provide “wellness” attributes
• Upgrade infrastructure
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Hotel Incentives Eligibility
Requirements of a hotel applicant for incentives eligibility:
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Agree to a Project Labor Agreement (PLA) for temporary & permanent jobs
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Provide pedestrian & retail oriented improvements
•
Fund an analysis (fiscal analysis) as part of application
•
Must be a 3-star hotel or higher
•
Must have at least 200 rooms or more
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