Quito Convention CenterQuito Convention CenterManagement ModelManagement Model

BackgroundBackground

BackgroundBackground•Ordinance No. 3535 of August 5, 2005 mentioned in Article 1: the land belonging to the Municipality of the Metropolitan District of Quito currently occupied by Mariscal Sucre Airport will become a city park, which will also house a convention center once the new airport begins operations.”

•The winning bidder "Lake Park" by architect Ernesto Bilbao (2006) states in his original proposal that a Convention Center Auditorium and Science Museum and Science Interactive Center should be included.

•In June 2011, Quito Turismo performs a consulting study titled "Analysis, diagnosis and feasibility of converting the existing passenger terminal of Mariscal Sucre Airport into a Convention and Exhibition Centre for Quito", and determines if it is architecturally and financially feasible to turn the terminal into a Convention Center.

•From this pre-feasibility study of the existing terminal, and considering the many recommendations, which state that the Convention Center should be complemented by additional infrastructure and facilities, a general “sizing of the area” was suggested.

• In February 2012 the consulting study titled "Sizing of facilities located in the grounds of the existing Mariscal Sucre Airport for conversion into a Convention Center complex" to determine the additional facilities needed to create a fully operatable Convention Center complex, taking into account the proposed Lake Park and the conversion of the Mariscal Sucre terminal

BackgroundBackground• In April 2012 the consulting document titled "Development of the model of competition rules and concession agreement for the design, construction, operation and transfer of infrastructure, equipment and facilities of the Quito Convention Center, to be located in the properties of the Mariscal Sucre Airport (AIMS), as per the legal regime applicable to such concessions” is submitted, establishing the basic program of works, a simulated business plan, a suggested schedule and model of public-private partnerships and contract for the project’s development.

• On July 31, 2012 the Metropolitan Council approves Resolution C-408, authorizing the project titled “City Park”, to divide the area of land on which the Convention Center will be developed in compliance with the provisions of national and city legislation, and according to provisions stated in Annex 3.

•On January 31, a ruling by Administrative RA 002 authorizes the Quito Visitor’s Bureau, Quito Turismo to coordinate, prepare, develop and implement the necessary schedule and program, as per national and city legislation, for the execution of Convention Center development project, to be implemented within 11.4 hectares of land specified in Article 3 of the resolution of the Metropolitan Council No. C 408, which will be individualized once the largest area of the former Mariscal Sucre International Airport is fractioned, project that must be submitted to the Metropolitan Council for approval.

Project JustificationProject Justification

QUITOQUITO 2009 2009 20102010 20112011 2010 / 2011 2010 / 2011

World Ranking # 99 # 96 # 92 Climbed 4 spots

Events per year 17 19 23 4 more eventsQUITOQUITO 2009 2009 2010 2010 20112011 2010 / 2011 2010 / 2011

Ranking in the Americas * # 20 # 21 # 24 Dropped 3 spotsEvents per year 17 19 23 4 more events

*Se incluye EEUU y México

Project ObjectivesProject Objectives

Double the number of congresses, conventions and events in Quito

Location of the ProjectLocation of the Project

Quito Convention CenterQuito Convention Center

Once comparative analyses with other destination, alternatives for project implementation, as well as inicial financial, tecnical, market and architectural analyses were completed, we defined the minimal infrastructural works required to create Quito’s Convention Center

4.- SupportingAreas

1.- Convention Center Area

3.- Spectacle &Entertainment

Arena

2.- ExhibitionExpositions

Area5.-Parking Lot

Basic Infrastructure for the Quito Basic Infrastructure for the Quito Convention CenterConvention Center

Minimum Required Minimum Required Capacity and FacilitiesCapacity and Facilities

Main ComponentsMain Components Surface AreaSurface Area(m2)(m2)

35% for 35% for circulationcirculation

(m2)(m2)

TotalTotal(m2)(m2)

Exposition and Convention Center 12,707 4,447 17,154

Performance Arena 7,820 2,737 10,557

Supporting Areas 2,631 921 3,552

SubtotalSubtotal 23,158 23,158 31,263 31,263

Common and complementary areas and parking lots 27,500 27,500

SubtotalSubtotal 50,65850,658 58,763 58,763

Estimated Area for Future Expansion (business area, hotels, entertainment venues, etc.) 33,037

Total Operational SpaceTotal Operational Space 91,800 91,800

Minimum Required InfrastructureMinimum Required Infrastructure

Main ComponentsMain Components AreaArea Estimated CostEstimated Cost%%

(m2) (m2) (USD)(USD)

Exposition and Convention Center 17,154 $ 8,289,870.00 23%

Performance Arean 10,557 $ 8,105,000.00 23%

Supporting Areas 3,552 $ 1,378,820.00 4%

Subtotal Subtotal 31,26331,263 $ 17,773,690.00 $ 17,773,690.00 50%50%Common and complementary areas, parking lots 27,500 $ 9,432,880.00 27%

Subtotal Subtotal 58,76358,763 $ 27,206,570.00 $ 27,206,570.00 77%77%Estimated Area for Future Expansion 33,037 - -Total Direct Investment CostTotal Direct Investment Cost 91,80091,800 $ 27,206,570.00 $ 27,206,570.00 77%77%

Preparación del Terreno

$ 1,260,000.00 4%

Indirect Investment Costs (studies) $ 6,426,191.83 18%

Project Facilities $ 432.000.00 1%

Minimum Investment BudgetMinimum Investment Budget $ 35,324,761.83 $ 35,324,761.83 100%100%

Minimum Reference BudgetMinimum Reference Budget

Minimum Reference BudgetMinimum Reference Budget

METROPOLITAN CONVENTION CENTER QUITOMETROPOLITAN CONVENTION CENTER QUITOBUDGET AND OPERATIONAL COSTSBUDGET AND OPERATIONAL COSTS

SALARIES VALOR TOTAL

Payroll: directors, administration $ 666,287.00Social Benifits $ 67,753.00Other Obligations (5%) $ 36,702.00

SEGURIDADHired. Mandato No.8 $ 322,560.008 jobs of 24 hours4 jobs of 12 morning hoursBASIC SERVICES $ 122,832.00Water, Light, Telephone and others according to AnexoADMINSITRATIVE EXPENSESInsurance, Legal, Environmental, Taxes, etc. $ 71,808.00MAINTENENCE EXPENSESEquipment, facilities, etc. $ 99,720.00ANEXO 5+ ANEXO 6 + ANEXO 7 $ 14,718.005% over speandingTOTAL BUDGET COSTS AND EXPENSES $ 1,402,380.00

Why must the private sector be Why must the private sector be involved in the project?involved in the project?

.

• To determine why the project must be managed by the private sector we preformed a Value for Money (VFM) analysis

• The objective of the analysis (VFM) is to ensure that the alternative model for the public-private project (PPP) produces the best results in terms of resource spending for the project.

• That is, the analysis VFM considers some risks are incurred by the public sector and other risks, such as construction and demand, are transferred to the private investor.

• The VFM model allows to build an indicator that defines whether it is convenient to provide public services directly or through a private contract based on the ability to develop and operate public projects more cheaply.

• Financial analysis concludes that the value for money of the Quito Turismo “CCEE Project” is $ 48.6 million and the value of the private investor would be $37.9 million.

• We conclude that conceding the CCEE Project to the private sector generates value to the Municipality of Quito and therefore becomes a better option for the project’s development, including the posibility of increased demand due to the "know-how" the private sector possesses in terms of project management.

Public Financial Management PlanPublic Financial Management PlanAño

0 1 2 3 4 5 6

2013 2014 2015 2016 2017 2018 2019

INITIAL INVESTMENT (33.914.504,87)

REVENUE FROM OWN EVENTS 520.064,80 546.275,46 573.807,09 602.726,29 633.102,98 788.212,73

CNEQ SPACE RENTAL 1.924.508,00 2.021.500,93 2.123.382,19 2.230.398,14 2.342.807,57 2.916.793,64

PERMANENT SPACE RENTAL (10 AREAS_ 240.499,31 252.620,19 265.351,95 278.725,38 292.772,81 307.528,21

PARKING LOT 1.100 528.000,00 528.000,00 528.000,00 528.000,00 528.000,00 633.600,00

Use of facilities 0,50 0,50 0,50 0,50 0,50 0,60

TOTAL REVENUE 1.250.309,98 3.309.297,52 3.449.471,63 3.596.710,34 3.751.369,71 3.913.823,74 4.791.974,26

OPERATION AND MAINTENANCE EXPENSES (1.402.381,05) (1.402.380,00) (1.473.058,29) (1.547.298,69) (1.625.280,71) (1.707.192,94)

EARNINGS BEFORE INTEREST, TAXES, AND DEPRECIATION (EBITDA) 1.906.916,47 2.047.091,63 2.123.652,05 2.204.071,02 2.288.543,02 3.084.781,32

FINANCLIAL EXPENSES (1.627.430,74) (1.607.665,09) (1.565.776,39) (1.495.423,69) (1.420.711,10) (1.341.317,67) (1.256.897,51)

DEPRECIATION - (1.782.125,24) (1.782.125,24) (1.782.125,24) (1.782.125,24) (1.782.125,24) (1.811.774,41)

EARNINGS BEFORE TAXES (1.627.430,74) (1.482.873,86) (1.300.810,01) (1.153.896,88) (998.765,32) (834.899,89) 16.109,41

Internal Revenue 0 - - - - - -

Employee Participation 0 - - - - - -

NET BENEFIT -1627430,736 (1.482.873,86) (1.300.810,01) (1.153.896,88) 998.765,32) (834.899,89) 16.109,41

Private Management Financial PlanPrivate Management Financial Plan

.

Año0 1 2 3 4 5 6

2013 2014 2015 2016 2017 2018 2019

INITIAL INVESTMENT (33.914.504,87) 4.919.118,77

REVENUE FROM OWN EVENTS 819.095,57 860.377,02 903.739,00 949.286,38 997.129,29 1.256.860,11

CMEQ SPACE RENTAL

3.172.879,90 3.332.789,29 3.500.757,93 3.677.191,99 3.862.518,12 4.832.356,24

Other revenue for complementary services 158.643,99 166.639,46 175.037,90 183.859,60 193.125,91 241.617,81

PERMANENT SPACE RENTAL (10 AREAS) 240.499,31 252.620,19 265.351,95 278.725,38 292.772,81 307.528,21

PARKING LOT 1.100,00 528.000,00 528.000,00 528.000,00 528.000,00 528.000,00 633.600,00

Use of facilities 0,50 0,50 0,50 0,50 0,50 0,60

TOTAL REVENUE 1.899.148,37 4.919.118,77 5.140.425,97 5.372.886,78 5.617.063,35 5.873.546,12 7.271.962,37

OPERATION AND MAINTENANCE EXPENSES (1.451.572,24) (1.453.784,26) (1.526.787,16) (1.603.469,32) (1.684.016,18) (1.779.912,56)

EARNINGS BEFORE INTEREST, TAXES & DEPRECIATION (EBITDA) 3.467.546,54 3.686.641,71 3.846.099,62 4.013.594,02 4.189.529,95 5.492.049,81

FINANCIAL EXPENSES - (3.469.740,58) (3.469.740,58) (3.346.345,53) (3.055.539,69) (2.727.852,39) (2.358.606,14)

Interests on private debt - (3.469.740,58) (3.469.740,58) (3.346.345,53) (3.055.539,69) (2.727.852,39) (2.358.606,14)

DEPRECIATION - (1.782.125,24) (1.782.125,24) (1.782.125,24) (1.782.125,24) (1.782.125,24) (1.811.774,41)

EARNINGS BEFORE TAXES - (1.784.319,29) (1.565.224,12) (1.282.371,15) (824.070,91) (320.447,69) 1.321.669,26

Internal Revenue (0,25) - - - - - - (330.417,31)

Employee participation (0,15) - - - - - - (198.250,39)

NET BENEFIT - (1.784.319,29) (1.565.224,12) (1.282.371,15) (824.070,91) (320.447,69) 793.001,56

Delegate Management ModelDelegate Management Model(Private-Public)(Private-Public)

Tender Invitation Tender Invitation & Terms and Conditions& Terms and Conditions

"Quito Turismo" will make an open call to national and international companies interested in designing, building and operating the Convention Center of Quito, by a variable term concession not exceeding 30 years.The Metropolitan District will deliver 11.4 hectares in concession, located at current Airport Mariscal SucreThe revenue generated from the operation of the Center will be profit for the company or corporation, which shall pay royalties to Quito Turismo based on: Fixed Rates (Associated to property valuation)Variable Rates (related to profit), The bidder should consider: The city requires public infrastructure representing an operational surface area of about 25,000 m2, minimumThe benchmark minimum budget is of $35,000,000

Minimum Requirements for Minimum Requirements for Bidding CompaniesBidding Companies

Minimum Requirements Minimum Requirements for Bidding Companiesfor Bidding Companies

Techincal Criteria for Techincal Criteria for Project EvaluationProject Evaluation

Economic Criteria Economic Criteria for Project Evaluationfor Project Evaluation

Lowest Present Value of RevenuesLowest Present Value of Revenues(Advantages)(Advantages)

Evaluation of Economic TermsEvaluation of Economic Terms

Bidding Process ScheduleBidding Process Schedule

Evaluation of Economic TermsEvaluation of Economic Terms