pennsylvania convention center · 2020-02-13 · finance: ziegler. ziegler is a privately held,...

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Navy Hill Development Advisory Services

Richmond, VirginiaFebruary 2020

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Section 1: Introduction

Section 2: Project Overview

Section 3: Arena

Section 4: Mixed-Use Real Estate

Section 5: Public Facilities & Infrastructure

Section 6: Transportation

Section 7: Impact on City Services

Section 8: TIF Analysis

Section 9: Financing Review

Section 10: Conclusion

Table of Contents

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Introduction

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IntroductionThe Consulting TeamProject Lead: Johnson ConsultingJohnson Consulting, founded in 1996 in Chicago, IL, is nationally recognized for its market research, economic impact

studies, and consulting expertise for arenas, convention centers, hotels, and mixed-use real estate developments. We

have extensive experience in preparing feasibility reports for these types of developments, and have earned a reputation

for quality, integrity, and success among facility owners and operators, developers, and within the public finance and

administration community. Our firm works extensively in the areas of arena business planning, structuring public-private

partnerships, and maximizing economic return from such venues.

CONDUCTING ECONOMIC, MARKETAND FINANCIAL ANALYSIS FOR PUBLIC ASSEMBLY FACILITIES

+20 YEARS

BUILT HOTEL ROOMS

IN PROJECTS BUILT

$100B

PROJECTS/ASSIGNMENTS

20,000 1,000

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IntroductionThe Consulting TeamInfrastructure & Transportation: CHA ConsultingCHA is a Richmond-based full-service transportation and civil engineering

consulting firm with specialization in public infrastructure. The firm’s more than

300 engineers, project managers, and utility support specialists are experts in

planning, designing and permitting transportation, traffic, land development, land

surveying, and power/utility sectors.

Finance: ZieglerZiegler is a privately held, national boutique investment bank, capital markets

and proprietary investments firm with a local presence in Richmond. Specializing

in the healthcare, senior living and education sectors, as well as general

municipal and structured finance, enables the firm to generate a positive impact

on the communities they serve. The firm provides its clients with capital raising,

strategic advisory services, fixed income sales, and trading and research.

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IntroductionThe Consulting TeamAffordable Housing: The Hanson CompanyTHC is a Richmond-based, MBE Certified firm that brings a wealth of knowledge

in affordable housing, particularly within the Richmond Metropolitan area; as well

as permits, zoning, tax credit applications and community engagement. It is the

firm’s intent to work in concert with the community to save and restore historically

significant structures and create revitalization with infill development throughout

the City of Richmond while providing both commercial and residential space to

the community.

Cost Estimating: M.A. & AssociatesM.A. + Associates is a professional cost estimator firm (SDMBE) based near

Washington D.C. The firm’s cost control capabilities include establishing a code

of account, schedule of values, progress payments, change orders, claim

management, and estimate to complete. Additionally, they perform cost

engineering and economic analyses for construction and operation projects.

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IntroductionProcessThe purpose of this study is to provide Independent Advisory Services in the review of the proposed Navy

Hill Development. Our main area of focus was to review and opine on the reasonableness of assumptions

presented to date to Council as well as the ordinances introduced to implement the Project. As a part of this

process, we engaged with the following stakeholders:

• Development Team

• Arena Management Team

• City Assessor

• City Public Works

• Economic Development

• Chief of Staff to Council

• Council Members

• Davenport & Company

• Orrick and City Attorney Office

• Transportation Consultant

• Richmond Housing Authority

• Better Housing Coalition

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IntroductionProcessWe also reviewed a vast repository of data, studies, and reports, including:

Presentations:• Davenport & Company – Presentation Prepared for the Navy Hill

Commission Davenport & Company - Credit Rating/Debt Capacity

Implications of the Navy Hill Project

• Cushman & Wakefield Retail Analysis

• Noell Consulting Group – Rental Apartment Feasibility

• One South Realty Group – Condo Market Assessment

• Benchmark Global Hospitality – Market Analysis

• Colliers International – Office Market Analysis

• VCU – Affordable Housing, Large-Scale Redevelopment, & Public

Benefit

• Better Housing Coalition – Affordable Housing

• Virginia Poverty Law Center – Navy Hill Project & The

Redevelopment of Public Housing in Richmond

• Citigroup & J.P. Morgan – Navy Hill Financing Overview

Reports, Memos, & Meeting Minutes:• HR&A Downtown Richmond Market Analysis*

• Hunden Report*

• Navy Hill Development Advisory Commission Report*

• Development Agreement & All Exhibits

• Q&A documentation between commission and development team

• CSL Report

• HVS – Headquarter Hotel Feasibility Report

• MuniCap 27A & 28C Reports

• GRTC Memorandum

• Orrick- Navy Hill Development Agreement Memo

• Orrick –Legal Protections/Safeguards Memo

• Arena Management MOU

*These reports will be summarized on the following slides

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IntroductionDowntown Richmond Market AnalysisHR&A Advisors – February 7, 2018Residential • Annual absorption of 415-425 market rate multifamily rental units at $2.20 per square foot

• Annual absorption of 30-32 for sale ownership units at $400 per square foot

Office

• Demand for 525,000-750,000 square feet of new office space

Retail• Demand for 580,000-690,000 square feet of new retail space

Hotel• Demand for 460-590 new hotel rooms

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IntroductionDowntown Richmond Redevelopment Project AnalysisHunden Strategic Partners – October 31, 2018

Market & Feasibility Analysis:• Arena, Event, & Entertainment

• Hotel, Meetings, & Convention

• Retail & Restaurant

• Residential

• Office

Net New Economic Impact over 30 years:• Direct Spending: $6.2 million

• Indirect Spending: $2.2 million

• Induced Spending: $2.5 million

• FTE Jobs: 6,997

• Earnings from FTE Jobs: $7.0 million

Net New Fiscal Impact over 30 years:• Sales Tax from New Spending: $49.8 million

• Sales Tax from Construction: $0.7 million

• Meals/Restaurant Tax: $171.8 million

• BPOL Tax: $12.3 million

• Admissions Tax: $125.8 million

• Lodging Tax: $111.7 million

• Real Estate Tax: $855 million

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IntroductionFinal ReportNavy Hill Development Advisory Commission – December 23, 2019

Supportive:• TIF Assumptions

• VCU Benefits

• Street Grid Benefits

• Minority Goals

• Mixed-Use Approach

Unsupportive:• Risk to General Fund

• Risk to School Funds

• City Oversight of Navy Hill

• Soundness of Public Investment for Arena

Insufficient Information / No Position:• Necessity of Arena to Navy Hill Development• Risk to Other Businesses or Programs• Arena Contract Risks• Tax District Base Values & Revenue Projections• Retail, Restaurant, Hotel, & Office Revenues• Development Schedules• Cost Estimate for Infrastructure• Cost Estimate for Parcel Acquisition• Impact of Rehab Tax Credits & Abatements• Impact of Annual EDA Grants• Impact on School Funding• Impact on General Fund• Benefits of Arena• Benefits of GRTC• Affordable Housing

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Project Overview

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Project OverviewTimeline2017November 9: City issues Request for Proposals for the North of Broad/Downtown Neighborhood Redevelopment Project

2018February 7: HR&A Delivers Downtown Richmond Market AnalysisFebruary 9: Request for Proposals Due Date / NH District Corporation Submits Proposal

2019August 5: Navy Hill Development Project Ordinances Introduced to City CouncilOctober 31: Hunden Strategic Partners Delivers Richmond Redevelopment Project Analysis December 23: Navy Hill Development Advisory Commission Issues Final Report

2020January 8: House Bill 1345 is introduced, which would allow TIF to shrink from 80 blocks to 11 blocksJanuary 13: CoStar plans to double its Richmond employment to 2,000 and occupy 400,000 sq. ft. of office space at Navy HillJanuary 14: MuniCap Delivers Tax Increment Financing Projections No. 28-CJanuary 27: ECHL endorses locating a team in the proposed arena at Navy HillFebruary 3: Johnson Consulting PresentationFebruary 4: VCU announces plans for medical offices, hospitality facilities, retail space, and parking at Navy HillFebruary 10: Johnson Consulting Final ReportFebruary 24: City Council Navy Hill Development Project Vote

Project OverviewNavy Hill Development Agreement

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Navy Hill Development SWOT Summary

W

StrengthsWeakness

Opportunities Threats NHDC Foundation can be better leverage as a greater good

and resource to City NHDC Foundation create an affordable housing investment

fund, a revolving loan fund, for non and for-profit developers to use as gap financing

Leverage NH development as a catalyst to spur additional growth on private property adjacent to main project site

Regional cooperation – Convention Center model Set standard for CBA for future developments GRTC move to Pulse alignment

No specific plan to date to address GRTC or DSS from both a strategy or funding standpoint

No appraisal of land was completed prior to RFP solicitation or to date

NHDC Foundation lacks organizational plan City presently lacks capacity of appropriate oversight of larger

scale projects 80 block TIF Percentage of affordable housing units within the development

Removal of HB1345 State TIF reallocationWithout HB1345, greater density will be needed in the

development area, thus may lengthen time for market absorption

Surrounding communities such as Hampton Roads and Norfolk are in the early stages of planning redevelopment opportunities for their aging venues

Time: will cause further delay in the City’s ability to create economic development engines, which are needed as costs grow regardless

T

S Proposed mixed-use development addresses latent

demand in downtown HQ Hotel and district brings vibrancy for convention

center visitors Thoroughly vetted development by various outside

specialty consultants Tax Revenue Potential

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O

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Arena

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ArenaOverviewJohnson Consulting reviewed both the CSL as well as the Hunden report in relation to the proposed arena development. In

reviewing the reasonableness of the arena development, an independent assessment of current Richmond MSA market

conditions and compared several economic indicators in relation to markets of similar size. While characteristics such as

population, employment and income are not strict predictors for the success and impact of a venue, these figures can provide

insight into the capacity of a market to yield – and sustain – support for infrastructure associated with this type of facility.

Additionally, an audit of similar sized venues across the region was performed. The closest arena of competitive size to the

proposed new Richmond arena is the John Paul Jones (JPJ) Arena in Charlottesville, VA, which is approximately 75 miles west

of the Richmond. However, it is important to note, the JPJ Arena is owned and operated by the University of Virginia, thus its

primary mandate from a functionality standpoint is University oriented events not entertainment/ concert events. The proposal

business plan for the new arena would be the inverse in its primary mandate would be its flexibility in schedule to attract larger

scale regional entertainment events.

Arena

Regional Arenas

Seating Capacity

90-minute Drive Time

Includes arenas with capacity of 15,000 or higher

*University-affiliation limits availability

*

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Arena

The Richmond Metropolitan Area is the 44th largest in the nation. It is adequately sized for an arena of this magnitude, and has

experienced healthy population growth in recent years, especially in relation to comparable markets. The Richmond

Metropolitan Area is projected to experience 1% annual population growth and will have nearly 1.4 million residents by 2024.

Comparable Market Analysis

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Arena

The Richmond Metropolitan Area also has a strong median household income relative to comparable markets,

and a median age that is on par.

Comparable Market Analysis

Arena

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Comparable Market AnalysisIn reviewing the economics of the proposed arena, understanding the appropriate

size of the arena is an important element in understanding its overall viability within

the marketplace. As illustrated in our comparative market analysis, we analyzed 5

markets larger in population as well as 5 market smaller in population than that of

Richmond MSA. Ironically, the five larger markets had an average arena seat

count of 17,718, while the 5 smaller market illustrated a slight larger arena with an

average seat capacity of 18,055 seats. Johnson Consulting believes the smaller

market average is being slightly skewed by the above average size of the KFC

Yum! Center in Louisville, KY, which has a capacity of 22,090. The smaller market

arena average capacity is approximately 17,046, when KFC Yum! is removed from

the average. Thus, with an average capacity in the range of 17,046 – 17,718

seats, in markets of similar size to that of Richmond MSA, Johnson Consulting is of

the opinion the proposed 17,150 seat capacity is line with peer markets and

venues. Further, Richmond historically hosted a significant number of sports

tournaments, such as Women’s Final Four, Basketball regionals and other sports.

Threshold size is required to regain Richmond’s presence in this space.

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Arena

YEAR OPENED: 2005

CAPACITY: 17,000

SUITES: 36 suites - $69,000 annual cost

CLUB SEATS: 660 seats - $2,132 annual cost

OWNERSHIP: Polk County, Iowa

OPERATOR: Spectra Venue Management

COST: $117-million ($153-million in 2020 dollars)

ABOUT: The Wells Fargo Arena is a multipurpose arena located in downtownDes Moines, Iowa. The arena is currently home to multiple different tenants,including the Iowa Wolves (NBA G League), Iowa Barnstormers (IndoorFootball League), and the Iowa Wild (American Hockey League). The arenais part of the Iowa Events Center, which also includes The Community ChoiceCredit Union Convention Center – a 100,000 square foot exhibit hall witheight breakout rooms.

The Wells Fargo Center has consistently been ranked as one of the top 100concert facilities in the United States according to Pollstar Magazine.

Arena Case Study #1: Wells Fargo Arena – Des Moines, IA

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ArenaArena Case Study #1: Wells Fargo Arena – Des Moines, IA DEMAND: From 2017 to 2019, the Wells Fargo Arena held a total of 420events, which is an average of 140 events annually. Most of these eventscome from its three main tenants: The Iowa Wolves, Iowa Barnstormers,and Iowa Wild. In total, sporting events make up over 90 events per year,which is 65 percent of their total events annually. Other events at the Arenainclude family shows such as Globetrotters, Disney on Ice, Disney Live,WWE, Monster Jam, as well as small and large trade shows, graduations,and banquets.

The Wells Fargo Arena sees approximately 760,000 people per year, whoattend events such as sporting events, family shows, concerts, and specialevents such as trade shows. This averages out to be 5,400 people perevent, with sporting events and concerts usually having more.

FINANCIALS: The Wells Fargo Arena generated approximately $23-millionannually in ticket sales over the last three years as well as $565,000 ofluxury suite ticket revenue as well. Because of the high amount of eventsand attendees, the arena had an average total Net Operating Income ofapproximately $2.5-million over the last 3 three years.

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ArenaArena Case Study #2: XL Center – Hartford, CTYEAR OPENED: 1975

CAPACITY: 15,500

SUITES: 46 suites

CLUB SEATS: 310 seats

OWNERSHIP: City of Hartford

OPERATOR: Spectra Venue Management

COST: $30-million ($143-million in 2020 dollars)

ABOUT: The XL Center is a multipurpose arena located in downtownHartford, Connecticut. It currently has four main tenants: Hartford Wolfpack(American Hockey League), UCONN Huskies Men’s and Women’s basketballteams, and the UCONN Huskies Men’s Ice Hockey Team. The 15,500-seatarena hosts a variety of different events including: sporting events for hockeyand basketball, concerts, family shows, banquets, and graduations.

The Arena underwent a $35 million renovation that began in 2014 thatincluded upgrades to the mechanical system, locker rooms, new lighting, anda new scoreboard. It is also important to note that the XL Center is attachedto the Hartford Convention Center, which features more than 140,000 feet ofexhibition space.

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ArenaArena Case Study #2: XL Center – Hartford, CTDEMAND: From 2018 to 2019, the XL Center held a total ofapproximately 127 events annually. These events were mostly sportsrelated, as the UCONN Men’s and Women’s Basketball teams and theMen’s Hockey teams, as well as the Harford Wolfpack all play there. Intotal, the XL Center hosts approximately 72 sports events there per year,which is 56.7 percent of their total events. Other events that arecurrently held there are Globetrotters, Disney on Ice, Disney Live, WWE,Monster Jam, as well as small and large trade shows, graduations, andbanquets.

In total, the XL Center sees approximately 500,000 people per year,which is an average of almost 4,000 people per event. Events such asconcerts and family shows are popular at the XL Center while theHartford Wolfpack average 3,950 people per game, which is belowAmerican Hockey League average.

FINANCIALS: The XL Center generated approximately $17-million ofticket sales over the last two years, as well as $342,000 in premiumseating sales on average annually. Over the last two years, the XLCenter has almost broken even, averaging a loss of $142,000, which isdirectly related to the number of events that were held.

Arena

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Spectra Performance ComparisonJohnson Consulting analyzed the actual performance of similarly-sized Spectra managed venues in both Des Moines, IA and Hartford, CT, in

comparison to the projected performance for the proposed Richmond arena. The analysis illustrated the two Spectra managed venues achieved

a total number of events range from 127-140 as well as total attendance range of 499,000 to 742,000. Additionally, as part of our analysis it was

important to understand the current quality of each venue. For instance, the XL Center in Hartford, CT is a 43-year-old venue in the midst of

considering a substantial renovation to the venue, in an effort to remain competitive within the marketplace. However, the Wells Fargo Center,

which is a much newer venue than the XL Center, which opened in 2005, was able to attract 742,000 in total attendance in a market that is

approximately half the size of the Richmond MSA. Given the results of this analysis, coupled with our independent review of the regional

competition, Johnson Consulting is of the opinion the projected total attendance for the proposed arena in Richmond of 683,000 are fair and

within reason.

Richmond Arena Projections

Wells Fargo Arena (2018-2019)

XL Center(2018-2019) Average

Location Richmond, VA Des Moines, IA Hartford, CT -Population (MSA) 1,320,715 680,233 1,227,817 954,025Annual Population % Growth (2019-2024) 1% 1.75% 0.14% 0.95%Median Household Income $67,972 $70,246 $71,858 $71,052Total Businesses 43,224 23,095 53,497 38,296Entertainment Spending $390,575,853 $198,586,911 $410,324,941 $304,455,926All Events (YTD)Number of Events 181 140 127 133Number of Attendees (turnstile) 683,000 742,842 499,255 621,048Box Office Sales $17,735,250 $23,459,419 $16,823,345 $20,141,382Suite Inventory 28 36 46 41Source: Spectra, Johnson Consulting

Arena Comparison

Arena

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Reasonableness of Assumptions• Arena Program & Cost: The proposed size and

premium seating mix is consistent with venues

supported in comparable markets; Typical arena cost

range between $10,000 to $15,000 per seat

• Demand: The total volume of attendance is fair,

however the total number of events at 181 events is

high. Comparable range to be 127-140 events.

Attendance is reasonable, but may be achieved by

multi-day festivals, tournaments and a refined demand

mix.

• Financials: The projected revenues streams and per

caps seem to be reasonable and in line with

comparable venues. It’s important to note, parking

assumes district-wide parking revenues.

Land Use Metric Baseline Assumption* Reasonable Unreasonable Considerations

Building Number of Seats 17,150 Suites 29 Club Seats 34 Construction Cost/per seat $13,700

Demand Number of Events by Type

G-League 24 No announcement or documentation shown to date assures this is likely

Minor League Hockey 36

Concert - A 5

Slightly Aggressive, of the top 100 touring shows, a total of 9 fit between 15,000- 20,000 attendance level, thus 55% of available acts would need to be captured in order to meet the projected concerts (5). A more conservative assumption would be (3 concerts) or 33% of available acts

Concert - B 12 Concert - C 6 Family Shows 10 Ice Shows 8 Motorsports 3 Rodeos 2 Boxing 1 Religious 6 Other Sports 10 HS Basketball 2 Graduations 10 Miscellaneous 40 Entertainment 6

Total Number of Events 181 Falls outside of comparable range; however this may be skewed by the volume Miscellaneous event totals and how they are recorded ( this total assumes 40 "Miscellaneous" events)

Total Attendance 683,000

FinancialsSponsorships(Naming Rights, Founding Partners, $2,210,000

District- Wide Sponsorships $1,500,000 Parking $2,000,000 F & B Per Cap $8 Novelty Per Cap $3 Average Ticket Cost $27 Total Box Office Ticket Sale $17,735,250

* Per CSL & SpectraSource: Prior Studies, Johnson Consulting

Reasonableness of Assumptions - Arena

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ArenaConsiderations• The Richmond area has favorable market conditions and a favorable regional inventory of competitive venues. The Richmond marketplace

and the proposed arena are well located between two major Mid-Atlantic markets and venues – PNC Arena in Raleigh, NC and Capital One

Arena in Washington, DC – which will make the proposed arena in Richmond an attractive option for larger touring entertainment events.

• A major tenant in the form of an ECHL team has been secured, which will insure 36 events and approximately 125,000 in annual

attendance.

• Spectra has equity at risk to tune of approximately $8 million dollars in this development, coupled with responsibility for cost overruns and

any operational deficits. These elements are atypical and help reduce the risk to the City in relation to the arena development and

financing.

• The Spectra performance comparison illustrates the total volume of project attendance at the new Richmond arena is in line with

comparable venues. The total number events was above average but after further review, it was noted 40 of the 181 events projected were

smaller miscellaneous events that would likely be induced by the displacement of such events from the convention center, with its ability to

focus and attract larger scale events with the needed headquarter hotel.

• The proposed arena in Richmond is projected to average 3,773 attendees per event while Wells Fargo Arena and the XL Center currently

average almost 4,700.

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Mixed-Use Real Estate


Reasonableness of AssumptionsProjections prepared by Hunden Strategic Partners (October 2018) are market-

driven and reasonable:

• Residential: Projected population growth is higher than historic averages but

consistent with trends observed in similar districts nationally

• Office: New office space at Navy Hill will be include some spec office space

to meet unmet demand throughout the market

• Hotel: Addition of a limited-service property is an important addition to the

market, along with the proposed full-service hotel, and arena and convention

center will generate significant demand

• Retail: Visitors to the arena and a permanent population base will be critical

to the success of the proposed retail space

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Considerations• Sports, entertainment and cultural venues can be strong catalysts for successful neighboring developments

• Nationally, the most successful districts are those that are located close to the downtown core of their respective cities

• The proposed mix of land uses at Navy Hill leverages both the arena and the locational attributes of the site

• The baseline assumptions and projections prepared for the project are considered to be market-driven and reasonable.

• Residential population base is critical vibrancy of a mixed-use community

• In the absence of the arena as the catalyst for the mixed-use development district, a much slower absorption of the

residential units is anticipated

• Retail space will be much less desirable without arena or additional residential population

• Hotels and office space are less impacted by the presence or absence of arena

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Mixed-Use Real EstateAffordable HousingOur team has reviewed the various reports submitted to the Navy Hill Advisory Committee. We have interviewed the

developers responsible for achieving the affordable housing goals of the Navy Hill development. Our findings are as follows:

• Definition of affordable housing is defined as rent not to exceed 30% of total household income. VHDA allows for utility

allowance in their affordable housing calculation. This is an accurate indicator for housing affordability.

• *The 30% affordability standard does not include those falling under the homeless and sheltered category, however, the

Navy Hill Project as proposed would not be serving that population.

• Median incomes as indicated in the report are consistent with those used by both State and City agencies responsible for

setting affordable housing policy and strategy.

• Demand for affordable housing is higher for families at 50% of median income than it is for upper levels of affordable

housing (60% & 80%) of median income.

• The higher demand for affordable housing at the 50% of median income and below level is a result of the steady decline

of housing units over a 10-year period that had previously served the 50% and below market.

• City of Richmond Department of Housing & Community Development estimates the current affordable housing shortage

at 3,000 units

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Mixed-Use Real EstateAffordable HousingThe developer will enter into an affordable housing covenant with the City of Richmond that will regulate rent amounts for the

affordable units. What follows is the verbiage included in the covenant:

Affordable Housing Covenant 4.3.2 (7/29/2019)

Establishment of maximum rent. The maximum allowable month rent (“maximum allowable rent” or “MAR”) for each Rental

Affordable Unit shall be an amount equal to the equivalent of the then current Maximum LIHTC Gross Rent for such category

of Affordable Housing Units (studio, one-bedroom, two-bedrooms, etc.) permitted to be charged by the Virginia Housing

Development Authority by owners of projects in the City of Richmond, Virginia that are participating in the Federal Low-

Income Housing Tax Credit (LITC) program, without allowance being provided for Utilities in the determination of such rents.

Navy Hill’s total residential count is 2,127 units. The master developer is committed to 15% of the total units being affordable

as recommended by the Navy Hill Advisory Committee. They will build 280 units that will serve 60-80% of median income

families. The 60-80% median income units being built by the master developer will not require any City or State subsidy. The

lower rents being charged for the affordable units will be offset by the higher density of apartment units, land cost and

commercial rents (see affordable housing review chart for affordable apartment rents).


Affordable Housing• Definition of affordable housing: rent not to exceed 30% of total household income. VHDA allows for utility allowance in

their affordable housing calculation. This is an accurate indicator for housing affordability.

• *30% affordability standard does not include those falling under the homeless and sheltered category

• Median incomes as indicated in the report are consistent with those used by both State and City agencies

• Demand for affordable housing is higher for families at 50% of median income than it is for 60% & 80% of median income

• Higher demand for affordable housing at 50% of median income and below is a result of steady decline of housing units

that had previously served the 50% and below market

• City of Richmond Department of Housing & Community Development estimates current affordable housing shortage at

3,000 units

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Mixed-Use Real EstateAffordable HousingThe developer will enter into an affordable housing covenant with the City of Richmond that will regulate rent amounts for the

affordable units according to limits set by the Virginia Housing Development Authority:

Legend:100% Median Income 80% Median Income 60% Median Income____City of Richmond $86,400 City of Richmond $69,120 City of Richmond $51,840

* Rent based on 30% of total household income

80% of Area Median Income 162 units proposed

60% of Area Median Income114 units proposed

DeveloperProposed

Rent

AffordableRents*

Maximum Affordable Rents*

(includes utility allowance)

DeveloperProposed

Rent

AffordableRents*

Maximum Affordable Rents*

(includes utility allowance)

Studio $1,335 $1,335 $1,210 $1,001 $1,001 $ 9071 BR $1,431 $1,431 $1,297 $1,073 $1,073 $ 9722 BR $1,555 $1,645 $1,556 $1,166 $1,256 $1,167

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Mixed-Use Real EstateAffordable Housing• Navy Hill’s total residential count is 2,127 units. The developer is committed to 15% of the total units being affordable as

recommended by the Navy Hill Advisory Committee.

• The developer will build 280 units that will serve 60-80% of median income families. These units will not require any City

or State subsidy. The lower rents being charged for the affordable units will be offset by the higher density of apartment

units, land cost and commercial rents.

• The developer will enter into a partnership agreement with The Better Housing Coalition (BHC) to develop an additional

75 units of affordable housing in the 40% – 50% of median income range in Block I of the Navy Hill Development.

• BHC has confirmed that the approach to developing affordable housing for the Navy Hill Project will follow the same

model of utilizing LIHTC and other affordable housing financial resources. BHC has estimated their development cost at

$200,000 per unit.

The 280 units being built by developer + the 75 units being built by BHC exceed the 15% requirement

for affordable units:

280 + 75 = 355

355 / 2,127 = 17% 38

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Public Facilities & Infrastructure

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Public Facilities & InfrastructureExisting ConditionsThe Timmons Group, retained by VHB and the Developer, performed an assessment of the existing utilities in the area of the

Navy Hill project. (“Initial Master Utility Plan for the North of Broad/Navy Hill Area” dated November 13, 2018)

Water SystemThe existing water system is made up mostly of

8”, 12” and 16” mains. A computerized water

model was developed for the project area using

hydrant flow test data. The existing system can

provide pressures at street level ranging from

40-55 psi which are within industry standards.

Fire flows were estimated in the range of 1,700-

2,100 gpm with residual pressure of 20 psi.

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Public Facilities & InfrastructureExisting ConditionsThe Timmons Group, retained by VHB and the Developer, performed an assessment of the existing utilities in the area of the


Combined SewerThe storm sewer and sanitary sewer mains within

the project area are part of the City’s Combined

Sewer system. City code prohibits any additional

flows to the system. Any proposed increase in

sanitary flow rates would need to be offset by

reductions in stormwater flows. No new

combined sewers are allowed within the City

system. Separate structures for sanitary and

storm sewer will need to be installed.

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Public Facilities & Infrastructure

Gas InfrastructureThe City owns and maintains all gas lines within the city.

There is enough capacity in the existing gas system to

serve the proposed redevelopment buildings and uses in

the initial phase of the project.

Street Lighting & Traffic SignalsA City owned and operated power grid serves City street

lights and traffic signals in the project area. This power grid

is independent of Dominion Energy which only serves the

buildings. The City power grid is made up of primary and

secondary underground electric lines.

Existing ConditionsThe Timmons Group, retained by VHB and the Developer, performed an assessment of the existing utilities in the area of the


Private PowerDominion Energy is the provider of power for the buildings

within the project area. Underground duct banks run under

the roadways within and adjacent to the redevelopment

area. Dominion’s power grid is independent of the City’s.

Private CommunicationsCommunication lines/duct banks run underground within

the project area.

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Public Facilities & InfrastructureConsiderationsAll utilities within the Navy

Hill Development area will be

impacted in some way. The

re-alignment of 7th St and the

extension of Clay St will have

the biggest impact. Utilities

within the remaining streets

will remain untouched unless

to make a service/lateral

connection.

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Public Facilities & InfrastructureWater System ConsiderationsExisting pressures of 40-55 psi were measured at street level. The proposed development of multi-story buildings may

necessitate the use of domestic service and/or fire pumps to provide adequate pressure to tenants.

Clay StreetThe water main located in a tunnel adjacent to the existing arena will

need to be abandoned and a new 8” main, with hydrants at grade,

constructed within the right-of-way of the Clay St extension.

7th StreetThe existing 12” main along 7th St, between E. Leigh St and Clay St,

may require relocation once right-of-way has been re-aligned to

straight section. The main may be too close to the right-of-way if it

remained.

The entire development area shall be examined for adequate fire

hydrant coverage as part of the project.

CLAY ST EXT

7thST

REET

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Public Facilities & InfrastructureCombined Sewer System ConsiderationsWastewaterProposed domestic wastewater flows were estimated using proposed land use and building sizes for the Navy Hill project.

Approximately 900,000 GPD of additional average wastewater flow is expected to enter the system with the development. As

mentioned earlier, no new wastewater flows can be added to the Combined Sewer per City Code. The proposed peak flow

will need to be computed and added to the projected stormwater flows to evaluate and provide for adequate capacity. (Per

Sections 2.2.3.B and 2.2.4.C of City of Richmond DPU Sanitary Sewer System Design Guidelines, Standard Specifications

and Details).

The majority of existing sewer mains lie within street rights-of-way and will remain in place. The Developer shall verify that no

proposed building footprint conflicts with existing sewer.

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Public Facilities & InfrastructureCombined Sewer System ConsiderationsStormwaterVHB was retained by the Developer to analyze the Stormwater side of the Combined Sewer improvements. (“North of BroadRedevelopment Stormwater management Approach Development Phase 1” dated December 2018)

VHB analyzed Phase 1 (Blocks A, B, E, and F). The site drains to the City’s Combined Sewer and therefore the developmentis exempt from the Virginia Stormwater Management Program regulations for water quality and water quantity. Rather, theDeveloper must conform to the City of Richmond ordinance requiring the post-development peak flow rate for the 10-yr stormevent does not increase from the pre-development flow rate.

It is recommended, through VHB’s analysis, that each Phase and/or Block of development be mitigated with the use/designof a central detention facility. Underground detention allows the storage of stormwater runoff onsite and for the release of therunoff at an acceptable rate, so as not to surcharge the combined sewer at times of peak flow. VHB demonstrates in theirreport that Phase 1 of the development area could be served with an 11,000 cubic foot concrete vault as its detention,satisfying the runoff of both the 10-yr and 15-yr storm events.

This same mitigation approach would need to be done for the additional peak wastewater flows for each Phase and/or Blockof development. An underground detention facility would need to be designed for domestic wastewater, allowing it to bereleased into the system at a rate so as not to exceed allowable peak flows.

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Public Facilities & InfrastructureGas ConsiderationsMost of the gas infrastructure shall remain in place within existing rights-of-way. With the removal of the Clay Street tunnel,

gas lines attached to the 5th St and 7th St bridges over it will need to be relocated. There is also a 4” gas line within the Clay

St tunnel that will require abandonment or removal.

There are currently no existing gas mains within 9th St between Marshall St and E. Leigh St, in Marshall St between 9th St

and 10th St, and in 10th St between Marshall St and Clay St. The needs of future development in this area will require

analysis by the Developer. As stated within the Development Agreement, all gas mains/gas main adjustments for the project

area will be designed and installed by the City of Richmond.

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Public Facilities & InfrastructureStreetlight ConsiderationsThe majority of streetlight and traffic signal electric lines will be able to remain in place. Improvements will be required for the

7th Street realignment and the Clay Street extension. The Developer is responsible for the installation of new LED

streetlights. All streetlight improvements will require City approval. The City of Richmond will be responsible for making the

connection to their power grid.

Private Power & Communications ConsiderationsDominion Energy will continue to serve the buildings as part of the Navy Hill development. Almost all of their infrastructure

can remain in place. Underground duct banks on the 5th St and 7th St bridges over the Clay St tunnel will need to be

reconstructed.

The same is true for the Verizon duct banks within the project area. Communication lines on the 7th St bridge over the Clay St

tunnel will need to be relocated.

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Public Facilities & InfrastructureAdditional Considerations

E. Leigh StThe overall master plan the Developer had based proposed utility usage and projected flows on has changed since the

previously mentioned reports were completed. A major change involving E. Leigh Street which was originally proposed

to be filled in and brought to meet grade at the surrounding streets is no longer part of the Navy Hill project.

Therefore, the developer should re-calculate building sizes and projected wastewater flows for the development along

the south side of E. Leigh Street

Proposed Gas UsageIt is recommended that the Developer consider using natural gas throughout the Navy Hill improvements as it is a City

owned and operated utility. All revenue would go directly to the City of Richmond.

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Transportation

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TransportationExisting Intersection Capacity Analysis• 33 intersections identified by Developer and Concurred by

Richmond Public Works

• Developer shall study AM and PM Peak Periods as well as

special events

• Developer shall create trip generation layout from ITE Trip

Generation Manual, 10th Edition

• Developer shall create trip distribution model based on

existing AM and PM Peak Traffic Patterns

• Developer shall include existing and proposed LOS for

intersections in the study area

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TransportationExisting Interstate Highway Access• No connections to the Interstate System will be studied by the Developer

• VDOT currently has a study currently underway to evaluate and program future improvements

• Public Meeting in Early January defined the Broad Street at I-64 and 5th/7th Street at I-95 as

• “Further Study Required” – Next Meeting on January 30th

• Broad Street improvements include northbound Collector-Distributor Road

• 5th and 7th Street improvements include additional access

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TransportationCapacity of Existing Streets & Sidewalks• Developer shall include existing and proposed LOS for multimodal uses including pedestrians, bicycles, and

transit

• City requires use of Better Streets Principles and Vision Zero Requirements for development within the City

• City requires use of Complete Streets Handbook for development within the City

Capacity of Existing Parking Infrastructure• Newtown Advisors study already has this information

• Developer study shall include reference to the Newtown Advisors study

• Richmond 300 study also completed by DESMAN/VHB – included in Citywide Parking Study

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TransportationBest Practices Analysis• Currently, City Engineer (M.S. Khara) is responsible for best practices

• Public Works has already developed a best practices manual – PM will be responsible for review and

approval of submittals ensuring best practices

• Developer plan includes analysis on modal emphasis by area and by corridor for the study area including an

access management plan

• Developer plan includes congestion and safety mitigation analysis within the study area for all system users

including vehicles, pedestrians, and other modes

• Developer’s scope includes definition of funding for each recommended improvement

• Developer to locate bicycle parking and designated passenger loading zones for rideshare, taxis, and

vehicle pickups and drop-offs

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TransportationConsiderations• Developer analysis of the study area intersections for safety improvements, including pulling existing crash

data and determining if any improvements are needed in the area, specifically for any pedestrian-involved

crashes that have happened within the past 5 years. This will be important for the success of the

development as a whole.

• Mitigation of AM and PM Peak LOS that are grade E and worse – the Developer shall recommend and

include mitigation in their development plan for any deficient intersections or movements within study area

• We are in agreement with the Developer’s plan to locate operationally and/or structurally deficient traffic

controls within the project area

• Overall scope of Traffic Impact Analysis Requirements put together by the Developer and the City Public

Works Staff is very reasonable and in line with best practices for the scope of the development

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Impact on City Services

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Impact on City Services

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Impact on City ServicesDepartment of Social ServicesProposed Navy Hill Development• Between Marshall & Clay Street:

• 400 residential units

• New GRTC Bus Transfer Center

• Education-related facility

• Between Cary & Leigh Street:

• Medical research lab, office, conferencing

• Ground level retail (540,000 square feet)

• Between Cary & Leigh Street:

• Doorways Hospitality House (150 rooms)

Department of Social ServicesConsiderations• All of this needs to be approved per the plan,

designed, and financed

• The DSS site has its advantages for the GRTC

facility due to the size of the property, lower level

elevation for capacity, and close proximity to the

proposed residential development and Broad

Street – Pulse

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TIF Analysis

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TIF AnalysisAny proposed TIF should be sized to make the project work. TIF only partially relates to size and boundaries. It also relates

to content and density of development of the project, so if 80 or 11 blocks are reconsidered, the TIF will have to be

recalibrated. It is commonplace for states to participate in such large capital projects, so an effort to restore House Bill 1345

is highly encouraged. This would provide an additional $55 million in revenues to go toward repayment of the non-recourse

revenue bonds for the arena.

The most important thing to recall is that these are City dollars and the developer is not receiving them – the City’s arena is.

Typically such TIF would be used to fund the proposed $47 million in infrastructure costs and the approximate $50+ million in

hotel subsidy. In Navy Hill’s case, the developer has committed to fund these costs and to achieve a 30 percent MBE content

on the private component of development, all of which are extraordinary to this deal and in benefit to the City and project.

TIF Analysis

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TIF Analysis

TIF Assumptions ConsiderationsReal Property Taxes:• Projections used the lower of the three approaches

(Income Capitalization, Comparable and Estimated Cost) tovalue except for Office Property

The use of the lower valuation methodologies is theconservative approach and the one we would recommend.

Sales Taxes:• 60/40 split between restaurant and retail, excluding Block I

(100% Retail)• City contribution – 1%• State Contribution – 2.025%

• 60/40 split consistent with proposed development plan• City contribution consistent with plan• State contribution consistent with legislation enactedwhen TIF district size changed from 80 blocks to 11 blocks

F&B Taxes• 6% of the available 7.5% total

• Consistent with the portion available for debt serviceafter the 1.5% dedicated to new and renovated schoolfacilities

Hotel Taxes• Projections based upon ADR of $221.50 at 70% occupancy

• ADR and occupancy assumptions consistent with themarket rates and occupancy levels provided in the CBREreport

Business, Professional and Occupational License (BPOL)Taxes

• Consistent with the application of BPOL tax applicationthroughout the City

TIF Analysis – Deal Structure is Sound & Calculations are Correct

TIF AnalysisTIF Case Study #1: Rio Nuevo TIF District – Tucson, AZSize: 1,105 acres

Anchor: Tucson Convention Center• Exhibit Halls: 143,460 SF

• Ballrooms: 20,164 SF

• Meeting Rooms: 10,640 SF

• Tucson Arena: 8,962 seats

• Tucson Music Hall: 2,289 seats

• Leo Rich Theater: 511 seats

Revenue Sources: Lesser of:• Incremental increase in sales tax

revenue within the district

• 50% of total sales tax revenue within

the district

Annual TIF Revenue: $15.5 million

TIF AnalysisTIF Case Study #2: Music City Tourism Development Zone – Nashville, TNSize: 1,700 acres

Anchor: Music City Center• Exhibit Halls: 353,140 SF

• Ballrooms: 70,250 SF

• Meeting Rooms: 81,350 SF

Revenue Sources:• 3% of 6% Hotel Tax

• $2 of $2.50 Hotel Room Tax

• $2 Contracted Vehicle Tax

• 1% Rental Vehicle Surcharge Tax

• Allocation of campus, state, and local

sales taxes


TIF AnalysisTIF Case Study #3: Nationwide Arena TIF District – Columbus, OHSize: 100 acres

Anchor: Nationwide Arena• Nationwide Arena: 20,000 seats

• Huntington Park: 10,000 seats

• Express Live!: 2,200-person concert venue

Revenue Sources:• 3% of 6% Hotel Tax

• $2 of $2.50 Hotel Room Tax

• $2 Contracted Vehicle Tax

• 1% Rental Vehicle Surcharge Tax

• Allocation of campus, state, and local sales

taxes


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Financing Review

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Financing ReviewItem Terms Considerations

Bonds Tax-Exempt and taxable, fixed rate tax and projectrevenue bonds

Most efficient vehicle to financelarge projects

Security for the Bonds The Bonds are primarily secured by and payable fromeligible portions of various tax revenues from thedevelopment and Arena project revenues, including:Real Estate Taxes, Local Sales Tax, Meals Taxes,Lodging Taxes, Admissions Taxes, BPOL Fee Revenues,Parking Increment Revenues, and other Arena project-based revenues

Security package is appropriatefor this type of project andaccepted by the market

Recourse to City Non-recourse debt to the City Non-recourse debt is appropriateand accepted by the market

Debt Service Reserve Fund Fully funded from Bond proceeds and sized as the “leastof the three” tax-test requirements (125% averageannual debt service, maximum annual debt service or10% of proceeds), remains funded through the finalmaturity

Fully funded Debt ServiceReserve Fund is standardpractice and expected by themarket

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Financing Review Item Terms Considerations

Stabilization Fund Funded from excess pledged revenues and sized inamount equal to maximum annual debt service, fundedthrough final maturity

Appropriate and expected by themarket as part of the cash flowwaterfall

Additional Bonds If requested, can be permitted for eligible costs andsubject to applicable debt service coverage test, savingstests for refunding bonds.

Appropriate, although savingstests for refunding bonds are lessapplicable since advancerefundings are not possible

Stated Final Maturity Approximately 30 years from issuance Industry standard

Amortization Slightly ascending debt service based upon projectedpledged revenues. The Bonds are subject to mandatoryannual “turbo” redemptions from 50% of net availablepledged revenues (after paying stated debt service).

Appropriate and “turbo”redemptions appeal to bondinvestors

Optional Redemption Standard 10-year par call Industry standard, althoughshorter call provisions may beavailable without premium

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Financing Review

Item Terms Considerations

Form of Offering Underwritten limited public offering Industry Standard

Ratings Non-Rated Acceptable to market

Conditions Precedent Designation of the TIF DistrictGuaranteed Maximum Price contract for the ArenaCommitted debt and equity financing for the firstdevelopment sequenceThird-party reports (engineer’s report, market studies,tax increment financing projections report)Market-acceptable debt structure and projected debtservice coverage ratios

Industry Standard, acceptableand required by market

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Financing Review

Proposed Structure Considerations

Non-Recourse BondsTIF Bonds are generally structured with no recourse to the municipality.Investors look exclusively to the projected tax revenues which are beingpledged as security for the debt.

Revenue shortfall LiabilityWe agree that if the event that the projected revenues are insufficient to paythe debt, the City will not be obligated to make up the shortfall or be requiredto provide any financial compensation to investors.

Financing Review – Deal Structure is Sound & Calculations are Correct

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Conclusion

Navy Hill Development SWOT Summary

W

StrengthsWeakness

Opportunities Threats NHDC Foundation can be better leverage as a greater good

and resource to City NHDC Foundation create an affordable housing investment

fund, a revolving loan fund, for non and for-profit developers to use as gap financing

Leverage NH development as a catalyst to spur additional growth on private property adjacent to main project site

Regional cooperation – Convention Center model Set standard for CBA for future developments GRTC move to Pulse alignment

No specific plan to date to address GRTC or DSS from both a strategy or funding standpoint

No appraisal of land was completed prior to RFP solicitation or to date

NHDC Foundation lacks organizational plan City presently lacks capacity of appropriate oversight of larger

scale projects 80 block TIF Percentage of affordable housing units within the development

Removal of HB1345 State TIF reallocationWithout HB1345, greater density will be needed in the

development area, thus may lengthen time for market absorption

Surrounding communities such as Hampton Roads and Norfolk are in the early stages of planning redevelopment opportunities for their aging venues

Time: will cause further delay in the City’s ability to create economic development engines, which are needed as costs grow regardless

T

S Proposed mixed-use development addresses latent

demand in downtown HQ Hotel and district brings vibrancy for convention

center visitors Thoroughly vetted development by various outside

specialty consultants Tax Revenue Potential

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