MASTER PLAN BOARD MEETING

DECEMBER 13, 2012FORT MONROE AUTHORITY

PLANNING PARTNERSHIP

GUIDING PRINCIPLES

Preserve the Place

Tell the Story

Be Economically Sustainable

AGENDA1. Summary of Community Input

2. Real Estate Market Context

3. Master Plan Alternatives

4. Economic Analysis of Alternatives

5. Observations, Recommendations & Next Steps

PLANNING PROCESS

Jan-July Fort Monroe Immersion & AnalysisCommunity Meeting

Aug-Sep Draft Master Plan AlternativesCommunity Meeting

Oct-Dec Refined AlternativesCommunity Meeting

Early 2013 Synthesis Plan

SUMMARY OF COMMUNITY INPUT

PARTICIPANTSIN

MASTER PLAN COMMUNITY MEETINGS

OVER

MIND MIXER IDEAS WEBSITE

MIND MIXER IDEAS WEBSITE

427 ideas

1387 comments

483 participants

+63

+62

+41increase since Sept 2012

ALL IDEAS ARCHIVED ON WEBSITEideas.fmauthority.com

REAL ESTATE MARKET CONTEXT

HR&A’S CHARGEAS PART THE MASTER PLAN TEAM, HR&A IS TASKED WITH FOUR KEY ACTIVITIES

Review past plans and market studies

Assess shifts in the market from 2008 to

today

Provide recommendations for updating the Reuse

Plan to inform current master planning efforts

Coordinate master plan recommendations with

concurrent plans for Phoebus and National

Monument

KEY CHANGES SINCE 2008

325 Acres Declared National Monument

Macroeconomic and Regulatory Conditions

Emergence of Potential Institutional Users

AGENDA: UPDATE REAL ESTATE MARKET FINDINGS

Residential

Office

Retail

Hospitality

• Approximately 1,000 residential units are needed to create critical mass for a dynamic new community

• A round-the-clock institutional user could reduce this residential critical mass to 600-700 units

• New communities in Florida and Colorado have approximately 3,000-6,000 units

A MINIMUM NUMBER OF UNITS IS NECESSARY TO CREATE A SENSE OF PLACERESIDENTIAL: CREATE CRITICAL MASS

Stapleton, CO

Baldwin Park, FL

RESIDENTIAL: ABSORPTION OF EXISTING UNITS

Implications for existing housing(with moderate rehab)

• $1,300-$2,500 per unit/monthly for duplexes

• Estimated $110-130 PSF existing unit sales price

Key Market Drivers

• Strong regional multifamily market

• Waterfront location

• High quality historic building stock

• Good leasing activity among existing units

ABSORBING EXISTING UNITS WILL CREATE MOMENTUM FOR LATER PHASES

RESIDENTIAL: NEW DEVELOPMENT

Implications for new housing

• $1,850- $3,500 per unit/monthly for new townhouses

• $130-150 PSF for new townhouses

• 50-100 unit per year annual absorption (existing and new)

• Take advantage of phasing to create value over time

Key Market Drivers

• Strong regional multifamily market

• Waterfront location

• Few highly accessible development sites of this scale available

East Beach, Norfolk will have 700 units on 100 acres. Listing prices are $175-$250 PSF for townhouses.

NEW WATERFRONT DEVELOPMENT IS A DESIRABLE PRODUCT

REGIONAL OFFICE MARKET

Fort Monroe

Williamsburg

Newport News

Downtown

Newport News

Shipyards

PortsmouthNorfolk Virginia

Beach

Chesapeake

Source: CoStar, Google Maps, HR&A

Employment Centers

• Challenging multi-hub regional market

• Slow economic recovery with vacancy at 13.5%

• Tenants are looking for 2,000-3,000 SF or 25,000-30,000 SF in locations near other office users and amenities

Key Market Drivers

• Small office buildings could be attractive to small tenants seeking signature space or incubator space

• Demonstrated interest from STEAM Academy, government agencies

OFFICE MARKET OPPORTUNITIES: VALUE-DRIVEN

Implications

• Recommended initial pricing of $10-12 PSF to drive demand; $16 PSF stabilized (for restored office buildings)

• Market could support absorption of up to 20,000 SF annually, or up to 400,000 SF over 20 years

• Attraction of an anchor office tenant could accelerate demand

Fort Monroe Building 77

• Anchor tenant will help define destination identity and encourage complementary ancillary uses

• In particular, STEAM Academy would help establish the site as a center for education

• Branding could enhance Fort Monroe’s appeal for residents and office tenants

ANCHOR TENANTS ENHANCE BRAND

RETAIL ON FORT MONROE: MODEST POTENTIAL

Key Market Drivers

• Nearby retail centers such as Coliseum Central and Downtown Hampton fulfill destination shopping needs

• Secluded location limits retail opportunities

• Phoebus, the gateway community to Fort Monroe, has better connections and more retail potential

Implications

• Orient retail to neighborhood residents and visitors to the National Monument

• At $12-14/PSF for restored spaces, 20,000 SF of small format retail could be supported

• Fort Monroe should promote retail linkages with Phoebus

• FMA should identify creative, entrepreneurial tenants to build retail destination and enhance planned programming

General Store

Waterfront Dining

Marina Retail

Key Market Drivers

• The development of historic sites stimulate tourism and larger revitalization efforts.

• The Hampton Roads region is a strong, but mainly regional, tourist destination.

• The region appears to be strongest in supporting mid-class hotels.

• Fort Monroe could support one 100-150 room hotel with event/conference space within the next 10 years as a destination is established.

Implications

• Waterfront location, recreational opportunities, and historic sites suggest complementary hospitality uses

• Creative, entrepreneurial operator could establish B&B’s in 1-2 smaller historic buildings

• Site could support one 100-150 room hotel with event/conference space over the next 10-15 years as a destination is established

HOSPITALITY: NICHE MARKET COULD BE STRENGTHENED BY NATIONAL MONUMENT PROGRAMMING

CONCLUSION: KEY REAL ESTATE MARKET DRIVERS

Residential

Office

Anchor tenants

Retail

Hospitality

Create critical mass

Focus on value

Enhance brand identity

Provide amenities, with modest potential at end of the Peninsula

Capture niche opportunities and leverage National Monument

REFINED MASTER PLAN ALTERNATIVES

REUSE & INFILL WHERRY PARK BAYSIDE GREENWAY

WATERFRONT COMMUNITYPARKLAND CLUSTER

SEPTEMBER 2012: ALTERNATIVE CONCEPTS

REUSE & INFILL WHERRY PARK

WATERFRONT COMMUNITY

3 CONCEPTS IDENTIFIED FOR REFINEMENT

CONCEPT A: REUSE & INFILLSEPT. 2012

CONCEPT A: REUSE & INFILL

RES. COMM/INST/MXD

REUSE 225 DU 1,000,000 SF

NEW 235 DU 400,000 SF

Total 460 DU 1,400,000 SF

DEC. 2012

CONCEPT A: REUSE & INFILLDEC. 2012

CONCEPT B: WHERRY PARKSEPT. 2012

CONCEPT B: WHERRY PARK

RES. COMM/INST/MXD

REUSE 225 DU 780,000 SF

NEW 215 DU 210,000 SF

Total 440 DU 990,000 SF

DEC. 2012

CONCEPT B: WHERRY PARKDEC. 2012

CONCEPT E: WATERFRONT COMMUNITYSEPT. 2012

CONCEPT C: WATERFRONT COMMUNITY

RES. COMM/INST/MXD

REUSE 225 DU 790,000 SF

NEW 575 DU 340,000 SF

Total 800 DU 1,130,000 SF

DEC. 2012

CONCEPT C: WATERFRONT COMMUNITYDEC. 2012

A. REUSE & INFILL B. WHERRY PARK C. WATERFRONT COMMUNITY

RES. COMM./INST./MXD

REUSE 225 DU 1,000,000 SF

NEW 235 DU 400,000 SF

Total 460 DU 1,400,000 SF

RES. COMM./INST./MXD

REUSE 225 DU 780,000 SF

NEW 220 DU 210,000 SF

Total 445 DU 990,000 SF

RES. COMM/INST/MXD

REUSE 225 DU 790,000 SF

NEW 575 DU 340,000 SF

Total 800 DU 1,130,000 SF

THREE ALTERNATIVES FOR ECONOMIC ANALYSIS

ECONOMIC ANALYSIS OF ALTERNATIVES

ECONOMIC ANALYSIS

Key Questions

• How will the Master Plan advance Fort Monroe’s goal to become financially independent?

• How will the Master Plan contribute to the prosperity of Hampton and the region?

General Approach

• Analyze Master Plan options and market data to estimate:

– Financial performance– Jobs

bae urban economics

FINANCIAL INDEPENDENCE

• When it established the FMA, the Virginia General Assembly mandated that Fort Monroe be operated in “a way that is economically sustainable.”

• “Economic sustainability” means generating revenue to pay the costs to meet Commonwealth goals to:

– Preserve Fort Monroe’s historic buildings and grounds– Provide access to historic features and recreation– Demonstrate exemplary stewardship of natural resources– Create a community desirable as a place to reside, work and visit

bae urban economics

WHAT FORT MONROE COSTS TO OPERATE

8%

• $13.2 million adopted budget for fiscal year 2012-13

• Key cost components:

bae urban economics

WHERE WILL REVENUE COME FROM?

TODAY

Commonwealth

($8.8M)

FMA residential & commercial

leasing ($2.4M)

Federal OEA grants ($2M)

5 YEARS FROM NOW

Commonwealth

FMA residential and commercial leasing & sales

Federal grants

Financial sustainabilitymandate

Leasing and sales revenue must grow

Federal support will decline

Tourism revenue

?

?

?

?

bae urban economics

THE ECONOMIC CHALLENGE

• The FMA must generate enough revenues to cover its expenses

• There are multiple paths to financial sustainability

• It is clear that revenue will have to come primarily from existing buildings and appropriate new development

Revenues

Expenses

bae urban economics

METHODOLOGY

REVENUES FINANCIALOUTCOME

Period of analysis: 20 years

‐ =CAPITALCOSTS

OPERATINGEXPENSES

For each Master Plan option, calculate:

bae urban economics

METHODOLOGY: REVENUESReal EstateRevenues

Existing Buildings

SpecifyUse

NewConstruction

AdaptiveReuse

Timing of leaseor sale

Rental rateor sales price

FMA costrecovery

TourismRevenues

VisitorEstimate Activities FMA charges

bae urban economics

METHODOLOGY: EXPENSES

FMA Organization

Building and Grounds

Capital Costs

– Management– Real estate– Planning, historic preservation, environmental– Public works– Property management

– Occupied building operations– Vacant building maintenance– Utility system operations (ex. electric)– Landscape & open space maintenance– Remediation monitoring

– Repair/replace existing utility systems– Tenant improvements & building metering– New systems for new construction

bae urban economics

CONCEPT A: REUSE AND INFILLFINANCIAL PERFORMANCE• Structural Deficit = $4.5 million in 2027

Revenues

Expenses

bae urban economics

CONCEPT A: REUSE AND INFILLPERMANENT JOBS

PROPOSED LAND USES JOBS Residential 21 Office/Commercial 2,251 Retail/Restaurant 218 Institutional & Community Facility 598 Lodging/Hospitality 16Subtotal Sq. Ft. 3,103

bae urban economics

CONCEPT B: WHERRY PARK

ADDITIONAL CAPITAL COSTS• Building demolition / site work / landscape

Revenues

Expenses

FINANCIAL PERFORMANCE• Structural Deficit = $4.8 million in 2027

bae urban economics

CONCEPT B: WHERRY PARKPERMANENT JOBS

PROPOSED LAND USES JOBS Residential 20 Office/Commercial 1,231 Retail/Restaurant 218 Institutional & Community Facility 598 Lodging/Hospitality 37Subtotal Sq. Ft. 2,103

bae urban economics

CONCEPT C: WATERFRONT COMMUNITYFINANCIAL PERFORMANCE• Structural Deficit = $3.3 million in 2027

Revenues

Expenses

bae urban economics

CONCEPT C: WATERFRONT COMMUNITYPERMANENT JOBS

PROPOSED LAND USES JOBS Residential 33 Office/Commercial 1,596 Retail/Restaurant 218 Institutional & Community Facility 598 Lodging/Hospitality 67Subtotal Sq. Ft. 2,511

bae urban economics

KEY DIFFERENCES FROM THE 2010 FINANCIAL ANALYSIS

• NPS unit larger than anticipated

• Fewer new residential units

• Slower absorption of office space

• Visitor conservation fees not assumed

• Loss of Wherry and other housing units

• Lower achieved Interim residential rents

• PILOT fee payments

• EDC split of Marina proceeds with Army

bae urban economics

WAYS TO BRIDGE THE GAP• Switch reuse of historic buildings from office to residential

• Reconsider FMA’s “guaranteed” PILOT obligation

• Minimum rent or cost recovery policy for non-profit tenants

• Adopt flexible reuse for Northgate Zone (e.g., residential/commercial)

• Charging for parking/visitor conservation fee

• Establish a cost sharing budget with NPS

• Position FMA as “concessioner” for national monument

• Consider retaining existing residences as rental

• Consider FMA serving as “bank” for long term leaseholds

• Pursue two major prospective tenancies (at low or no rent)

• Realize adaptive reuse of existing buildings with experienced developers

• Create a revenue stream from the marina

bae urban economics

DRAFT OBSERVATIONS & RECOMMENDATIONS

DRAFT OBSERVATIONS1. Redevelopment will be complex and long-term

2. Need to expand opportunities for revenue generation and reduce expenses (but no identified “silver bullet” yet)

3. Cost transference to private sector is critical in the short, mid, and long term to financial sustainability

4. Strongest current market demand is for residential uses

5. Attracting high quality, large scale employment reuse requires creative local, regional, and state partnerships

6. Unresolved property ownership hinders marketing to prospective users

7. Aging, inefficient infrastructure results in high redevelopment costs and ongoing maintenance expenses

DRAFT RECOMMENDATIONS1. Prioritize reuse of the Historic Village, Inner Fort, and North Gate as “early action”

projects while creating long term reuse/development opportunities

2. Identify opportunities for public/private/institutional partnerships to accelerate reuse/redevelopment projects

3. Provide a critical mass of residential to create a thriving, mixed use community

4. Establish a FMA Board Working Group to collaborate with FMA staff during the economic evaluation period

5. Share risks/rewards of redevelopment through new strategic local, regional, and state partnerships

6. Be nimble…maintain a flexible planning framework for adaptability to changing market conditions

7. Promote Fort Monroe’s national identity and “brand” through available sources

NEXT STEPS1. Winter 2013: Refine economic model with FMA Board Working Group

2. Spring 2013: Meet with PAG; FMA Board Finance Committee; and FMA Board

3. Summer 2013: Submit recommended master plan to the Governor

MASTER PLAN BOARD MEETING

DECEMBER 13, 2012FORT MONROE AUTHORITY