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Briefing: North of Broad/Downtown NeighborhoodRedevelopment Project City of Richmond, Virginia

November 2, 2018

Due Diligence – Independent 3rd Party Economic Analysis

Goals and Objectives of the Analysis

Global Observations and Findings

Financial Results

November 2, 2018 1

November 2, 2018

The Mayor commissioned an independent 3rd party economic analysis (the “Analysis”) that

outlined the direct, indirect and induced (i.e. outside the proposed TIF District) impacts to be

undertaken in conjunction with negotiations.

The purpose of the Analysis was to independently examine the financial impact of the

Project.

Hunden Strategic Partners, a Chicago based Destination Real Estate Development

Consulting Firm, was engaged to provide the Analysis for the North of Broad/Downtown

Neighborhood Redevelopment Project.

– Hunden has worked on more than 500 projects/studies in the past 20 years.

– Hunden has no affiliation with the Developer, its proposal or any of the affiliated parties in

connection to the proposed Project.

City Due Diligence

2

November 2, 2018

To independently analyze the economic benefits/costs to the City of the proposed Project

to include:

– Direct Impact of the proposed Project development.

– Direct, Indirect and Induced impacts on the area surrounding the Project development

and the City as a whole.

– Impact on Arena, event and entertainment.

– Impact on Greater Richmond Convention Center and hotel/meeting activity.

– Impact on existing and potential for new retail and restaurant activity.

– Impact on existing and potential for new office space.

– Potential for cannibalization of existing businesses in surrounding areas.

– Additional 1.5% Meals Tax for Schools.

Due Diligence – Goals & Objectives of the Analysis

3

November 2, 2018

Due Diligence – Global Observations and Initial Findings

4

Global Observations

– The unique nature and scope of the Project would benefit not only the immediate Project

area, but also the surrounding existing businesses. No cannibalization expected.

– The critical mass of the Project would actually be beneficial to current businesses.

(1) Excludes estimated $278 Million of increment from two new Dominion Towers.

Initial Findings:

– The Hunden report estimates an even more favorable economic benefit to the City

than the Developer and provide over $1 Billion of net new tax revenue over 30

years(1).

– A New arena would attract many national entertainment tours and provide a

strong opportunity for a sports franchise, likely the American Hockey League.

– The proposed Convention Center Hotel (Hyatt Regency) is what the market needs

to better leverage the Convention Center and optimize the performance of existing

and new hotels.

November 2, 2018

Due Diligence – Global Observations and Initial Findings (cont.)

5

Initial Findings (cont.):

– The influx of thousands of new residents and day-time workers from the proposed

residential and office developments will demand and support more, better and

diverse shopping and dining options.

– Residential properties in downtown Richmond have experienced improved

performance in recent years with high average occupancy rates, steady rental rate

growth and low concession rates.

– New office buildings would be welcomed by the downtown Richmond Market due

to the aging inventory and lack of suitable, large contiguous space.

– Richmond Public Schools will benefit from additional (1.5%) meals taxes for

schools due to the Project, which will be applied to the designated funds for

school investment. This amount is in addition to potential allocation of new City

revenues that can be available.

November 2, 2018

Financial Results

6

$0.0

$0.5

$1.0

$1.5

$2.0

Billio

ns

City Revenues

(Total over 30 Years)

$1.7 B

Do Nothing

$480 M

Do the Project

“Do Nothing” – estimated

incremental real estate

tax revenues of the

proposed TIF District

received by the City

assuming no Project.

“Do the Project”

estimated incremental

real estate tax revenues,

other local tax revenue

and arena/ parking

revenue received by the

City as a result of the

Project(1).

(1) Real Estate and Other Local Tax revenue estimates are from the Hunden Analysis. Parking

/Arena revenue estimates from the Respondent.

How will the Project be Funded?/Financial Benefits to the City

November 2, 2018 7

November 2, 2018

The Project will be funded from three sources:

Source One: Private investment:

Source Two: New Revenues generated by the Project:

Source Three: Incremental Real Estate Revenues of the

TIF District:

How Will the Project be Funded?

8

Approx. $1.1 Billion

Approx. $600 Million

Approx. $1.1 Billion

November 2, 2018

The Public Portion of the Project will be funded from Non-recourse Revenue Bonds

repaid from Sources Two and Three:

– New Revenues generated by the Project (Source Two); and

– Incremental Real Estate Revenues of the TIF District (Source Three).

How Will the Public Portion of the Project (“Arena/Blues Armory/Leigh Street”) be Funded?

9

November 2, 2018

New Revenues generated by the Project as follows:

1. Incremental Sales Tax Revenues from the Project Blocks – City’s local and the Commonwealth’s

share, which is subject to General Assembly approval.

– Existing Sales tax revenues will remain in the City’s General Fund.

2. Incremental Other Local Tax (Meals, Admissions, BPOL) Revenues from the Project Blocks.

– Existing Sales tax revenues will remain in the City’s General Fund. NOTE: the recently adopted additional

1.5% Meals Tax dedicated to schools will not be included.

3. Incremental Parking Revenues.

– Existing Parking revenues will remain in the City’s Parking Enterprise Fund.

4. New Arena Revenues.

– Do not currently exist; Current Coliseum is subsidized.

5. Rebate of Incremental Lodging Taxes in excess of the City’s obligation to the Greater Richmond

Convention Center Authority (“GRCCA”).

– To the extent available in an amount not to exceed the Lodging Taxes generated by the new Convention

Center Hotel.

New Revenues Generated by the Project (Source Two)

10

November 2, 2018

Incremental Real Estate Tax Revenues generated by the TIF District (highlighted in orange):

– Bounded on the east and west by 1st and 10th Streets, respectively.

– Bounded on the north and south by I-64/I-95 and I-195 (Downtown Expressway), respectively.

Incremental Real Estate Revenues (Source Three) from the Proposed TIF District

11

– Existing Real

Estate Tax

revenues in

the district will

remain in the

City’s General

Fund.

November 2, 2018

Approximately One Billion Dollars of Tax-Exempt Real Estate in the Proposed TIF District.

Approximately One Billion Dollars of additional Tax-Exempt Real Estate in the area immediately

to the East of the Proposed TIF District.

Tax-Exempt Real Estate

12

November 2, 2018

New Revenues Generated by the Project(Source Two) – Total over 30 Years

13

Total over 30 Years

Note: Other Local Tax Revenue estimates from the Hunden Analysis. Project/Other revenue estimates from Respondent.

(1) Excludes 1.5% Meals Tax dedicated to Schools.

(2) Includes Parking and Arena revenues.

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Sales Tax Meals Tax

(6.0%)(1)

Admissions

Tax

Lodging

Tax

BPOL Tax Project/

Other(2)

New Revenues Generated by the Project

(Total over 30 Years)$

mill

ion

s

New Revenues

Generated by

the Project

$604.4million

Total over 30 Years

November 2, 2018

Incremental Real Estate Tax Revenues(Source Three) – Total over 30 Years

14

Total over 30 Years

$0

$200

$400

$600

$800

$1,000

$1,200

Real Estate

Tax

Incremental Real Estate Tax Revenues

(Total over 30 Years)

$ m

illio

ns

Incremental

Real Estate Tax

Revenues

$1.1billion

Total over 30 Years

Note: Real Estate Tax revenue estimates from the Hunden Analysis.

November 2, 2018

New Revenues/Incremental Real Estate Tax Revenues (Sources Two and Three) – Total over 30 Years

15

Total over 30 Years

New Revenues Incremental

Generated by Real Estate Tax

the Project Revenues Total

$604.4 + $1.1 = $1.7million billion billion

November 2, 2018

Issued in an approximate size of $350 Million.

Fixed rate debt.

Repayable over 30 years with the potential to be repaid in as few as 18 to 20

years.

Total debt service over 30 years approximates $620 Million, however, debt service

could be as little as $495 Million.

The Revenue Bonds

16

November 2, 2018

All Surplus revenues benefit the City as follows:

Required by the Underwriter – 50% of the Surplus Revenues will be directed to the

early payment of the Revenue Bonds.

– Based on the Hunden Projections, the Revenue Bonds are projected to be paid off in

18 years (by FY 2036).

– Projected interest savings to the City approximates $125 Million.

50% of the Surplus will go to the City for General Purposes.

– This amount translates into $1.2 Billion.

Financial Benefits to the City – Total Surplus over 30 Years

17

See next page for approximate annual benefit.

November 2, 2018

Average Annual Surplus Revenues to the City after paying annual debt service payments and

accelerating the repayment of the Revenue Bonds.

Financial Benefits to the City – Average Annual Surplus

18

Excludes Surplus over first five years (2019-2023) to fund stabilization fund and to be applied to payment of revenue bonds in final year.

$13.3

$60.8

$91.4

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

First 10 years Second 10 Years Last 5 Years

$ m

illio

ns

Average Annual Surplus Revenues

to the City

(2024-33) (2034-43) (2044-48)

November 2, 2018

What if the City Does Nothing?

19

The Coliseum will continue to be a drain on the General Fund with annual operating subsidies

and debt service approximating $1.5 Million.

Capital investment related to several projects (i.e. GRTC Transfer Station, Social Services Facility,

Coliseum, amongst others) will require tens of millions of dollars that will hurt the City’s future

debt capacity and cash flows.

There will be fewer dollars for school construction (i.e. no additional 1.5% Meals Tax as a result of

the Project).

A core portion of the City’s downtown will remain undeveloped and not generate tax revenues.

The Greater Richmond Convention Center will remain underutilized due to the lack of sufficient

hotel capacity.

There will continue to be a lack of affordable housing in the City’s downtown area.

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