Building an Outstanding “World's Jewish Museum” in Tel Aviv
Building an outstanding “World’s Jewish Museum” in Tel Aviv
Asper Foundation
Final report June 2013 Executive summary (1/2) ▪ There is a clear white-space for an iconic cultural institution in Israel in general and specifically in Tel Aviv – There is no “must visit” cultural institute in Tel Aviv – Tel Aviv is under-represented in the museum landscape in Israel – Tel Aviv is missing an architectural symbol
▪ The World Jewish museum may be a viable candidate to fill this need. Initial indications from interviews are positive, and prime location given by the city is a significant achievement. However, further work is required on concept: – Assuming the museum can fully tap its target visitor groups and position itself as one of Israel’s top 3 museums, we believe a target of circa 850K visitors annually feasible1 – To achieve this, concept requires adjustment and significant further development. Expert interviews suggest a list of key elements critical to the success of the concept – In addition, at present the museum concept is not sufficiently differentiated from Beit Hatfutsot
▪ Even a very successful museum will only deliver limited economic benefits to Israel or to Tel Aviv; however, such a museum could contribute to the cultural and educational offering of /Tel Aviv, strengthen the relationship with the diaspora and add a sense of pride to the people of Israel
1 By 2019, assuming 2-3% growth in population and tourism
SOURCE: Team McKinsey & Company | 1 Executive summary (2/2) ▪ Funding requirements: – Construction of the museum is estimated at NIS 650M, excluding development of exhibits – Ongoing operations costs and self-generated revenues estimated at NIS 75-90M, and ~40M respectively, resulting in an annual funding requirement for operations of NIS 35-50M
▪ Interviews indicate that securing a commitment for significant financial support from the government will be challenging – Initial focus should be on gathering strong support from key opinion leaders – Several innovative funding options were identified, all requiring some commitment by the government – Gathering significant donations from local donors might prove challenging, and some adaptions to the concept and the execution are required
▪ Going forward – Asper Foundation should set up local team to quarterback the concept development, orchestrate lobbying with key stakeholders, and manage the municipal processes
1 By 2019, assuming 2-3% growth in population and tourism
SOURCE: Team McKinsey & Company | 2 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 3 Content of final report
1 Proposed concept
Description White space assessment Assessment of potential traffic
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 4 PROPOSED CONCEPT - DESCRIPTION The Jewish Museum will aim to offer a complete experience and immerse visitors in Jewish thoughts and achievements
The World’s Jewish Museum will narrate, in an overarching chronological account, the odyssey of the Jewish people
It will attest to the significance of outstanding Jewish achievement and intellectual output, and showcase how Jewish contributions have enriched the spirit of humankind. Exhibitions and programs will also document the covenant between Jewish people and the Land of Israel The museum will serve as the collaborative force among Jewish museums nationally and throughout the world and, most crucially, enhance the cultural bond between Israel and global Jewish populations through the strengthening of its collective identity The greater museum campus will provide a major new green public space where residents and tourists alike can learn, honor, discover, and celebrate
SOURCE: Asper Foundation McKinsey & Company | 5 PROPOSED CONCEPT - DESCRIPTION The museum will include 6 pavilions with a different message for each
Tzedakah Pavilion
The Covenant Pavilion Tzedakah Amphi theatre Education Pavilion Covenant Theatre Volunteering space Children’s museum
Origins Gallery Indoor Garden Digital library Museum welcome area Conference center
Enterprise Pavilion Inquiry Pavilion
Innovators Gallery Hand-on science Creativity pavilion center Product Showcase Arts gallery Future Laboratory
Inventions Laboratory Artists residences Lecture Theater
Materials Library
SOURCE: Ralph Appelbaum McKinsey & Company | 6 PROPOSED CONCEPT - DESCRIPTION The museum will exhibit iconic architecture
▪ Great new museum projects arc suitably served by iconic architecture. The buildings that house epic historical narratives can, at best, add to the wonder and dimensions of the stories, giving texture to the visitor’s experience, and helping to enliven his or her imagination ▪ At best, these buildings become a symbol of some common human or cultural value that is larger than architecture itself. We imagine that the concept of a World’s Jewish Museum will invite this kind of inspired response ▪ The footprint provided by the site will allow the museum to inhabit a scale comparable to other leading global institutions
SOURCE: Ralph Appelbaum McKinsey & Company | 7 PROPOSED CONCEPT - DESCRIPTION A prime location in the north of Tel Aviv, next to Hayarkon Park
▪ The Museum will capitalize on a priceless opportunity – a 22 dunam (6 acres) site on the edge of HaYarkon Park – a major green belt for the city – looking out over Tel Aviv Port and the Mediterranean
▪ The park already receives some 16 million visits per year, attracted by a range of recreational offers – ranging from the botanic gardens to a water park, or sports fields to wandering meadows. To this abundant setting, the World’s Jewish Museum can add cultural richness and depth
SOURCE: Asper Foundation McKinsey & Company | 8 PROPOSED CONCEPT - DESCRIPTION The Asper Foundation
The Asper Foundation was established in Winnipeg, Manitoba, Canada in 1983 to build on the philanthropic objectives of Israel Asper (1932-2003), Babs Asper (1933-2011) and the Asper family. It undertakes and develops major initiatives in the areas of Jewish charity as well as culture, education, community development and human rights locally, nationally and internationally. Two such initiatives are the Canadian Museum for Human Rights, established as a Canadian national museum in 2008 and opening in 2014 and the award-winning Asper Foundation Human Rights and Holocaust Studies Program, established in 1997. In the recent past, over $125 million has been donated to various charitable causes through The Asper Foundation.
SOURCE: Asper Foundation McKinsey & Company | 9 Contents
1 Proposed concept
Description White space assessment Assessment of potential traffic
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 10 PROPOSED CONCEPT– WHITE SPACE ASSESSMENT There is a white space for iconic, landmark cultural institution in Tel Aviv
Description / explanation
A “Tel Aviv is now perceived as destination ▪ Tel Aviv attractions are of leisure and There is no “must for leisure and business, we need to recreation nature, and involve mainly connect it to culture, Zionism and the visit” cultural the city experience rather than must institute in Tel Aviv “new”, non-religious Judaism…” visit locations
▪ As the city is striving to become a “…We don’t have a “Must” experience in global leading city, it lacks a must city Tel Aviv. I want the museum to be one. cultural anchor in par with leaving cities Yad Vashem will be for the past, The B Jewish Museum for the future…” Of the top 3 museum in Israel, only Tel Aviv is under- ▪ Hilla Oren, Manager of Tel Aviv Ir Olam and one (Tel Aviv Museum of Art) is in Tel represented in the responsible for tourism museum landscape Aviv, ranked #3 in Israel ▪ Most visited places by foreign tourists are of historical and religious nature, “Tel Aviv needs its cultural and Jerusalem is the most visited anchor…” Avner Shalev, C Chairman of Yad Vashem ▪ The city lacks an iconic building which Tel Aviv lacks a could be the symbol of the city visual / architectural “It can be the next Mega Project symbol that gives the city its identity” Zvi Hauser, Secretary of the government of Israel
SOURCE: Team analysis, interviews McKinsey & Company | 11 PROPOSED CONCEPT– WHITE SPACE ASSESSMENT A Top tourist attractions are historical and religious sites Share of international tourists visiting the site, percent
The wailing wall Via Dolorosa Masada
75 74 77
58 60 51
35 36 30
2008 09 2010 2008 09 2010 2008 09 2010
SOURCE: CBS tourism report 2010 McKinsey & Company | 12 PROPOSED CONCEPT– WHITE SPACE ASSESSMENT A Most visited sites in Israel are of leisure, nature and history
Most visited paid sites Greater Tel Aviv area
Tel Aviv Masada 786,000
Biblical Zoo (Jerusalem) 746,639
Safari Ramat Gan 744,550
Caesarea 668,208
Israel Museum 658,576
Banias River 584,029 Limited number of Tel Aviv Museum of Art 502,149 sites in the greater Tel Aviv area (only 3 sites) Ein Gedi 460,404
Yamit 2000 426,999
Underwater observatory 421,000
National Science Museum 407,178
Hamat Gader 395,777
Qumran Caves 379,805
SOURCE: D&B, 2011, Pilat 2010 McKinsey & Company | 13 PROPOSED CONCEPT– WHITE SPACE ASSESSMENT B Only two of the most visited museums in Israel are in Tel Aviv
Number of visitors Focus areas Location
1 Yad Vashem 900,000 Holocaust Jerusalem
2 Israel Museum 658,576 History, archeology, Judaica Jerusalem
3 Tel Aviv Museum 502,149 Art Tel Aviv
The national 4 407,178 Science, nature Haifa science museum
5 Eretz Israel museum 366,485 History, archeology, Judaica Tel Aviv
6 Bloomfield science 246,522 History, nature, science Jerusalem museum
7 Haifa museum 209,631 Art, archeology Haifa
SOURCE: Pilat repot on museums in Israel, 2010 McKinsey & Company | 14 PROPOSED CONCEPT– WHITE SPACE ASSESSMENT C Tel Aviv attractions mainly include sightseeing and leisure Most recommended places in Tel Aviv by “Tel Aviv Guide”
Tel Aviv The Museum beach of Arts
Azrieli Suzanne ▪ No “Must Obser- Dalal visit” place vatory Center ▪ No iconic building to symbolize the Hacarmel Neve city (except market Tzedek maybe for Azrieli towers) ▪ Limited heritage/ Jaffa Nightlife history related attractions
Bauhaus Hayarkon archi- Park tecture
SOURCE: The Tel Aviv Guide, web search McKinsey & Company | 15 PROPOSED CONCEPT– WHITE SPACE ASSESSMENT This is despite relatively high spending on culture in Israel and specifically in Tel Aviv
Spend as Spend on recreation, culture Municipality spend on share of Government spend and religion as a share of GDP culture and recreation budget on leading museums1 2010, % 2012, NIS millions 2012, % 2010, NIS millions Museums Other
Israel 1.7 Jerusalem1 20 89 2.2 75
Spain 1.7 Tel Aviv2 49 154 3.8 29 Italy 0.8
Turkey 0.6 Higher spend on culture by in Tel Aviv is balanced by a Greece 0.6 higher government spend on museums in Jerusalem
1 Jerusalem includes: Yad Vashem, Israel Museum, Bloomfield Science Museum, Begin Center, Tower of David, Bible Lands Museum and Islamic Arts Museum; Tel Aviv includes: Tel-Aviv Museum of Art, Eretz Israel Museum, Beit Hatfutsot and Rabin Center
SOURCE: Euromonitor; Pilat; Tel-Aviv 2012 budget; Jerusalem 2012 budget McKinsey & Company | 16 Contents
1 Proposed concept
Description White space assessment Assessment of potential traffic
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
SOURCE: Source McKinsey & Company | 17 Assessment of potential traffic – Key messages
▪ Official museums in Israel attracted ~5.2m visitors in 2010, top 3 museums had 10-17% share each, with ~40% of combined share
▪ Under the assumption that the museum can be designed and built such that it becomes one of Israel’s top 3 institutions, The maximum potential number of visitors stands at ~700k a year (in 2011 terms):
– Benchmark to top 3 museums shares of current museum visitors => 500-800k – Assessment of the Jewish Museum concept fit to visitors of different museum types => 450-600k – Assessment of the Jewish Museum concept fit to different segments of local population and benchmark of share of tourists visiting leading international museums => 550-800k combined
▪ Analyses were done based on 2010 numbers, therefore taking into account ~2- 3% growth in tourism and local population, we expect 2019 figures to be 15-20% higher, i.e., 820-890k visitors
▪ To tap this potential the museum needs to become a must-see attraction in Tel-Aviv, expert interviews suggest that the current concept needs to be adjusted and further developed to tap the full potential
SOURCE: Team McKinsey & Company | 18 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC To tap traffic potential the museum needs to become a must-see attraction in Tel-Aviv and the concept adapted
Assessment of potential traffic to the museum is based on 1 an analysis of current museum traffic in total, and bottom- up by assessing domestic and international potential
The potential was calculated under the assumption the 2 museum can become a must-see attraction in Tel-Aviv, and one of the top 3 museums in Israel
Expert interviews suggest that the current concept needs to 3 be adjusted to tap the full potential, and further development is required to allow a careful assessment of the concept
SOURCE: Team McKinsey & Company | 19 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC 1 If the museum manages to exploit its full potential it can attract up to 850k visitors in 2019 Based on execution level, can range between 300- A Benchmark to top Israeli museums 1,000k visits annually B Fit against different types of museums ▪ Top 3 museums attracted 10-17% ▪ Fit of Jewish museum concept was share of a total of 5.2 million visits ▪ Fulfilling its potential assessed against different types of ▪ A top notch museum will attract a the museum can museums to estimate potential of 10-15% share attract ~700k visits attracting their audiences per annum ▪ Low fit – arts, science, archeology ▪ 820-890k in 2019 Medium fit – Israel museums, modern terms2 history High fit – world Jewish
Total of 500-800k1 Total of 450-600k1
Target audience segmentation
C Relevance and fit to local population groups D Share of international tourists visiting Israel ▪ Population was divided to relevant groups ▪ Correlation between leading museums in the to assess potential world rank among regional attractions and ▪ Low fit – young adults (21-30) their share of the region’s tourists Medium fit – elementary school, families ▪ Assuming the Jewish museum can rank 6-10 with kids of school age, seniors (55+) in Israel it will attract 10-15% of Israel’s High fit – high schools, IDF tourist (of a total of 2.8 million) ▪ Potential is 250-400k per annum1 ▪ Potential is 300-400k per annum1 Total of 550-800k1
1 In 2011 terms 2 Assuming 2-3% growth per year of population and tourism
SOURCE: Team analysis McKinsey & Company | 20 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC 1A Potential for a top-notch museum in Israel is to attract 10-15% of museum visitors, amounting to 500-800K visitors
Share of LOCAL + INTERNATIONAL Number of visitors visitors 2010, Millions Percent ▪ Top museums in Israel Yad Vashem 0.9 17 attracted 10-17% share of total muse- Israel Museum 0.7 13 ums visits, with a com- Tel Aviv Museum bined share of 40% 0.5 10 of Art ▪ Potential for a top notch museum is to Madatech 0.4 8 become a top 3 Eretz Israel museum in Israel and 0.4 7 Museum attract 10-15% share Bloomfield Science of museum visitors, 0.2 Museum 5 amounting to 500- Others 800K visitors 2.2 (44 museums) 40 Total 5.2 (50 museums)1 100
1 There are ~150 other, non-official, museums in Israel, we estimate the total number of visitors to them to be insignificant
SOURCE: Pilat Report; team analysis McKinsey & Company | 21 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC LOCAL + INTERNATIONAL 1B Potential number of visitors for a world’s Jewish museum based on current museum visits can reach up to 600k
Relevance Estimated Potential Number of of Jewish share of traffic annual number Number of annual visits Museum captured2 of visitors Museum type1 museums 2010, millions concept % ‘000 Rationale
World Jewish ▪ High audience fit, however tough (Non-Israeli 5 1.2 20-25 240-300 competition (Yad Vashem) subjects) ▪ Different concept suggest Arts 15 1.2 3-5 40-60 different target audience ▪ Audience looks for archeological aspect of the country, some will Archeology 11 1.0 3-5 30-40 also look for the Jewish modern story ▪ Different target audience as Science 6 0.8 3-5 30-50 most visitors are children looking for science education ▪ Israel Museum covers many Multi category 1 0.7 10-15 45-60 topics but its audience might be (Israel Museum3) partly overlapping Modern history ▪ Mostly museums narrating the (Israel related 12 0.4 10-15 65-100 Jewish-Israeli story so it is history) likely that some fit exists
Total 50 5.2 8-11 450-600
1 List of museum in each cluster type is detailed in backup 2 We assessed different share of visitors for different levels of audience fit – low 3-5%, medium 10-15% and high 20-25% 3 Israel Museum displays: art, archeology, Judaica and ethnography
SOURCE: Team analysis; Pilat; Yad Vashem McKinsey & Company | 22 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC LOCAL VISITORS 1C Potential annual number of local visitors can reach 400k a large share of it from the families segment Share of Benchmark Potential Population Relevance of population of top 7 annual number Population size1 Jewish Museum type2 museums of visitors type Millions concept % % ‘000 Rationale ▪ We assume the Jewish Museum Elementary will only be relevant for a small 0.6 4-6 3-10 20-40 School portion of elementary students
▪ Assuming this will become one of High 0.6 7-10 3-63 40-50 the must-sees for schools School
▪ Assuming a very high level of 3 IDF 0.2 7-10 3-5 10-20 exposure to the army
Young ▪ We assumed museums in 5-20 general are not extremely popular adults 0.8 1-3 (21-30) with that age group Families ▪ Families are a relevant but face 4-6 130-190 many different types of with kids of 3.3 school age competing options ▪ Will be interested in the museum Seniors 4-6 50-80 along with other museums that 1.3 (55+) pose a tough competition
6-8 3.7 250-400
1 Population type has duplicates as kids might visit the museum both with their schools and with their schools 2 We assessed different share of population for different levels of fit with the museum – low 1-3%, medium 4-6% and high 7-10% 3 Doesn’t include Yad Vashem that given its stature in local education we assess is an invalid benchmark
SOURCE: Team analysis; CBS; INSS: The Institute for National Security Studies McKinsey & Company | 23 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC INTERNATIONAL VISITORS 1D Assessment of top attractions in Israel and around the world suggest 10-15% of international tourists will visit the museum
Number of foreign visitors Millions 5.5
3.5 ▪ Highly attractive museums would be ranked between 6- 1.4 1.4 10 Israeli attraction ▪ Attractions ranked 0.7 0.5 0.5 0.2 0.7 0.2 6-10 attract 10- 15% of Louvre British Centre Wash- Berlin Van Rijks Guggen- Yad Israel international Museum Pompidou ington Jewish Gogh Museum heim Vashem Museum tourists visiting Holocaust Museum Museum Bilbao their region Museum ▪ As Israel has ~2.8 Largest museums Leading Jewish Comparable sized museums Leading Israel million visitors museums museums annually, potential amount to 300- Assuming museum ranks in top Baseline assumption is that Museum will be 400k 10 – benchmark suggests 10-15% at least as attractive as Israel Museum and ▪ If it becomes a share of foreign visitors at best case as attractive as Yad Vashem must-see attraction (such as Louvre, British Museum, Wash- Basque Van Gogh) can Location Paris London Paris ington Berlin Amsterdam Country Israel attract as much as 20-30% of tourists Share of total ▪ 2019 figures are tourists visiting 19 24 5 13 15 35 14 25 16 9 expected to be 15- the museum, % 20% higher Rank in regions 1-5 1-5 10 6-10 10 1-5 1-5 1-5 1-5 6-10 attractions list1
1 Average of ranking based on ranking in popular tourist guides (e.g., Michelein, Lonely Planet, etc)
SOURCE: Annual reports; various tourists guides, Ministries of Tourism McKinsey & Company | 24 PROPOSED CONCEPT ASSESSMENT 3 Interviews with local museum leaders reveal different perspectives on the attractiveness of the concept
“There is a need to explore what it is that generates such a “The concept has an apologetic element, it is more of a flow of creativity, vibrancy and sensitivity for injustice among diaspora than an Israeli need. There is no burning need for Jews” that in Israel” “Tel-Aviv needs its cultural anchor…” “We must not try to import an “American” museum…” – Avner Shalev, Yad Vashem Chairman – Avner Shalev, Yad Vashem chairman
“Tel Aviv is now perceived as destination for leisure and “This type of museum is not needed in Israel, there is no business, we need to connect it to culture, Zionism and the need for it. I guess no needs assessment was done yet” various facets of Judaism…” – Ronen Mir, Madatech Ex-CEO
“…We don’t have a “Must” experience in Tel Aviv. I want the museum to be one. Yad Vashem will be for the past, The “The concept is not evolved enough it must be further Jewish Museum for the future…” elaborated” – Hilla Oren, Manager of Tel Aviv Ir Olam – James Snyder, Israel Museum VP and responsible for tourism “At best target audience for the Jewish Museum and Beit “Tel-Aviv needs a place discussing values and origins” Hatfutsot overlaps, there is no logic of building such a museum” – Zach Granit, Israel Museum VP – Shuli Kislev, Tel-Aviv Museum of Art VP “This museum can complete ours – we discuss ancient Jewish history, it will discuss modern Jewish History and “A Jewish hall of fame won’t work in Israel, it only raises future” cynicism. This is an American topic” – Amanda Weiss, Bible Lands Museum CEO – Orit Shachm-Gover, leading Israeli curator
SOURCE: Interviews McKinsey & Company | 25 PROPOSED CONCEPT ASSESSMENT 3 Expert interviews suggest several critical elements to be considered in defining the museum’s concept
Considerations from expert interviews ▪ Risk of hubris and creation of alienism Sensitivities ▪ Fine line between Jewish-related and personal around theme achievements
▪ Significantly different interpretation of theme by Israelis Significant and diaspora Jews variance ▪ Finding common interests for very different populations What should be within target with different interests (IDF, North American Jews, Israeli the essence of audience families…) the visitor experience? Creation of ▪ Risk of importing an “American” museum to Israel an authentic ▪ Generating a true Israeli experience critical for experience generating large-scale pull for tourists
▪ Tel Aviv positioning as a modern, innovative and young Adherence to city should be incorporated into the museum concept Tel Aviv ▪ Museum should reflect Tel-Aviv’s spirit e.g., by utilizing brand late opening hours to match Tel Aviv’s nightlife brand
SOURCE: Team analysis; Museum industry leaders interviews McKinsey & Company | 26 PROPOSED CONCEPT ASSESSMENT 3 In addition, several elements could enhance the museum’s local fit and increase its attractiveness
Innovation and entrepreneurship ▪ Israel is known to be ‘Start-up nation’ - visitors will be keen to learn more about what’s the latest from Israel and how did it come to be a pioneer of ingenuity Night life Interviews and ▪ Tel Aviv is known for its night life, many tourists visit it research identified to experience that aspect of Israel several elements ▪ It is possible to incorporate the museum in the night life which may be landscape (late opening hours, in-house bar…) incorporated into the Authenticity of Jewish and Israeli culture concept and delivery ▪ Israel is the one place in the world where Jewish model to enhance fit culture is the local culture, tourists visiting Israel are and location and key keen to meet that culture target audiences ▪ The museum can help them meet the Jewish culture in its home (in-house synagogue, Jewish ceremonies and festivals…) Cuisine elements ▪ The museum can introduce visitors to the very different elements of the Jewish cuisines around the world
SOURCE: Team analysis; interview with Hila Oren (Tel Aviv Ir Olam) McKinsey & Company | 27 Content
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 28 Content
1 Proposed concept
2 Overview of museum landscape
Trends and museum landscape overview Beit Hatfutsot deep dive Overview of key museums in Israel
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 29 Overview of museum landscape – Key messages
▪ Past two decades have seen renovations of leading cultural institutes but no establishments of new institutes ▪ Yad Vashem, the leading museum in terms of visitors, attracts ~0.9M visitors a year, Israel Museum attracts ~0.7M visitors and 5 other museums attract 0.2- 0.5M visitors each ▪ Visitors traffic has grown by 5% p.a in the last decade, some due to tourism recovery after 2nd Intifada. We expect future growth of 2-3% p.a ▪ With an average price of NIS 24, admission is the main source of revenues, rep- resenting 88% of total self-generated revenues and 33% of operational budget ▪ Government funds differ based on the museum type: – Ministry of Culture total subsidies amount to NIS 40M, ~40% of which to the Israel Museum. Other museums receive NIS 1.5-3.5M each – Museums operating under a special law are subject to various levels of support, e.g., Yad Vashem ~NIS 40M,commemoration centers1 ~NIS 10m – Municipal museums support is generally limited, exception is heavy support of Tel Aviv Art and Erez Israel Museums (NIS 33M annually combined)
1 E.g., Begin Heritage Center, the Yitzhak Rabin Center
SOURCE: Team McKinsey & Company | 30 OVERVIEW OF MUSEUM LANDSCAPE Past two decades have seen renovations of leading cultural New establishment institutes but no establishments of new institutes Expansion / renovation
1978 – 2011 – Establishment of Expanding of the Beit Hatfutsot Tel Aviv Museum Museum of Art
1958 – Establish- 1965 – 1994 – Building 2008 – ment of Eretz Establishment of of Israeli Opera Renovation of Israel Museum Israel Museum home Habima home ▪ The two largest museums in Israel were established in the 50’ and 60’ ▪ The last 1950 1960 1970 1980 1990 2000 2010 significant cultural institute to be built was the Israeli Opera 1953 – 1971 – Building the Tel Aviv 2005 – Building of 2010 – Re- in ’94 Establishment Museum of Art home in the new Yad novation of the of Yad Vashem Shaul Hamelech Boulevards Vashem section Israel Museum
1960 – Building of the 1984 – Establishment of 2012 – Architectural National Library home the Madatech Museum in competition for the National in Givat Ram campus the old Techniyon building Library new home
SOURCE: Institutes websites; team analysis McKinsey & Company | 31 OVERVIEW OF MUSEUM LANDSCAPE Israeli museums attract ~5.2 million visitors annually, 30% of which in the top 2 museums
Number of visits in Israeli museums 2010, ‘000 Top Second Fourth Fifth tier tier Third tier tier tier
▪ There are over 900 200 museums in Israel, 48 of which 659 are supported by the Ministry of 502 Culture 407 366 ▪ Formal museums 247 210 are divided into 5 96 tiers based on 35 their size and activity magnitude Yad Israel Tel Aviv The Eretz Bloom- Haifa Tier 4 Tier 5 Vashem Museum Museum National Israel field Museu- museu- museu- of Art Science Museum Science ms ms aver- ms aver- Museum Museum age (9) age (33) (Madatech) Share of total museum visits 17 13 10 8 7 5 4 16 22 2010, %
100%=5.2M visitors
SOURCE: Pilat museums survey 2010; Yad Vashem; team analysis McKinsey & Company | 32 OVERVIEW OF MUSEUM LANDSCAPE Visitors traffic to museums in Israel has grown over 5% p.a in the last decade, driven mainly by growth in 3rd tier museum visits
Number of visitors per year Annual growth Thousands Percent
▪ It is important to Top tier – 0.6 note that the number Yad Vashe 845 600 1,013 900 of visitors to museums dropped significantly in 2001 because of the 2nd Second tier – 3.7 Intifada Israel Museum 456 429 492 659 ▪ 3rd tier museums had the most significant growth among leading Third tier total 1,732 6.9 Israeli museums (five museums) 887 1,309 729 ▪ Comparing to tourist recovery in the past Total for museums 4,396 decade, we estimate 3,414 (48) supported by a 2-3% annual 2,548 2,569 5.6 the ministry of growth in visitors culture1 2001 04 07 2010
1 Does not include Yad Vashem
SOURCE: Pilat Report; Jerusalem municipality; Yad Vashem; team analysis McKinsey & Company | 33 OVERVIEW OF MUSEUM LANDSCAPE With only 60% of visitors paying for regular or reduced entry, Unpaid Paid average admission per visitor in top Israeli museums is ~24 NIS Adult single entry price is ~50 NIS with lower prices In the top museums ~60% of visitors pay regular for children, seniors, and soldiers, amounting to an tickets, while ~15% of visits are free average of 36NIS per ticket Share of single Breakdown of # of visits by type of payment Average single entry price entry paid visits 2010, %, 2nd and 3rd tier museums NIS, top 4 museums % 100%=2.4 million visits Unpaid 14 x NIS 0 visits Adults 50.8 46
Subscribers / Educational 24 x NIS 10 activity Youth 21.6 18
Reduced single Adults – 29 25.4 34 entry reduced
x NIS 36 Soldiers 18.5 1 Regular single 31 entry Average single 36.2 entry price Average admission NIS 24
SOURCE: Pilat – 2nd & 3rd tiers average; interviews team analysis McKinsey & Company | 34 Content
1 Proposed concept
2 Overview of museum landscape
Trends and museum landscape overview Beit Hatfutsot deep dive Overview of key museums in Israel
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 35 Beit Hatfutsot - Key messages
▪ After reaching an all-time low in number of visitors and coming close to bankruptcy in 2003, Beit Hatfutsot seems to be on path to recovery – Significant renewal plan, backed with an investment of NIS 200M, aims to position Beit Hatfutsot as the new Jewish Museum, with ambitious goals of reaching 500K visitors annually – Significant governmental support in subsidies (NIS 64M) provided through a specially designed law, aiming to re-position Beit Hatfutsot as a relevant museum – Recent refurbishment and introduction of new content and exhibitions (databases, family area) is already resulting in increased number of visitors (though still significantly lower than peak 80’s and 90’s figures) ▪ Various evidences from different sources suggest that Beit Hatfutsot is expected to be a very significant museum upon it opening in late 2016 ▪ The concept of the renewed museum seems to significantly overlap with the proposed concept for the Jewish Museum ▪ The renewed investment in Beit Hatfutsot may pose challenges for the development of the Jewish Museum: – Competition for funding and support (governmental, municipal, private donors) – Competition for visitors (overlapping target audience)
SOURCE: Team analysis McKinsey & Company | 36 OVERVIEW OF MUSEUM LANDSCAPE – BEIT HATFUTSOT DEEP DIVE Beit Hatfutsot is recovering from a significant drop in number of visitors from the 80’s peak
Number of visitors has increased, but has not yet returned to the 80’s and 90’s figures Number of visitors Beit Hatfutsot is a long standing Thousands institution, and aims to be the 500 museum of the Jewish people 450 Number of visitors to be validated in ▪ Situated in the Tel Aviv meeting with CEO University, Beit Hatfutsot was opened in 1978 and was 250 considered innovative and 150-200 interactive 125 93 110 ▪ The institute aims to “tell the 63 ongoing and extraordinary story of the Jewish people” and holds several unique 80’s 90’s 2000 2003 2008 2010 2012 2015 databases1 (Estimates) (est.) (target) ▪ After nearly going bankrupt in New IT system Planned 2003, the Israeli government Preparation of Government unifies all unique opening of the decided to support it by NIS decides to support a renewal plan ~7M p.a, and a dedicated law databases new museum was passed2 to ensure this 2003 2004 2005 2006 2007 2008 2015 ▪ Ongoing and significant efforts in past years (e.g., the establishment of a family gallery) have resulted in All time low Beit Significant increased traffic number of Hatfutsot refurbishment of visitors law entry floor and lobby
1Jewish music, genealogy, family names, etc. 2 Beit Hatfutsot law, that defines it as "the national center for Jewish communities in Israel and around the world”
SOURCE: Pilat Report; Beit Hatfutsot Website; press clips; team analysis McKinsey & Company | 37 OVERVIEW OF MUSEUM LANDSCAPE – BEIT HATFUTSOT DEEP DIVE Bet Hatfutsot has launched a significant renewal plan to position itself as a relevant, cutting-edge museum of the Jewish people
Interviews indicate that competition with Beit Hatfutsot Significant renewal plan (“renaissance”) may become an issue ▪ Multi-year renewal plan, expected to conclude by 2015, “Their presentation was impressive, there is something targeting 500k visitors annually huge going on there and it might be overlapping” ▪ Significant development budget of NIS 200M, with – Hila Oren, Tel Aviv municipality NIS 64M already guaranteed by the government ▪ Patrick Gallagher, a world class museum designer1 “They seem to be in the right direction. Their content hired to lead the plan of a 4,000m2 exhibition space and might overlap with the Jewish museum, and it is a real assist in the design in the development of the entire of the issue to consider” complex (17,000m2 ) – James Snyder, Chairman of the Israel museum
“The Mayor would like to prevent any competition between the Tel Aviv museums” – Zvi Kanor, CEO of Tel Aviv-Yaffo foundation
1 Gallagher & Associates’ notable projects include the National Museum of American Jewish History which recently opened in Philadelphia, Shanghai Natural History Museum, the Grammy Museum in Los Angeles, and the Franklin D. Roosevelt Presidential Library and Museum
SOURCE: Beit Hatfutsot website; Interviews; team analysis McKinsey & Company | 38 OVERVIEW OF MUSEUM LANDSCAPE – BEIT HATFUTSOT DEEP DIVE New Beit Hatfutsot concept may overlap with Jewish Museum message and language
Jewish Museum Beit Hatfutsot ▪ The World’s Jewish Museum will ▪ Beit Hatfutsot, the Museum of the Jewish narrate, in an overarching People, is more than a museum. This chronological account, the odyssey of unique global institution tells the ongoing the Jewish people and extraordinary story of the Jewish people ▪ It will attest to the significance of ▪ Beit Hatfutsot conveys to the world the outstanding Jewish achievement and fascinating narrative of the Jewish intellectual output, and showcase how people and the essence of the Jewish Jewish contributions have enriched the culture, faith, purpose and deed while spirit of humankind. presenting the contribution of world Jewry to humanity ▪ The museum will serve as the ▪ Beit Hatfutsot connects Jewish people to collaborative force among Jewish their roots and strengthens their personal museums nationally and… enhance the and collective Jewish identity cultural bond between Israel and global Jewish populations through the strengthening of its collective identity
SOURCE: Beit Hatfutsot website; Jewish Museum booklet McKinsey & Company | 39 OVERVIEW OF MUSEUM LANDSCAPE – BEIT HATFUTSOT DEEP DIVE Beit Hatfutsot plans to narrate the Jewish story from past to present
Renewed Beit Hatfutsot planned content delivery ▪ Peoplehood and Jewish identity nowadays and “Tikun Olam” (3rd floor) – Life in open community – Expressions of communality and belief – Partnership and destiny (environment, human rights, Jews for Jews) – Jews in global culture – pride and achievements – This story is yours – interactive visitor input – Modern Jewish culture (food, art, language, literature, etc) ▪ People among people – the story of the Jewish people (2nd floor) – Jewish centers in the old, middle and early new ages – Belief and creation – Development of the Jewish creation – Modern age, Zionism, holocaust and the State of Israel ▪ Origins and sources (1st floor) – The biblical story – New way of reading the bible – Jewish way of life
SOURCE: Beit Hatfutsot renewal plan; team analysis McKinsey & Company | 40 Content
1 Proposed concept
2 Overview of museum landscape
Trends and museum landscape overview Beit Hatfutsot deep dive Overview of key museums in Israel
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 41 Museum overview – Israel Museum
Revenues Key messages – CEO interview Income sources Self-generated revenues breakdown ▪ Israel museum is situated on an 80 Total 2011 income = NIS 115.3m 2011, NIS million Share of revenue dunam site with 60,000 m2 built area Government Percent subsidies ▪ Recent Refurbishment project costs of 18.7 Admission 16.1 47 NIS ~100M (16%) Museum ▪ The museum receives ~40% of the Self- Departments 13.1 38 gen- Ministry of Culture museums budget 34.1 activities erated 54.4 (30%) Gift shop 4.9 14 (~16 M NIS), that amounts for ~13% of Donat- (47%) operational budget (covers energy costs ions 8.1 Total 34.1 and 1/3 of security costs) (7%) ▪ Special events organized by the Others museum will at best cover their own Costs costs, and not generate profit Expense Categories of Israel Museum Gift shop is operated by the museum 2011, NIS millions Personnel x Percentage of total expense ▪ 48 17 15 9 4 3 2 itself but isn’t profitable ▪ Food services are through a rental and 2.3 120.4 10.3 8.1 3.2 % of revenue business model 18.3 60% 20.5 ▪ Israel Museum rarely rents spaces for 57.7 events due to the image it creates and 78% 41% due to ideology (a museum, not an Operation Facility Exhibitions Depriciation Manage- Advetising Other Total wedding hall) management ment ▪ Dedicated unit whose role is to raise donations, on top of that being the CEO’s main activity
SOURCE: Interview; museum data; team analysis McKinsey & Company | 42 Museum overview – Yad Vashem
Revenues Key messages – CEO interview Income sources ▪ Costs of building the new museum part Total 2012 income = 190.9 million NIS were USD ~100M, the government paid Government ~15% (less than the VAT paid) subsidies ▪ Budget is divided to operational budget 44.9 (24%) (NIS ~90M) for recurring costs and Self- development budget (NIS 70-80M) for 19.5 generated (10%) projects and multiyear plans Detailed breakdown of ▪ ~50% of the operational budget is self-generated revenues is subsidized by the ministry of 126.6 not available (66%) education based on an ongoing Donations negotiation and a dedicated law Costs ▪ Major sources of funding are shrinking Expense categories of Yad Vashem (donations – raised by a dedicated 2012, NIS millions Personnel x Percentage of total expense 14 8 8 8 5 5 51 team and claims), Yad Vashem works on alternative sources (interest from 98.1 191.0 fund, auxiliary services – parking, publications, restaurant, educational 9.8 9.4 15.6 14.9 27.1 16.1 activities) ▪ It is important to avoid building Mainte- Education Document- Commem- Research Administr- Develop- Total unsustainable monuments, maintenance nance ation oration ation ment implications needs to be checked throughout the design steps
SOURCE: Interview; museum data; team analysis McKinsey & Company | 43 Museum overview – Tel-Aviv Museum of Art
Revenues Key messages – CEO interview Income sources Self-generated revenues breakdown ▪ Tel Aviv Museum of Art spreads on Total 2011 income = NIS 64.5m 2011, NIS million Share of revenue 33,000 m2 (old building is 15k m2 and Government Percent 2 subsidies new is 18k m ) Admission 3.9 20 ▪ Building cost for the new section was 32.9 Gift Shop 3.5 18 USD ~20m Self- Departments (51%) gen- 3.4 17 ▪ Halls rented only for corporates 19.5 activity erated (30%) Rent 3.2 16 events, private events only include Classes 3.1 16 birthdays combined with an museum 12.1 Special events 2.4 12 activity (19%) Total 19.5 ▪ Most of donations are made by Donations foundations, donations for catalogues Costs are very popular Expense Categories of Israel Museum In 2013 they will spend NIS ~7.5M on 2011, NIS millions Personnel x Percentage of total expense ▪ 28 19 17 14 13 7 2 exhibitions ▪ There are ~150 employees in the 1.1 8.7 4.4 66.8 museum, since they are a municipal 9.5 11.2 48% institute employment contracts are 12.9 19.0 19% collective, making labor expensive 10% ▪ They try to minimize outsourcing and Exhibitions Operating Facility Special Manage- Depriciation Advertising Total operate with internal maintenance, mangement events ment ticketing, and shop
SOURCE: Interview; museum data; team analysis McKinsey & Company | 44 Museum overview – Eretz Israel Museum
Revenues Income sources Self-generated revenues breakdown Total 2011 income = NIS 33.1m 2011, NIS million Key messages – CEO interview Share of revenue Percent ▪ A very large museum on a 200 dunam Gover- Admission 9.1 50 land with 17 buildings and an overall nment Self- built area of 14,000 m2 subsidies gen- Rent 5.6 31 erated Mostly local visitors (~90%), majority 14.5 18.2 ▪ Gift Shop 2.9 16 (44%) (55%) not from Tel-Aviv area Restaurant rent 0.4 2 ▪ Space rented for private events 200- 0.4 Other 0.2 1 250 days a year (1%) ▪ Limited donations because fund raising Donations Total 18.2 is not done systematically Costs ▪ Half of their donations are from Israel Expense Categories of Israel Museum ▪ Operate their own gift shop with ~10% 2011, NIS millions Personnel x Percentage of total expense margin (NIS 200-300k) 47 15 13 11 10 4 ▪ Their special events rarely cover their
3.7 1.5 36.8 own costs and are done to deliver 4.2 4.7 5.4 educational messages 17.3 39% 85% 46%
Operation Management Depriciation Facility Exhibitions Advertising Total management
SOURCE: Interview; museum data; team analysis McKinsey & Company | 45 Museum overview – Bloomfield Science Museum
Revenues Key messages – CEO interview Income sources Self-generated revenues breakdown ▪ They see education as one of their Total 2011 income = NIS 16.7m 2011, NIS million Share of revenue primary objectives and therefore have Government Percent subsidies a very strong department Admission 2.7 49 ▪ To make sure children groups get the 6.7 Educational 2.3 42 best out of their visit they use 2 guides (40%) Self- activity gen- per group, which automatically raises 5.5 erated Rent 0.3 5 (33%) the costs considerably Books 0.1 2 ▪ Since they have no artifacts they don’t 4.5 Other 0.1 2 need climate control which (27%) Total 5.5 dramatically reduces costs Donations ▪ Maintain an in-house content Costs development and production Expense Categories of Israel Museum department with a designated 2011, NIS millions Personnel x Percentage of total expense 46 17 16 9 9 2 workshop ▪ Don’t have a gift shop or a restaurant 0.4 17.6 1.6 1.6 due to low number of visitors and 2.9 3.0 location 8.1 62% 53% 47% 60%
Operation Exhibitions Manage- Maintenance Advertising Depriciation Total ment
SOURCE: Interview; museum data; team analysis McKinsey & Company | 46 Museum overview – Madatech
Revenues Key messages – CEO interview Income sources Self-generated revenues breakdown ▪ Madatech has significantly grown in Total 2011 income = NIS 28.3m 2012F, NIS million Share of revenue the last 4 years (from 200K to 500K Government Percent subsidies paying visitors) and is now forth in size 71 5.0 Admission 5.2 in Israel (18%) ▪ Main target group is families since Self- gen- Classes 2.1 2.1 29 they hold the highest potential and 7.4 erated (26%) young kids are best for educational 15.8 Total 7.3 impact (56%) 0.1 Donat- (0%) ▪ 80% of the Madatech visitors are from ions Others the center of Israel ▪ They decided to double their Costs admission (35 NIS to 75 NIS) in order Expense Categories of Madatech to create better branding and to help 2011, NIS millions Personnel x Percentage of total expense 48 30 14 8 finance exhibitions and marketing ▪ Marketing is a life line for a museum and 4.8 2.7 34.1 should be 15% of budget 10.4 ▪ The government is not a significant 16.2 source of revenues 78% 37% ▪ Madatech limits rental to birthdays Operation Exhibition Depriciation Management Total and Bar-Mitzvas, weddings are a Pandora box and are thus avoided
SOURCE: Interview; museum data; team analysis McKinsey & Company | 47 Museum overview – Begin Museum
Revenues Key messages – CEO interview Income sources Self-generated revenues breakdown ▪ The establishment operates under the Total 2012 income = 17.8 million NIS 2012F, NIS million Menachem Begin commemoration law Share of revenue that states it is to be built from private Government Percent funds and operated (and financed) by subsidies (PMO) the government (PMO) Admission 1.00 22 ▪ Building cost of ~USD 20 M for a Academic activity 1.00 22 2 11.0 5,000 m building Self- 16 (62%) gen- Hall rent 0.75 ▪ ~120 donors (~60% foreign) donated 4.0 16 erated USD 25M 1.8 (22%) Auxiliary services 0.75 8 ▪ Interior design of the museum (setting, (10%) 1.0 Content 0.56 3 electronics, exhibits) costs USD ~ 3,000 Educational per m2 (6%) 0.51 0 activities Begin ▪ The level of government support is set Other Foundation Total 4.57 in an annual negotiation ▪ Both the gift shop and the restaurant Costs are operated by a third side for a fixed Expense channels of the Menachem Begin Heritage Center fee (rent) 2012, NIS millions Personnel x Percentage of total expense ▪ The museum gets ~150k visits annually 18 16 13 9 8 4 15 with an effective admission price of NIS 0.8 1.7 1.5 15-20 21% 8% 68% 2.7 17.8 Due to competition on tourists attention 5.0 79% ▪ 92% 32% in Jerusalem they target returning 22% tourists 2.9 78% 79% 3.2 ▪ Educational activities for the army are 21% an important aspect of their activity, once approved by the army you must Mainte- Conven- Research, Adminis- Educational Museum Others Total market yourself to the units to nance tions and academic tration activity succeed events activity and content Rabin center has a similar structure production !
SOURCE: Interview; museum data; team analysis McKinsey & Company | 48 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 49 Financial assessment of proposed concept – operations – key messages
▪ Effort focused on developing a business model for museum operations, to estimate annual operational budget and quantify the required external funding ▪ The most critical cost component of museum operations (35-45%) is the investment in content renewal and development. The level of required investment is driven primarily by the target number of visitors – Capturing a large share of museum traffic depends on significant repeat visits – To stimulate repeat visits, new content must be developed frequently and on a significant scale ▪ To assess budget and funding requirement, 3 scenarios were evaluated: – The museum manages to exceed all expectations and becomes a blockbuster with 1 million visitors per annum – The museum manages to fulfill its potential, becomes one of the top 3 museums in Israel and attracts 850K visitors per annum – The museum doesn’t reach its full potential but is one of the top 5 museums in Israel with 400K visitors per annum ▪ Assessment of required budget and revenue potential for each scenario shows that: – Operational budget requirements will be between NIS 75-90m – Revenues from museum operations will be between NIS 20-40m driven by visitors admission in the different scenarios (with parking being a significant revenue source), resulting in a requirement for NIS ~50m external funding
SOURCE: Team analysis McKinsey & Company | 50 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS To model museum operations, we identified key cost and revenue categories and mapped relevant drivers
Cost Revenue Description Key driver Description
▪ Guides, energy, ▪ Number of ▪ Admission, special events Operation ticketing, taxes, visitors Direct
special events generated
Security, cleaning, Facility size - ▪ Gift shop, restaurant, Facility ▪ ▪ maintenance Indirect cafeteria, parking, location
management Self rent, etc.
▪ Management, ▪ Fixed ▪ Corporates funding an SG&A marketing, Sponsorship event, exhibition, project, advertising, fund etc. for advertising (e.g. Operatingmaintenance & raising, catalog with company logo
advertising on it)
Exhibitions, Rotating Funds / private people / ▪ ▪ Private ▪ Planning education, exhibition corporates that choose to donations guidance area support the museum or a
Funded specific project by a donation
▪ Building ▪ Rotating ▪ Government ministries / Execution exhibitions, exhibition Government municipalities that allocate launching area subsidies a funding amount for the Content Content development workshops, etc. museum
SOURCE: Team analysis McKinsey & Company | 51 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS To assess the operational budget and revenue streams we have made several assumptions on the Jewish Museum operation
Main assumptions on Jewish Museum operation
▪ A top-notch iconic museum, situated in an highly sophisticated building Description ▪ Attracts significant share of tourists and locals, some returning visitors
▪ 0.85M visitors annually as a base case # of visitors ▪ 2 other scenarios were evaluated: 400k visitors (below expectations) and 1m visitors (blockbuster)
▪ Average admission per visitor is NIS 28 Admission ▪ Average admission per visitor in the lower visitors range scenario (below expectations) was assumed to be lower – NIS 24
▪ Frequently rotating top-notch exhibitions Exhibit development ▪ 20-35% of exhibition space is rotating
. 30,000 m2 built area Museum’s built area ▪ 25% of which is exhibition space and another 25% community learning space
Comparable ▪ Yad Vashem museums in ▪ Israel Museum Israel
SOURCE: Team analysis McKinsey & Company | 52 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Operating the Jewish museum will require an annual budget of ESTIMATES NIS 70-90 m
Assessment for the World’s Description Jewish Museum, NIS m Key cost driver Benchmarks Explanation
Target number of 700 ▪ The museum intends Guides, visitors, 000 to be more eventful as Yad Vashem Israel Museum Operation energy, 15-16 x Israel Museum but has ticketing no collections to 21-23 32 Cost per visitor, NIS preserve 2 Built space, m 30,000 ▪ Interviews indicated Facility Security, 600 NIS/m2, costs Israel Museum Yad Vashem manage- cleaning, 18 x should be higher due ment maintenance to building 2 520 560 800 Cost per m , NIS sophistication Fixed, NIS m ▪ Spend on advertising Management will be significantly Operatingmanagement & Yad Vashem Israel Museum SG&A marketing, 16-20 higher to build brand fund raising and promote new 9 10 11 exhibitions
# of employees 39 ▪ # of employees based Curators, on the museums law Planning education, 10-11 x ▪ Extra 30% of per guidance Cost per employee, employee for 290 ’000 NIS materials and other Rotating exhibition 1,500 – 2,625 ▪ 20-35% of exhibition space, m2 space rotates annually Building Execution 15-26 x Based on RAA exhibitions ▪
assessment of USD ~ Content development Cost per m2, NIS 10,000 3,000 per m2
▪ Annual content development budget ranges between 2,500 ▪ In-line with leading 74-90 NIS/m2 in Israel museum and 9,000 NIS/m2 in Yad Vashem Total international museums ▪ We estimated 5,000-6,000 NIS/m2 due to extensive content (relative to size) development
SOURCE: Team analysis; Pilat museums survey; Yad Vashem data; interviews McKinsey & Company | 53 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Total self-generated revenues will be NIS ~38 m if the museum ESTIMATES meets its expectations
Direct self-generated revenues Indirect self-generated revenues
Restaurant1 Assumed rental 2 NIS m model for ~200m Effective price/ 0.6 – 1.1 visitor, 1.1 0.8 0.6 NIS 24 - 28 3 scenarios were assessed Based on Israeli BB BC BE average ▪ Blockbuster Cafeteria1 Assumed rental 2 (BB) – the 29 28 NIS m model for ~300m museum 24 0.7 – 1.1 attracts 1 Admissions 1.1 0.9 0.7 million visitors NIS m annually 10 - 28 BB BC BE ▪ Base case BB BC BE (BC) – the Gift shop1 Assumed rental 28 2 museum 24 NIS m model for ~100m 0.4 – 0.7 fulfills its Indirect 10 potential and Number of revenues 0.7 0.6 0.4 manages to visitors NIS m 13 – 15 attract 850k Direct revenues Millions 0.4 – 1 BB BC BE visitors BB BC BE 15 14 13 NIS m Assuming 700 annually Parking 1.0 parking spaces, Below 10 - 28 0.9 NIS m ▪ BB BC BE 9 each generating 750
expectations 0.4 NIS m annually (BE) – the 28 24 museum Location rent2 Assuming 170 – 225 attract 400k 10 NIS m days of rental for NIS 1.4 – 3.1 visitors BB BC BE 8000-11500 per day 3.1 annually Special events Each event estimated to 2.4 1.4 BB BC BE NIS m generate NIS ~150K from 0 admission, making it BB BC BE close to break even Cellular anttena NIS m 0.5
1 Based on benchmark of leading Israeli commercial areas 2 Based on benchmark with Eretz Israel Museum
SOURCE: Team analysis McKinsey & Company | 54 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Parking is expected to generate 9m NIS annually depending on number of parking spaces
Monthly costs of car park space in Estimated number of Tel-Aviv NIS car park spaces Prime 1,000 ▪ The municipality will locations demand that the Jewish range Tel-Aviv port Museum will build a Revenue from is amongst ~1,500 spaces parking will be prime car park NIS ~9m, locations, we assuming the 750 assume ▪ ~50% of it will be car parks will owned by the museum 650 revenue from service park parking space and port visitors to be ~30% as well as higher than museum visitors rent price – ~750 spaces NIS 1000 Average location 300
SOURCE: Team analysis; Interviews; News clips McKinsey & Company | 55 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS We expect fees charged for renting space for auxiliary services to be similar to those of top locations
Monthly rental price per m2 in different locations NIS/m2
Benchmark Average 7 stars mall, Azrieli Ramat Aviv Azrieli mall- locations retail in Tel- Hertzelia average mall - boutique shop Aviv average average
190 210 290 470 720
World’s Jewish Cafeteria Restaurant Gift shop museum estimate 200-300 250-450 350-600
Restaurant is Cafeteria is expected Gift shop is expected expected to be to be charged similar to be charged similar charged between court to food court to a boutique shop and boutique shop
SOURCE: Team analysis; Man properties real estate report; Globes McKinsey & Company | 56 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Self-generated revenues generally don’t exceed 20% of annual budget 1 M€1, 2006 X Visitors (Millions)
The operational budget is well below the MET resources that are capitalized for the large part (~ 60%)
63 105 125 101 183 72 88 100% = Museum 5 4 5 3 3 5 operational Others 22 8 14 budget Subsidies 48 32 61 70 Donations 44 57 77
Endowments 25 Auxiliary 2 3 36 6 6 1 services 19 10 13 2 29 1 5 0 Admission 3 5 23 6 8 12 7 3 5 11 Guggenheim Art Institute The Met Tate Le Louvre British Centre of Chicago Galleries Museum Pompidou
2.5 1.4 4.5 7.73 8.3 4.9 3.7 Average Self-generated Share of revenues 31 11 13 12 29 8 16 17 %
▪ The range of models is vast, ranging from the European museums who are very dependent on grants to the relatively independent American museums who heavily rely on endowment funds ▪ In all analyzed museums auxiliary services are a marginal source of revenues
1 Exchange rate of € 1 for $ 1.4 and 0.7 pounds, Some data is for 2005 (Guggenheim) and some for 2007 (Tate and British Museum) 2 For reasons of comparability between museums and to reflect the real contribution, revenues from auxiliary services have been restated and replaced by their contribution (revenue - direct and indirect costs) 3 Includes all Tate galleries in the UK (Tate Britain, Tate Modern, Tate Liverpool, Tate St. Ives)
SOURCE: Annual reports; team analysis McKinsey & Company | 57 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Assuming the museum is successful, it can generate NIS ~40m from internal sources, and will require external funding of NIS ~50m Operation budget of the Jewish Museum – base case expenses and revenue sources NIS millions1
Budget is in line with top Includes a potential of NIS 2M Two main factors museums around the world from private events (not could affect funding organized by the museum) and requirements: 90 NIS 0.5M from cellular antenna Number of visitors . 850K (base case) 24 40 – NIS 50M . 1 million (best 9 case) – NIS 40M 50 5 52 . 400K (below expectations) – NIS 65M Content renewal budget . Minimizing content renewal Museum Content Required Admission Parking Auxiliary External can shrink operations develop- budget revenues2 revenues services3 funding required budget ment and requirement by up to NIS 15m production for each scenario
1 All monetary figures are in 2011 terms 2 Number of visitors is in 2019 terms 3 Includes gift shop, cafeteria, restaurant, private (not organized by the museum) events and cellular antenna lease
SOURCE: Team analysis McKinsey & Company | 58 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Free admission model will require significant additional external funding but has limited potential for attracting new audiences
Max capacity Monetary implications Museum max 2,0001 Change ▪ Free admission capacity (# of from base Rationale for free has limited visitors) at a Base case Free case admission numbers potential to given time significantly 2 Up to ▪ Reaching full Traffic 750 +40% change visitors 1,200 capacity # of weekdays 255 ‘000 visitors number as operative Jewish annually ▪ Free admission Museum Rev- Admission 28 0 -100% planned size # of weekends 51 enue NIS M capacity operative constraints annually ▪ Proportional to makes it hard Maintenance 18 23 +30% change in traffic to attract a very Capacity per 3,000 NIS M large number weekday Costs of visitors ▪ Higher guides ▪ Required Operation Capacity per 8,000 15 15 +0% budget offset by external NIS M weekend (Friday no ticketing funding is & Saturday) expected to significantly Annual 1.2M grow to cover capacity Required external the loss of funding 523 803 +54% revenue NIS M
1 Input from RAA given size of exhibition space 2 In 2019 terms 3 Minimizing content renewal can shrink required budget by up to NIS 15m
SOURCE: Interviews; team analysis McKinsey & Company | 59 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS In case the museum doesn’t deliver on content, resulting in a low number of visitors, required external funding can reach NIS 74m
Assumptions Required external funding
Base Worst Rationale for worst case NIS M case case numbers ▪ Typical # of visitors to mid- Operating # of visitors 1 73-80 What if? 700 100 level Israeli museums budget ‘000 Evaluating a scenario Operating ▪ Operation budget largely where the budget 73-90 73-80 depends on selected design concept is not Parking 4 NIS m point and less on # of visitors delivered to fit local population Average ad- ▪ Typical admission of mid- and execution mission price 28 19 level museums level is not NIS Rentals 3 sufficiently high, leading to less Parking ▪ Parking revenue will drop to visitors than revenues 9 4 Tel-Aviv average expected NIS m ▪ Similar to Tel-Aviv average Admission 2 Rentals 2.3 1.3 retail rental prices NIS m
▪ Location becomes less Required Location rent external 66-74 2 1 attractive and cheaper to rent NIS m funding
1 Israeli museums are divided into 4 tiers with high level 3rd tier museums (below top 6) attract ~100k visitors annually (e.g. Rabin, Begin, Palmach)
SOURCE: Team analysis McKinsey & Company | 60 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 61 Construction costs – key messages
▪ Interviews with city officials suggest the museum is an integral part of urban plans for the location and its surroundings, though 2-3 years of modifying municipal plans and formal approval are expected (some construction work can start before final confirmation) ▪ Location appears to pose no significant challenges to execution (e.g., official land allocation, topography, planning, environmental issues) ▪ It is expected that the museum will include underground parking space for 1,000-1500 cars, part of which will be used by the museum and part by the city ▪ The single biggest cost driver is the number of square meters of the built area (rather than division to number of floors, split to buildings, etc.) ▪ With the current guidelines we received – we estimate construction costs of the project (excluding actual exhibits) to range between NIS 600-650M depending on architectural layout and level of sophistication
McKinsey & Company | 62 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – CONSTRUCTION The proposed location does not seem to impose significant construction and environmental challenges or objections
▪ Plot size of 22 dunams south of Sde Dov airport and north of the funeral hall ▪ Currently there is a parking lot on the plot, no significant development work required ▪ High voltage power line will need to be relocated, at approximate costs of USD 6M ▪ Planning department of the city already in Some process of changing Taba, a process which challenges, is expected to take two years none of them appear to be a ▪ Plans is part of major change in the area show stopper including removal of the fire station and funeral hall and construction of hotel and major transportation station including light train ▪ It is a requirement by the city that the construction work will include two floors of underground parking
SOURCE: Letter of intent, discussions with engineer, city of the Tel Aviv McKinsey & Company | 63 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – CONSTRUCTION Tel Aviv municipality is already progressing plans for the museum construction and is likely to insist on its involvement in future planning Key messages from meetings with city engineer and strategic planning department
▪ Plans for the area are at advanced stage and include the museum: Urban – Museum will end a pathway with 5 museums extended from Tel Aviv university: Nature planning Museum, Beit Hatfutsot, The Palmach and Eretz Israel Museums, and Rabin Center, which will end in a pedestrian zone leading to Hayarkon river – Current funeral hall area will demolished and new public space will include the museum, hotel, transportation center (light train, bus, taxies and shuttles) and other elements, all part of extension of the Hayarkon park towards the sea – “Riding” station and the old oil tankers will remain and be preserved as part of public area – Interviews suggest guidelines for architect should be very open and not include the Star of David concept ▪ All required infrastructure work except for moving the electricity line will be taken care of by the city (e.g., moving sewage and water lines, water treatment facility, move of the fire station)
▪ Taba modification process is already in progress, and key requirement from the museum Requirements project team is to provide a “Programa” (estimated cost of $10-20K) that will include key from the requirements of the building. Taba is likely to be approved within two years museum ▪ Parking – the museum will have to include two floors of underground parking (~1,000-1,500 cars). Unclear how much of it will use the museum and how much will be operated by the city
▪ Approval for the final architectural plan for the museum will to be required by the city engineer / Future city regional planner involvement ▪ City is likely to ask for additional involvement of the design, concept and execution
SOURCE: Meeting with City Engineer McKinsey & Company | 64 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – CONSTRUCTION Cost structure for the project ESTIMATED Percent Estimated share of total cost Cost item Levers Hypothesis on levers Percent ▪ Existing elements on the plot ▪ Limited cost, no major issues at Environmental requirement current location Basic cost ▪ ▪ Topography ▪ Includes open areas costs 5-8% ▪ Licensing costs ▪ Architecture Planning and ▪ 15% of total construction cost Planning 10-12% oversight ▪ ▪ Supervising ▪ Building design ▪ Size, floors, open area Assumes very high standards Built area ▪ Exhibition space ▪ 60-65% and high end finishing to meet ▪ Material world iconic buildings standards ▪ Parking High end ▪ Geometry 20% finishing ▪ Material
Total exc. additional 100% features
Additional ▪ Size, height ▪ 70-100 meters tall tower, as features ▪ Additional requirements example additional feature 7-10% (e.g., tower)
Total incl. additional 107-110% features
SOURCE: Engineering expert McKinsey & Company | 65 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – CONSTRUCTION The construction costs will depend on architecture WORKING ASSUMPTIONS layout, finishing quality and additional features
Guidelines/assumptions Alternatives ▪ Iconic monument that will become the city symbol, Horizontal ▪ Single building, two floors at the level of Bilbao build ▪ Each floor 7,500 m2 Guggenheim or the Human Rights museum ▪ Single building with 10 floors in Winnipeg Architecture Vertical build ▪ Each floor 1,500 m2 ▪ 30,000 m2 divided into: layout 2 ▪ 7 buildings, connected with bridges – 7,500 m of exhibition Ralph and multimedia space ▪ Each building 4 floors Appelbaum 2 – 7,500 m2 of service ▪ Each building 2,100 m , each floor plan 2 area (e.g., 535 m restaurants, offices, ▪ Straight angles meeting Standard ▪ Stone walls rooms/learning space) ▪ Multimedia infrastructure 2 – 15,000 m of open Finishing ▪ Unusual geometric space with gardens, quality/ High end ▪ None standard roof terraces, features ▪ Wall surfacing amphitheater, etc ▪ 70-100 m observation tower (as ▪ Underground parking with High end + example for additional features) space for 1,500 cars features (37,500 m2)
SOURCE: Discussion with Moe and Ralph Appelbaum, engineering expert McKinsey & Company | 66 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – CONSTRUCTION Preliminary construction cost estimation is of NIS ~600-650M, Working assumption excluding exhibits
Cost assumptions Preliminary construction costs estimation
Cost NIS Millions Item USD Layout Basic costs 15M Ralph ▪ Horizontal Vertical Appelba- belt belt ▪ Planning and 15% of built cost um plan oversight
▪ Parking 500/m2
Standard 440 450 640
▪ Exhibition and 4,000-4,500/m2 multimedia space (building cost) High end ▪ Exhibition and 3,000/m2 550 565 610 multimedia infrastructure
Sophistication level Sophistication High end ▪ Service area 2,500-2,800/m2 +
1 600 620 660 ▪ High End finishing 2,000/m2 features ▪ Observation tower 13-14M
1 Observation tower of 70-100 meters as an example for additional feature
SOURCE: Construction model McKinsey & Company | 67 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – CONSTRUCTION Fast track Overview of timing and spend sequencing Typical schedule
2013 2014 2015 2016 2017 2018 2019 2020 Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Museum ▪ Pre-project – Steering Committee Critical for design and project manager and procurement – Programa phase – Architect competition Project ▪ Design and procurement Taba change is a must for – Preliminary design the museum construction – Building permit and “Taba” Can be split to permit for ground works and skeleton – Design for tenders and general permit – Tender offer – Design for execution Critical ▪ Execution before execution – Ground works – Digging and constructing parking garage – Skeleton – Facades – Finishing works – Electromechanical systems – Exhibitions – Authority permits
Spend – typical schedule $2M $3.0M ~$0M $15.0M $40M $57M $26M $35M Spend – “fast track” project $5M $14M $41M $58M $25M $35M Total spend Total spend $178M
SOURCE: Interview with City Engineer; engineering expert; team analysis McKinsey & Company | 68 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 69 COUNTRY/CITY BUSINESS CASE Country and city business case – Key messages
▪ An iconic museum in a landmark building in Tel Aviv could contribute to the cultural and educational offering of the city, strengthen the relationship with the diaspora and add to sense of pride of the people of Israel (and particularly Tel Aviv) ▪ There are three dimensions to the financial impact of the museum: – Impact on tourism: We believe the museum could attract 10-15% of the international tourists visiting Israel, which will drive financial impact ranging between NIS 10-20M of incremental GDP and 160-260 new jobs – Impact of the construction: We estimate the construction work to contribute NIS 220-300M of incremental GDP, 100-120 jobs for average of two years, and tax income of NIS 17-21M – Museum operations: The museum is expected to create 100-150 new jobs, contribute NIS 65-75M of incremental GDP and add NIS 10-16M of taxes to the treasury
McKinsey & Company | 70 COUNTRY/CITY BUSINESS CASE While having limited economic impact, a World Jewish Museum in an iconic building in Tel Aviv will serve both the city and Israel as a whole
Intangible benefits Financial benefits
▪ Educational hub for Jewish ▪ New jobs driven by 160-260 heritage tours, research, and Jobs museum's academic cooperation operations and incremental tourism
▪ Cultural center to host concerts, ▪ Additional stays in 40-100K lectures, and shows Hotel TLV hotels by stays tourists
Strengthened relationship with ▪ Construction cost ▪ Capital 500-700M diaspora injected into Israel’s + invested economy1
▪ Tax paid to Israel 10-15M ▪ Architectural landmark Tax treasury p.a ▪ Tax paid to Israel 15-20M during construction
▪ Pride and prestige as city of the ▪ Contribution to 75-90M world and cultural leader in Israel GDP Israel p.a
1 Excluding exhibit production, large share of which will be produced abroad
SOURCE: Team McKinsey & Company | 71 COUNTRY/CITY BUSINESS CASE - INTANGIBLE BENEFIT Educational hub for Jewish heritage Potential ideas
Teachers seminars Students tours Academia / think-tanks
▪ Cooperation with the ▪ Visits as part of the ▪ Joint programs with Ministry of Education university courses leading Israeli and for teachers training global academic ▪ After hours teaching institutions to research ▪ Shared content hours Jewish heritage development ▪ Cooperation in guiding ▪ Dedicated researchers
SOURCE: Team analysis McKinsey & Company | 72 COUNTRY/CITY BUSINESS CASE - INTANGIBLE BENEFIT Cultural center – proposed ideas to position as Jewish cultural hub
Concerts
Film festivals
Events
Theatre
Lectures/ seminars
SOURCE: Team analysis McKinsey & Company | 73 COUNTRY/CITY BUSINESS CASE - INTANGIBLE BENEFIT Strengthen relationship with diaspora Potential ideas
▪ Develop strong ties with institutions like “Taglit” and Masa, ▪ Establish the museum as a “must visit” experience in these journeys
▪ Invite “Olim Chadashim” to join the workforce of the museum
▪ Develop user generated content from Jews across the globe
▪ Include user-generated - “my Israeli experience” section for Jewish tourists as part of the museums
SOURCE: Team analysis McKinsey & Company | 74 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT Financial benefit to the economy will be driven by the museum spend (construction and operations) and its impact on tourism
Impact 1 a How we evaluate each element Construction Return to the economy as a whole: Impact on GDP via: Museum - Employment: Number of jobs created (direct direct ▪ Direct and indirect) by construction and operation of b employment the museum, and by the additional tourism driven by it and total salaries Operations ▪ Businesses profits: The incremental Suppliers contribution of the museum to margins of the all business across the different supply chains
Direct return to the government and city: Financial Taxes: Money returned to the treasury and city benefit ▪ Domestic of Tel Aviv via direct and indirect taxes collected 2 Tourism/biz activity Foreign
To be Part/port 3 discussed development ▪ TBD at later phase with city
SOURCE: Team analysis McKinsey & Company | 75 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT We expect that Israel will gain 160-260 jobs, NIS 60-100M of GDP and NIS 14-23M in taxes annually on top of one-off impact of the construction work
Tax revenue GDP New jobs NIS Millions NIS Millions
One-off impact
1a Construction1 100-120 17-21 220-305
Ongoing annual impact
1b Operations 100-150 7-12 66-76
2 Tourism 65-115 3-4 8-14
Total 165-265 10-16 73-91
1 Does not include exhibit development (estimated at cost of NIS 200M); Jobs – Two years FTE
SOURCE: Team analysis, USD = 3.7 NIS McKinsey & Company | 76 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT 1a Construction impact on economy Low High
Jobs1 100 120 FTE ▪ Construction cost ranges between NIS 600-650m depending on finishing level GDP2 NIS Millions (today’s 220 305 ▪ Construction impact values) was calculated in correspondence with its cost (low and high) Taxes3 NIS Millions 17 21 (today’s values)
1 Average over 2 construction years 2 Includes construction costs without exhibits development ) 3 Includes fees to municipality, income tax for employees and corporate tax for suppliers. Does not include amelioration fee
SOURCE: Construction model, USD = 3.7 NIS McKinsey & Company | 77 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT 1b To assess the operational budget and revenue streams we have made several assumptions on the Jewish Museum operation
Main assumptions on Jewish Museum operation ▪ A top-notch iconic museum, situated in an highly sophisticated building Description ▪ Attracts significant share of tourists and locals, some returning visitors
▪ 0.85 m visitors annually as a base case # of visitors ▪ 2 other scenarios were evaluated: 400k visitors (below expectations) and 1m visitors (blockbuster) ▪ Average admission per visitor is NIS 28 Admission ▪ Average admission per visitor in the lower visitors range scenario (below expectations) was assumed to be lower – NIS 24 ▪ Frequently rotating top-notch exhibitions Exhibit development ▪ 20-35% of exhibition space is rotating
. 30,000 m2 built area Museum’s built area ▪ 25% of which is exhibition space and another 25% community learning space
Comparable ▪ Yad Vashem museums in ▪ Israel Museum Israel
SOURCE: Team analysis McKinsey & Company | 78 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT 1b Museum operations contribution to economy Low High
Jobs1 ▪ Operating cost is driven 100 150 by investment in FTE renewing content – ranging from NIS 75-90m GDP2 ▪ Museum operation NIS Millions (today’s 65 75 contribution was values) calculated in correspondence with operating cost (low and Taxes3 high) NIS Millions 7 12 (today’s values)
1 Includes 40-50 jobs created for outsourced tasks such as cleaning and security 2 Museum spend, as government and other non-profit organization – calculated as addition to GDP 3 Includes direct taxes for employees and outsourced employees, corporate tax from suppliers, and local taxes
SOURCE: Construction model McKinsey & Company | 79 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT 2 We looked at two scenarios to assess potential economic impact driven by tourists visiting the museum
Share of tourists Share if tourist who add a night visitors who add a Share of tourists in Israel (and Tel night in Tel Aviv on Number of tourists visiting the Aviv) due to the the expense of other to Israel, Millions, museum museum destination in Israel 2019 estimated Percent Percent Percent
Moderate 3.7 10% 5% 5%
Optimistic 4.4 15% 5% 10%
Average tourist spend of ~NIS 600 per day
SOURCE: Team analysis McKinsey & Company | 80 COUNTRY/CITY BUSINESS CASE – FINANCIAL BENEFIT 2 Tel Aviv could gain up to 340 new jobs and GDP contribution of up to NIS ~72M. Less than half the impact will be incremental to Israel 2019, Today’s values Moderate scenario Optimistic scenario
Impact on Of which on expense of Net impact to Tel Aviv other destinations Israel
Employment FTE ~125 340 60 225 65 115
GDP NIS Millions 24 50 16 36 8 14 (today’s values)
Taxes1 NIS Millions 3 4.5 (today’s values)
1 Assumes no VAT on hotels for foreign tourists (33% of total spend), taxes only calculated on incremental spend to Israel. Income tax on incremental employees, on average salary of 6,500 NIS per month
SOURCE: Team analysis McKinsey & Company | 81 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 82 Governance overview – key messages
▪ Museums established through a dedicated law have a strict governance structure dictated by that law whereas the governance of “regular” museums is flexible ▪ There are 5 types of institutes commonly involved in the founding of museums, governments, municipalities, NGOs (e.g. academic, Jewish, etc.), private donors and founders, each with their own set of requirements. ▪ Museums can be managed through a Society or a Community Interest Company, the former being easier to introduce new stakeholders to, but both are non-profit organizations with very similar legal implications ▪ In the Israeli landscape most large museums are public or semi- public (held by NGOs). Public museums are either owned by governmental or municipal entities
SOURCE: Team McKinsey & Company | 83 GOVERNANCE AND FUNDING STRATEGY – GOVERNANCE OVERVIEW Museums set up without a dedicated law have several common parties with various demands for governance structure
Implications for governance Type of structure institution Common requirements ▪ Rigid governance structure that ▪ Mostly regulations and reporting standards, Govern- is defined by the relevant law policy of avoiding ownership of cultural ment and bylaws centers Museums set up ▪ Representation in the board and partial through a Munici- ownership dedicated palities ▪ Residents’ interests (e.g., reduced fees) law ▪ Representation in the board, involvement NGO type in content creation, with no commitment to finance ▪ Flexible governance, can be set either through a Registered Private ▪ Commemoration / representation in the Museums Society or a Community board Interest Company (“CIC”) donors set up (major) without ▪ A Society is more flexible as a specific each member has an equal ▪ Large part of the ownership and law voice unlike CIC with different Founders management shares ▪ Ensuring the preservation of their vision for the museum
SOURCE: Team analysis; interviews McKinsey & Company | 84 GOVERNANCE AND FUNDING STRATEGY – GOVERNANCE OVERVIEW A Society allows for an easier introduction of new parties and offers less opportunity for a turnover by a single party
Governance and description Pros Cons ▪ There are two ▪ Managed by a ▪ Easier to introduce ▪ Founders’ influence common forms council with equal new council is diluted with the Society of legal entities impact per members introduction of new
for Israeli member council members Little opportunity for ▪ ("עמותה museums, New members a turnover by a ▪ רשומה") Community can be introduced single party Interest by a council vote Company and Society ▪ Managed by ▪ Possibility of ▪ Hart to introduce ▪ Both forms are shareholders with securing a large new parties due non-profit a share related share of the to reallocation ▪ No significant Community impact governance overtime of shares Interest to the founders differences in ▪ Introducing a new ▪ Possibility of a Company legal stakeholder takeover by a
implications involves allocating single party ("חברה ▪ However, there a share on the לתועלת are some expense of current הציבור") governance shareholders differences (not necessarily equally)
SOURCE: Team analysis, interviews, Companies law, Registered societies law McKinsey & Company | 85 GOVERNANCE AND FUNDING STRATEGY – GOVERNANCE OVERVIEW XX Subsidies share of Leading museums in Israel are publicly or semi-publicly held annual budget, % Governing Holding Publicly held law company type1 Ownership Governance structure Details ▪ Yad ▪ Official ▪ Public - ▪ 7 government reps. ▪ The exact structure of Vashem authority government (including chairman) Yad Vashem’s director- Yad law ▪ Government ▪ 5 Jewish organizations ship is dictated in the law Vashem Corporation reps. and regulations set in the ▪ Others approved by the Knesset 25 minister of education ▪ Comme- ▪ Government ▪ Public - ▪ 9 government reps. ▪ The centers were Rabin / morations Corporation government ▪ 5 Begin/Rabin found. reps. established privately Begin laws ▪ 2 Municipality rep. then given to the centers ▪ 5 academic inst. reps government to manage 66 ▪ 7 public reps. (and fund) their operation ▪ Museums ▪ Community ▪ Public – Tel ▪ Owned by the Tel Aviv ▪ Established by Tel-Aviv Tel Aviv Law Interest Aviv Municipality Municipality Museum Company municipality ▪ TLV mayor is chairman ▪ Board has members of Art of the municipality, city 35 council and professionals
Eretz ▪ Museums ▪ Community ▪ Public – Tel ▪ Owned by the Tel-Aviv ▪ Established by Tel-Aviv Israel Mu- Law Interest Aviv Municipality Municipality seum Company municipality 50 ▪ Special ▪ Community ▪ Semi-Public – ▪ Owned by several Jewish ▪ Nevzelin Family part Beit supporting Interest several organizations and the of Board since their Hatfuzot law Company organizations government support in 2005 and gov. 25 ▪ Museums ▪ Community ▪ Semi-public - ▪ Owned by the government, ▪ Board is composed Israel Law Interest official orgs, academic institutes, of professionals and Museum Company gov. and Jerusalem Municipality representatives of the Privately held municipality and several organizations owners 15
1 Regular museums can operate as a Community Interest Company or a Registered Society, difference between the two is a shares structure (CIC) vs. members with equal voices (Society), both are non-profit. Special law museums are commonly a Government Corporation and are fully controlled by it
SOURCE: Interviews; team analysis McKinsey & Company | 86 GOVERNANCE AND FUNDING STRATEGY – GOVERNANCE OVERVIEW The museums act does not dictate any specific governance structure KEY ELEMENTS Museum – a non-profit establishment that holds a culturally valuable collection of displays for the purpose of educating, teaching or entertaining
Museums must meet some criteria Annual reports must include ▪ Employ professionals based on a set standard ▪ List of permanent and rotating exhibitors (at least one curator) ▪ Cultural and educational activities ▪ Conserve and display its exhibits in proper ▪ Special events and other activities conditions ▪ Connections with other museums, including ▪ Keep records of all exhibits using an appointed exhibitors exchange registrar ▪ Publications name ▪ Inform the public on exhibits and publish ▪ Number of visitors catalogues ▪ Financial reports ▪ Hold educational activities ▪ Museum employees standards ▪ Keep safety and security standards and appoint security officer ▪ Admission prices including discounts criteria's ▪ Report annually on activity and plans ▪ Safety and security report ▪ Admission fees will be decided upon by the ▪ Activity and budget proposal for the coming year museums managements ▪ Discounts will be given to police officers, solders, youth, school students and senior citizens; The act does not require children under 5 will not pay admission fees any specific governance structure
SOURCE: Team analysis, The Museum Act and Regulations 1983 McKinsey & Company | 87 Funding strategy – key messages
▪ Funding gap for the museum operations is likely to range between NIS 35-50M ▪ Each of the top 3 museums in Israel receive support in this range from a combination of significant government/municipal funding and donations ▪ Interviews suggest it is unlikely that the Museum will get public funding in the construction phase, or commitment to fund ongoing operations before the museum is operational; Even when operational, receiving significant public funding will be challenging ▪ Donations to cultural institutions in Israel in 2011 amount with over NIS 1.5B, with donations from locals accounting for 75% of total, indicating potential for local fund raising ▪ In order to bridge the funding gap with donations, the museum will have to be at least as effective as Yad Vashem or Israel Museum, the only two museums in Israel who manage to raise NIS 90M and 60M respectively ▪ Concerns raised in interviews that the museum will not be able to fund its ongoing operations might risk its launch. Early set up of an endowment of NIS 1.1-1.6B ($300-450M) can both fund part of on-going operations and ease these concerns
SOURCE: Team McKinsey & Company | 88 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY We estimate total required funding for the museum to Current hypothesis amount NIS ~2-2.5 billion – 860m for construction, and 35-50m annually
Total required donations, NIS billions Required donations over time
Required Required funds funds2 1,000 1.7 2.2 Spend NIS USD
element millions millions Timing Construction 860 232 Gradually
and exhibits until 2109
s
700 1.9 2.5 000
‘ Ongoing (via 1,000- 270-432 By 2019 endowment1) 1,600 (generating (generating USD 10-
Number of visitors of Number NIS 35- 15m per 56M per annum) 400 2.3 2.8 annum) Or Ongoing 35-50M 10-14 On-going (annual fund 75 90 raising) Annual operating cost NIS Millions
1 Assuming 3.5% annual interest 2 Assuming an exchange rate of 3.7 Shekels to the Dollar
SOURCE: Team analysis McKinsey & Company | 89 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Top three museums in Israel receive over NIS 50M p.a from combination of public sources and donations; others don’t pass the ~ NIS 20M mark Funds received from public sources and donations, 2011, NIS millions Subsidies Donations
Museum Funds raised Share of budget ▪ Combination of public funding and Yad Vashem 43 85-90 128-133 90% donations account for the lion share Israel Museum 17 60 77 75% of budget of all museums, mostly for over 60% Tel Aviv Museum of Art 32 18 50 80% ▪ With estimated funding gap of the Jewish museum of Madatech 6 16 22 63% NIS 40-60M, it will have to meet the level funding from Beit Hatfutsot 14 5-10 19-24 85% public sources and donations of Erets Israel Museum 15 17-18 50% the top three museums 2-3
SOURCE: Annual reports, team analysis McKinsey & Company | 90 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Museums rely on different sources for government Ministry of Culture support support; Museums owned by the city of Tel Aviv Ministry of Education support Other Ministries support receive significant funding from the city Municipal support
Museums are subsidized by a number of sources Level of support by source ▪ Supported museums are divided Annual subsidies into 4 groups 2011, NIS m ▪ Groups are separated by a set of 32 criteria revolving around the size of 3 17 15 Ministry operation Ministry 29 2 0 3 of Culture 16 1 6 ▪ Total support is 40 NIS m for 48 of Culture 12 0 1 1 1 1 2 museums museums ▪ Each group receives a share of the Tel Aviv Israel Eretz Israel Madatech total basket regardless of the Museum Museum Museum number of museums it holds of Art Share of 46 15 45 21 ▪ Several museums operate and are annual budget Operating subsidized through a special law under a ▪ Among them are – Beit Hatfutsot, Beit Hatfutsot gets a special annual special law Yad Vashem, leaders 43 support for its reconstruction – commemoration institutes 8.5 NIS m per year Special law ▪ Few museums are significantly museums 14 11 supported by municipalities 9 0 5 Municipal ▪ Most significant support is by the support Tel-Aviv municipality to Tel Aviv Yad Vashem3 Beit Hatfuzot Begin Center2 Museum of Art (~29 NIS m) and Share of 26 48 63 Eretz Israel Museum (~12 NIS m) annual budget
1 Some support is given by the Ministry of Education for content development 2 2012 data
SOURCE: Pilat Report; Yad Vashem; Interviews; team analysis McKinsey & Company | 91 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Relevant funding options include mainly low risk / low cost indirect government involvement
Several funding options could be relevant for the museums… … while other might seem less relevant for this project
Funding option Description Reason for relevance Funding option Description Reason for irrelevance 1 Direct funding Tax money is used to Direct Ministry of 6 Matching Each donation dollar Seems unreasonable directly finance non- Culture funding for is matched (or more) that the government will profit activity museums, though at by the government/ invest in a rather direct low scale large foundation tool
2 Tax exempt Third party bonds No direct expenditure 7 Lottery National lottery Israel’s national lottery low interest issues at low interest by the government revenues are used is aimed at education bonds against tax exemption to finance social and sports, a specially from the government projects dedicated lottery seems highly unlikely 3 Tax Credit Bonds directly No direct expenditure Non-profit rewarding holders by the government 8 Social Impact To capitalize Used to capitalize Impact Bonds with tax benefits Financing significant amounts international mega Facility for mega social projects involving 4 Private loans Loans at nominal or Asper’s proved record projects, multiple numerous countries with minimal less interest (backed of fund raising can governments issue interest by the government) reassure backing minimal risk bonds are issued and paid back through 9 Social Impact Investors finance Focused at eliminating donations Bonds/Pay activities aimed at negative phenomena, For Success preventing negative and requires a illustrate 5 Prize-linked Collective bonds Requires a special social phenomena, success Savings interest is collected legislation and those that succeed Bonds and rewarded to lobbying but no are being paid by the specific bonds holder investment by the government through a lottery government (other bondholders do not receive interest) excess spread used to fund social projects
SOURCE: McKinsey experts; Press articles, NS&I Web site; D2D Fund, Interviews; McKinsey, "From Potential to Action: McKinsey & Company | 92 Bringing Social Impact Bonds to the US" GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 1 Direct funding
What is it and how it works ▪ Government allocate tax money to finance non-profit activity
Core benefits ▪ Non-profits receive direct support to finance their activities ▪ Ensures availability of funds
Examples/Models Considerations ▪ The Chicago Park District (CPD), an independent tax authority, reports annual operating ▪ Limited scale potential revenues in excess of $390 million; every year, the CPD distributes a portion of these funds as Ministry of Culture to the 10 museums that form the Museums in the Park consortium and the Chicago Zoo support potential is ▪ Yad Vashem which is operated and controlled by the government receives an annual NIS 1.5-3m, other operating budget from the Ministry of Education totaling at NIS 43m sources are unlikely ▪ Ministry of Culture funds museums through a NIS 40m annual budget, budget is distributed among museums based on a set of criteria
SOURCE: McKinsey McKinsey & Company | 93 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 2 Tax exempt low interest bonds
What is it and how it works ▪ A third party issues, on behalf of the borrower, low interest, tax exempt bonds ▪ Lenders have the opportunity to invest in tax exempt bonds for a lower interest rate and help finance social causes
Core benefits ▪ Non-profit organizations receive low-cost financing for their activities ▪ Companies that act as lenders become engaged in social issues, opening up the possibility for deeper partnerships
Examples/Models Considerations ▪ Bond financing facilitated by the South Carolina Jobs-Economic Development Authority ▪ Marginal investment (JEDA) will help the South Carolina State Museum build a state-of-the-art expansion that by the government – will reinvent the museum when the expansion opens in late 2012 foregoing taxes on ▪ JEDA issues bonds on behalf of investment the borrower, allowing the borrower to benefit from a tax-exempt Borrowing . Bonds issued by JEDA are payable solely by the underlying borrower from the funds and assets pledged for each individual bond issue JEDA does not enhance the credit of the underlying borrower
SOURCE: McKinsey McKinsey & Company | 94 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 3 Tax Credit Non-profit Impact Bond (TCNIB)
What is it and how it works ▪ Allows qualified non-profit organizations to borrow at nominal interest rates from private sector partners ▪ Private sector lenders in turn purchase bonds, and receives tax credits in lieu of interest payments from the organization
Core benefits ▪ Non-profits receive ultra-low-cost financing for their activities ▪ Companies that act as lenders become engaged in social issues, opening up the possibility for deeper partnerships
Examples/Models Considerations ▪ Tax Credit Build America Bonds (under American Recovery and Reinvestment Act of 2009, ▪ May help draw large which was part of the American response to the financial crisis) corporates ▪ Qualified Zone Academy Bonds (QZAB) ▪ Only requires – Public schools located in empowerment zones or enterprise communities and public government to forego schools with 35% or more of their student body on the free and/or reduced lunch potential revenues programs are eligible to participate – A Zone Academy must be created with programs to enhance the curriculum, increase graduation rates, improve employment opportunities, and better prepare students for the workplace or higher education – Funds can be used for renovation and rehabilitation projects, as well as equipment purchases (but not for new building construction) – School district must obtain matching funds from a private-sector partner equal to at least 10% of the cost of the proposed project – A qualified lender as defined by the law must purchase bonds (e.g., insurance companies, some banks or other corporations actively engaged in lending, as determined by the Internal Revenue Code) – The lender receives a tax credit in lieu of interest payments from the school; the IRS determines the amount of this tax credit
SOURCE: McKinsey McKinsey & Company | 95 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 4 Private loans with minimal interest
What is it and how it works ▪ Loans at nominal or less interest (backed by the government) are issued and paid back through donations
Core benefits ▪ Non-profits receive ultra-low-cost financing for their activities ▪ Relatively easy execution, allows financial institutes to join in on the effort at minimal risk
Examples/Models Considerations ▪ New York City mayor Michael R. Bloomberg has made a low-interest loan of $15 million to ▪ Asper’s proved track the National September 11 Memorial and Museum to help cover its expenses until the record of fundraising museum opens to the public at the former World Trade Center site will make it easier for financing institutes to ▪ To ensure that the transaction qualifies as a loan rather than a gift, Bloomberg, who serves as provide low interest chair of the 9/11 Memorial and Museum, is charging the lowest possible interest rate — less loans than 0.3 percent — through a corporate entity of which he is the sole shareholder
SOURCE: McKinsey McKinsey & Company | 96 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 5 Prize-linked savings bonds
What is it and how it works ▪ Prize-linked Savings (PLS) bonds provide a savings vehicle augmented with the appeal of a lottery ▪ Bonds are sold to individual investors; the government as issuer guarantees principal repayment ▪ Cumulative interest is paid into a prize fund rather than to individual bondholders ▪ Tax-free prizes are distributed from the prize fund to bondholders whose numbers are randomly selected ▪ The excess spread between what the government earns on investment of bond proceeds and what it pays out as prizes available to fund social impact projects
Core benefits ▪ Provides a net new source of capital for social impact programs ▪ Promotes savings for individuals, as bondholders are not only guaranteed their principal but enjoy the possibility of a prize
Examples/Models Considerations ▪ The Premium Bond was issued by the UK government’s National Savings and Investments ▪ Allows for a relatively scheme cost-free direct funding – Premium bonds have been extremely successful in the UK, capturing 10% of the overall ▪ Might require special UK gaming market legislation and pose – The program also has widespread appeal; over 1/3rd of the population owns a premium issues with international bond legislations ▪ PLS bonds have also been successful in Ireland & New Zealand ▪ Following the success of a pilot in Michigan, a total of 9 US states now allow for PLS products1
1 Alaska, Arizona, Georgia, Maryland, Michigan, Nebraska, North Carolina, Rhode Island & Washington
SOURCE: Press articles, NS&I Web site; D2D Fund, Interviews McKinsey & Company | 97 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 6 Matching
What is it and how it works ▪ Government / large foundation match each dollar of donation (at a 1:1 ratio or higher)
Core benefits ▪ Provides a sense of security for potential donors and ensures governmental support
Examples/Models Considerations ▪ Gates Foundation matching donations to Northwest African American Museum (1:1 up ▪ Seems unreasonable to $100,000 in 2013) that the government will ▪ Challenge grants provide a set amount of government funding on the condition that the invest in a rather direct museum obtains matching or greater amounts of money from non-government sources: tool examples include The National Constitution Center, the Mississippi Valley Archeology Center and the Museum of the Cherokee Indian
SOURCE: McKinsey McKinsey & Company | 98 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 7 National lottery
What is it and how it works ▪ Lottery tickets revenues are used to finance different social goals
Core benefits ▪ No cost for the government ▪ High revenue generator
Examples/Models Considerations ▪ The Heritage Lottery Fund (HLF) confirmed a £10 million grant for the new World ▪ Israeli national lottery Conservation and Exhibition Centre (WCEC) at the British Museum (PAIS) dedicates its ▪ The Israeli national lottery (PAIS) granted NIS 1b for educational and cultural local funds for education centers ▪ It is highly unlikely that another lottery will be approved
SOURCE: McKinsey McKinsey & Company | 99 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 8 Social Impact Financing Facility (SIFF)
What is it and how it works ▪ SIFF accelerates the availability of donor funds for social impact programs ▪ SIFF issues bonds collateralized through legally binding funder payment agreements ▪ Bonds proceeds are used to pay NGOs to deliver social impact programs ▪ As funder payments become available over time, the SIFF applies these funds to repay bond holders
Core benefits ▪ Bonds advance access to funder’s commitments allowing social impact programs to be delivered sooner ▪ Funders do not have to frontload all of their commitments
Examples/Models Considerations ▪ International Finance Facility for Immunization (IFFim) ▪ Offsetting transaction – Set up in 2006 to issue “vaccine bonds” costs requires – GAVI uses these funds for immunization programs; immunization is best delivered programs with very as soon as possible rather than gradually over time significant scale – IFFIm attracted legally binding donor commitments of up to 20 years from the U.K., France, Italy, Spain, Sweden, Norway, Netherlands, South Africa and Australia – With the World Bank as treasury manager, IFFIm has raised more than $3B to date – IFFs have sold bonds in international markets to a broad range of investors including central banks, pension funds, fund managers and retail investors – The bonds have been rated AAA and typically make semi-annual coupon payments
SOURCE: McKinsey McKinsey & Company | 100 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY 9 Social Impact Bonds and Pay For Success
What is it and how it works ▪ Social Impact Bonds (SIBs) employ private investment capital to pay for early intervention programs delivered by nonprofit service providers ▪ SIBs monetize social outcomes by capturing the value between the cost of prevention now and the price of remediation in the future ▪ The government pays investors their principal and a rate of return only if programs achieve predefined results
Core benefits ▪ Scales up proven social interventions ▪ Pay for results rather than activities ▪ Structured model to hand off programs from philanthropy to ▪ Shift resources to prevention from remediation government ▪ Enhance collaboration across agencies ▪ Market-based approach to scaling programs requiring case ▪ Accelerates adoption of robust data systems mgmt & ongoing assessment ▪ Rewards social sector’s investment in what works ▪ Supports government performance transformation
Examples/Models Considerations ▪ UK Peterborough Prison ▪ Focused at eliminating ▪ NYC Rikers Island negative phenomena, ▪ Massachusetts and requires a illustrate ▪ Fresno, CA success ▪ Illinois
SOURCE: McKinsey, "From Potential to Action: Bringing Social Impact Bonds to the US" McKinsey & Company | 101 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Current assumption is that there will be no public funding for construction, and no guarantee for on-going operations
“The government will not support the construction of the Museum with funds. They will say “if you are really serious Construction about this, you need to fund it yourself”” Zvi Hauser ▪ Commitment to public funding seems very unlikely before On-going funding “It will be almost impossible to make it into tier one and museum is by Culture receive more than NIS 2-3M annually for the government” operational Shulli Kislev, Deputy CEO – Tel Aviv Museum of arts Administration ▪ The Asper Foundation will need to make a “Dedicated legislation is extremely difficult, it happened in Beit “go/no go” decision Hatfutsot only since PM Sharon was personally involved, and without such the museum already existed” Zach Granit, Deputy CEO, Israel Dedicated law commitment Museum to fund the “Beit Hatfutsot Law was very unique, I don’t see how other ▪ Furthermore, the museum's museums can pass dedicated laws to support them” Museum business operations Maya Halevi, Blumfield Science Museum manager case needs to take “No one will promise you anything for a museum which is set into account to open in 6-8 years”, Zvi Hauser situation in which on-going public funding will be “The city of Tel Aviv will give the land – I will be very surprised negligible Municipal if we will also support on-going operations support Hila Oren, Tel Aviv Global city
SOURCE: Interviews McKinsey & Company | 102 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Donations to non-profit organizations in Israel showed healthy growth between 2009-2011; Over 50% of donations originated in Israel Total donations to non-profit organizations in Israel, NIS Billions
+6% p.a. 22.2 21.0 19.8
10.3 9.8 From abroad 9.2
From Israel 10.6 11.2 11.9
2009 10 2011
SOURCE: CBS Expenditures and Revenues of Non-Profit Institutions 2009-2011, January 2013 McKinsey & Company | 103 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Culture and entertainment raise NIS 1.5B of donations annually, From Israel about 75% of which come from Israel From abroad Total donations to non-profit organizations, NIS Billions, 20111
Share of donations from Israeli Segment Donations raised donors within Segment
Philanthropy and volunteering 2.7 5.0 7.7 35%
Education and research 2.6 2.0 4.6 56%
Welfare 2.1 1.0 3.1 69% ▪ Significant potential for donations for the Religion 1.6 0.5 2.2 75% culture sports and entertainment segment Culture, sports 1.1 0.4 1.6 74% ▪ Potentially some and entertainment additional donations potential in the Health 1.0 0.5 1.5 67% philanthropy segment
Unclear what is museums share of 0.6 Politics and public defense 0.9 40% segment, and if split is similar, e.g.,: 0.4 ▪ Only 10% of Israel Museum donations in 2011 came from 0.3 Other 0.7 49% Israel 0.3 ▪ Except for big donation from the Nevzlin family – donations to Beit Total 11.9 10.3 22.2 54% Hatfutsot from Israeli sources are “negligible”
1 Extrapolated to 2011 based on 2009 detailed split and 2011 totals
SOURCE: CBS Expenditures and Revenues of Non-Profit Institutions 2009-2011, January 2013 McKinsey & Company | 104 GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Interviews with Israeli fund raising experts suggest local fund raising might be challenging Key perspectives ▪ Only 10% of donations in Israeli are made by local donors, many of these from North-American-born individuals Characteristics ▪ The critical mass of donors is from “old money” individuals of donors ▪ 50% of total donations are from corporate, and only 12% of total donations origin from individuals donating over NIS 100k ▪ Experts believe that raising local donations might be challenging/ ▪ Key success factors: – The project needs to be extraordinary, people need to feel they are What it takes part of a big thing to succeed – Co-operations with other parties (e.g., Beit Hatfutsot) – Projects outside of the center are more attractive – The project needs to guarantee its survival on an ongoing basis (i.e., it can cover the operational costs) ▪ The founders need to contribute a very significant amount ▪ The current concept and position will make it hard for local donors to Additional identify with the cause points ▪ All donors are expected to raise concerns about the overlap with Beit Hatfutsot
Source: Interviews with fund raising experts (Shuki Ehrlich – Chairman of committed to give, Maya Natan, CEO of JFN, McKinsey & Company | 105 Ilan Egozi, CEO of Zahal Disabled Veterans Fund) GOVERNANCE AND FUNDING STRATEGY – FUNDING STRATEGY Bridging the NIS 35-50M funding gap of the Jewish Museum with donations will require to be as successful as top two Museums NIS millions
Donations part of operating budget 2011 ▪ Leading museums have dedicated fund raising Funding need Museum Amount teams ▪ Yad Vashem, with a clear, Assumption is that raising donation for unique narrative, and construction is feasible given naming Yad Vashem 90 Israel Museum with a opportunities and iconic architecture CEO who is a world-class fund raiser are unique in Israel Museum 60 their level of success 600- Construction 800 ▪ Raising NIS 35-50M annually for the Tel Aviv Museum of Art 18 museum’s ongoing operations seems Ongoing 35-50 challenging yet feasible Madatech 16 ▪ In order to reduce the risk of not meeting annual “It is very difficult to raise donation fund raising goals, the for on-going operation as it does Beith Hatfutsot 8 museum could set up an not give naming opportunity…No endowment, which one wants to fund maintenance, returns will fill funding salaries and local taxes” Erets Israel Museum 3 gaps when needed Dan Tadmor, Beit Hatfutsot CEO
SOURCE: Annual reports, team analysis McKinsey & Company | 106 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 107 We see 7 streams of work in the coming months FOR DISCUSSION Priority over next 3 months Details ▪ A very clear and detailed articulation of the concept and the expected experience with emphasis on 1 Concept – Adapting to various target audience – Differentiating it vs. Beit Hatfutsot ▪ Initiate formal process vs. Tel Aviv Municipality to receive required approvals and Building and 2 land ownership site ▪ Launch construction fund raising strategy ▪ Plan and launch a lobbying campaign to approach government and municipal Government/ officials to achieve 2 goals 3 municipal – Clear support of the process to facilitate the establishment lobbying – Potential financial support ▪ Define a fund-raising strategy and begin approaching possible donors for Private fund 4 construction and operations raising
▪ Agree on desired governance and approach relevant stakeholders to participate 5 Governance
▪ Following the concept, create a detailed design concept with RAA Design and ▪ Launch the architectural competition for a design consistent with the concept and 6 architecture expected experience ▪ Settle tax issues and legal status vs. the Canadian Government 7 Legal ▪ Set up local entity to handle various legal aspects The Asper Foundation will need a fully dedicated project manager on the ground to coordinate all local effort and set direction for the project
SOURCE: Team analysis McKinsey & Company | 108 Lobbying efforts should eventually target most senior FOR DISCUSSION government stakeholders
▪ Government funding in ▪ In order to achieve such support, a the “formal” path is expected to be significant lobbying effort is needed very limited (NIS ~2-3m p.a.) – Conduct ~15-20 interviews with ▪ Effort should focus on securing key influential people dedicated support (e.g., Yad – Engage with a PR/lobbying Vashem and Beit Hatfutsot) agency for the effort ▪ Such support typically requires the ▪ In addition, we believe that several personal involvement of the Prime other stakeholders should be Minister (e.g., Ariel Sharon for Beit approached Hatfutsot) – Ministry of Finance ▪ We believe support of 2 individuals – Ministry of Education could be crucial: – Ministry of Culture – Prime Minister – Ministry of Tourism – Minister of Economy (Naftali – Tel-Aviv Municipality Bennett)
SOURCE: Team McKinsey & Company | 109 Several risks should be considered FOR DISCUSSION High probability/very negative impact
Relative Possible Risk Details probability impact
Approval ▪ Tel Aviv Municipality approval process extends over a process long period or meets significant hurdles/objections
Construction ▪ Construction costs exceed raised amount (either due overrun to increased costs or inability to raise enough funds) ▪ Construction time exceeds expectations and delays museum opening
Operational ▪ Inability to bridge the funding gap (no government costs subsidies and lack of sufficient private donations)
▪ Lower than expected number of visitors due to Visitors – Concept design or delivery – New and successful offerings from other museums – Impact of external event (e.g., security situation) ▪ Beit Hatfutsot decides and executes a step change in Beit Hatfutsot concept and delivery, attracting a significant number of visitors
McKinsey & Company | 110 In the coming 3 months a few crucial steps are to be taken followed by a go/no-go decision
▪ Create detailed concept ▪ Expand and enforce government municipal support ▪ Provide municipality with program and get commitment on land ▪ Initiate extensive fund raising
▪ Generate substantial government Go/no-go ▪ Decide on governance structure /municipal support (lobbying) decision ▪ Get commitment from public sector on required funding ▪ Launch architectural competition and design ▪ Receive strong support from key donors ▪ Settle legal issues
Coming 3 months Following 3 months
SOURCE: Team McKinsey & Company | 111 High level implementation roadmap FOR DISCUSSION
2013 Activity 06 07 08 09 10 11 12 ▪ Define clear concept 1 Concept ▪ Gather local experts and refine concept ▪ Adapt concept to various target audiences ▪ Provide municipality with program 2 Building and site ▪ Launch fund raising effort Government/ ▪ Define lobbying plan 3 municipal lobbying ▪ Approach officials ▪ Define fund raising strategy 4 Private fund raising ▪ Approach donors 5 Governance ▪ Decide on governance structure
Design and ▪ Detailed design 6 architecture ▪ Architectural competition ▪ Settle tax issues with Canadian government 7 Legal ▪ Incorporate local entity
SOURCE: Team McKinsey & Company | 112 Backup
McKinsey & Company | 113 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 114 PROPOSED CONCEPT – ASSESSMENT OF POTENTIAL TRAFFIC Evaluating concept relevance to different religions and visit purposes suggest a potential of 300-350 foreign visitors annually 2 nights or less 6-10 nights 3-5 nights 11+ nights
Concept relevance by visit purpose of incoming tourists Concept relevance by religion of incoming tourists Relevance of Relevance of Purpose of Group size1 Jewish museum Group size1 Jewish museum visit 000 concept2 Religion 000 concept2 Leisure and 240 Jewish 674 recreation Touring and Protestant 782 210 sightseeing Evangelical Other Religion 668 97 Protestant Relatives 539 Catholic 819 300-350k Russian Conventions 57 102 300- Orthodox 270- 400k Other 350k Business 363 49 Orthodox Other Medical 15 272 Christian
Research 60 2011 numbers, in Moslem 49 2019, museum Taglit 27 operating, numbers Non-affiliated 103 expected to be 15- Other 49 20% higher Other 426
Groups were divided based on the number of nights spent in Israel: ▪ Up to 2 nights – low likelihood of visiting the museum ▪ 3-5 nights – medium likelihood ▪ 6-10 nights- very high likelihood ▪ 11+ nights – high likelihood (length suggests repeated visit) 1 Based on proportions from a ministry of tourism survey held in 2011 and a base of 2.8m tourists per annum 2 Each group was divided by number of nights spent in Israel, relevance of concept was assessed accordingly
McKinsey & Company | 115 PROPOSED CONCEPT ASSESSMENT Israel’s museums leaders and local stakeholders perspective on the concept potential, and local involvement in planning and execution
Perspective
▪ The concept must appeal and be “Beit Hatfutsot is doing very “Jewish pride and “There is no burning need for such a
adapted to the local population, impressive work rebuilding itself, achievements is a museum,, there is an apologetic basis
focusing on Jewish achievements and this is an overlapping concept, concept relevant to the in the concept. I would focus on what pride is more relevant to the diaspora with the same audience, it’s not diaspora, not Israelis, it will generates the creation turmoil and ▪ Beit Hatfutsot has a very similar needed” raise cynicism” sensitivity to injustice in the Jewish world” Concept concept and targets the same audience, – Shuli Kislev, Tel Aviv – Zach Beker, Eretz Israel -Avner Shalev, Yad and is going through a dramatic change
Jewish MuseumJewish Museum of Art Deputy CEO Museum Deputy CEO Vashem chariman that looks looks very promising ▪ First step is a detailed concept, defining the different exhibition halls, what will be “Designers make bad museums, “The building should be part of the presented, through what medium, what there must be a local content person” exhibition, it should serve the concept and enhance
feeling it should create the museum’s impact. The concept must dictate the
▪ The project should be led by excellent architecture, not the other way around”
local content and administrative expert ▪ Architecture should be done in light of – Maya Halevi, Bloomfield -Avner Shalev, Yad Vashem chaiman
the concept with minimal visual Science Museum CEO you you abuild
instructions, to avoid a conflict between the building and the content “City engineer or regional planner should have all work, at any stage of promoting the museum,
great museumgreat ▪ It is very important to avoid having the authority to approve/disapprove the architectural shall be executed in cooperation with the designer leading the content How do How design” benefactor and his representatives, together with ▪ All relevant stake holders should be the relevant entities of the Tel Aviv Municipality involved and form a steering committee led by the local content function – Dron Gvuly, Tel Aviv city engineer Memo from the city to Zvi Kanor ▪ A museum should tell an easy to
understand, compelling story that “People have an overdose of technology, “Content is what makes a museum great,
generates an experience they need rare unique objects, there is a it is better to invest less in the building ▪ Fully interactive museums are in a downward trend in the popularity of interactive and devote money for content renewal and downward trend, people desire to see museums” development” real unique artifacts
▪ What makes a museum iconic is the make it it last make How do you doyou How content, not the building – Orit Shacham Gover, Curator – Zach Granit, Israel Museum Deputy CEO ▪ Content renewal is the key for returning audience
SOURCE: More than 10 Israeli Museums managers and leading curators interviews McKinsey & Company | 116 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 117 OVERVIEW OF MUSEUM LANDSCAPE Of more than 200 museums in Israel 48 are budgeted by The Ministry of Culture, we will focus on those
▪ 200+ museums in Israel ▪ 48 of those are budgeted by The Ministry of Culture ▪ 53 NIS million - Ministry of Culture museum subsidy budget in 2010 (including special allocations) ▪ Yad Vashem and several other museums are not funded by The Ministry of Culture but do receive We will mainly focus government support on the museums supported by The Ministry of Culture and Yad Vashem
SOURCE: Museums; pilot museums survey; interviews; team analysis McKinsey & Company | 118 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 119 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Operating budget model (1/2)
# of employees - low # of employees - high Cost - low Cost - high Total cost - low Total cost - high Content development Senior employees 3 3 22,500 22,500 810,000 810,000 Educational department Junior employees 10 10 12,500 12,500 1,500,000 1,500,000 Materials 2,000,000 2,000,000 Senior employees 2 2 18,750 18,750 450,000 450,000 Guiding development Junior employees 8 8 10,000 10,000 960,000 960,000 Materials 750,000 750,000 Senior employees 2 3 26,001 26,001 624,031 936,047 Medium emp 3 4 18,750 18,750 675,000 900,000 Exhibitions development Junior employees 7 9 13,750 13,750 1,155,000 1,485,000 Materials 1,500,000 1,500,000 Exhibitions production Outsource per m 10,000 10,000 15,000,000 26,250,000 Sub total 25,424,031 37,541,047
Management Top Management Management 7 7 39,000 39,000 3,276,000 3,276,000 Accounting Junior employees 5 5 12,500 12,500 750,000 750,000 Office Junior employees 15 15 10,000 10,000 1,800,000 1,800,000 Materials 1,000,000 1,000,000 Marketing Junior employees 7 10 13,750 13,750 1,155,000 1,650,000 Medium emp 5 8 21,250 21,250 1,275,000 2,040,000 Fund raising Materials 1,000,000 1,000,000 Travel Expense per month 150,000 150,000 1,800,000 1,800,000 Junior employees 2 2 12,500 12,500 300,000 300,000 Advertisement Cost per month 300,000 500,000 3,600,000 6,000,000 Sub total 15,956,000 19,616,000
SOURCE: Team analysis McKinsey & Company | 120 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Operating budget model (2/2)
# of employees - low # of employees - high Cost - low Cost - high Total cost - low Total cost - high Facility management Cleaning Cost per m 60 60 1,800,000 1,800,000 Security & ushers Total cost 5,000,000 5,000,000 5,000,000 5,000,000 Senior Employees 2 2 13,750 13,750 330,000 330,000 Maintenance Junior employees 10 10 7,500 7,500 900,000 900,000 Materials 1,500,000 1,500,000 Construction maintenance Cost per m 240 240 7,200,000 7,200,000 Guards 2 2 6,000 6,000 144,000 144,000 Parking Maintenance emp 4 4 7,500 7,500 360,000 360,000 Manager 1 1 10,000 10,000 120,000 120,000 Maintenance per month 30,000 30,000 360,000 360,000 Sub total 17,714,000 17,714,000
Operation Energy & water 10,000,000 10,000,000 Junior employees 9 12 7,500 7,500 810,000 1,080,000 Ticketing Materials 500,000 500,000 Junior employees 15 20 7,500 7,500 1,350,000 1,800,000 Guides Materials 1,500,000 1,500,000 Local taxes 700,000 700,000 Sub-total 14,860,000 15,580,000
Total operation budget 73,954,031 90,451,047
SOURCE: Team analysis McKinsey & Company | 121 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Direct revenues are expected to amount to 24 M NIS if the ESTIMATES museum will meet its target
Price, NIS Price range in top Israeli 35 - 40 museums 40 40 35 Single entry BB BC BE Share, % Based on Effective price/ Israeli visitor, NIS 60 24 - 28 average Price, NIS Based on 28 28 24 interview 10 – 15 with Begin Admissions Museum NIS m Educati- 15 15 10 - 28 10 BB BC BE onal 28 activity 24 BB BC BE 10 Share, % Based on Number of visitors Israeli Millions 25 average Direct revenues BB BC BE 0.4 – 1.0 NIS m Price, NIS 10 - 28 1.0 0.9 0.4 Non- 0 28 24 paying Based on 10 Share, % BB BC BE Israeli 15 average BB BC BE Special events ▪ Each event estimated to generate ~150k NIS NIS m 0 from admission, making it hard to break even
SOURCE: Team analysis; Pilat museums survey McKinsey & Company | 122 FINANCIAL ASSESSMENT OF PROPOSED CONCEPT – OPERATIONS Indirect revenues are expected to amount to ~14 M NIS if the ESTIMATES museum meets its target
Size ▪ Based on benchmarking with Israeli Restaurant m2 200 boutique restaurants NIS m 0.6 – 1.1 Rent/m2 ▪ Based on benchmark with leading 1.1 NIS 3000 - 6000 0.8 0.6 commercial rental locations 5,400 4,200 3,000 BB BC BE BB BC BE Size m2 300 Cafeteria Based on NIS m 0.7 – 1.1 Rent/m2 ▪ benchmark NIS 2400 - 3600 1.1 0.9 0.7 with leading 3,600 3,000 Size 2,400 commercial m2 100 rental BB BC BE locations Gift shop BB BC BE NIS m 0.4 – 0.7 Rent/m2 ▪ Based on benchmark with leading NIS 3600 – 8200 commercial rental locations Indirect revenues 0.7 0.6 0.4 NIS m 13 – 15 7,200 6,000 4,200
BB BC BE BB BC BE 15 14 13 Cellular antennas Rent for halls range between 1,000 – 8000 Average rent per event ▪ NIS m 0.5 NIS ‘000 NIS 8 - 11 ▪ Location rent reach 50 thousand NIS per BB BC BE 11 10 8 event Location rent NIS m 1.4 – 3.1 BB BC BE 2.4 ▪ Eretz Israel Museum rents between 200 – 2.0 1.4 # of annual events 250 days 170 - 225 BB BC BE 225 205 170
BB BC BE Parking slots ▪ Based on municipality interview Parking 750 NIS m 9 Revenue from slot Based on Tel Aviv indoor parking prices NIS 12,000 ▪
SOURCE: Team analysis McKinsey & Company | 123 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 124 Construction - basic costs breakdown USD Millions
Cost Details / description
Does not include yet land Licensing 2.0 ▪ betterment tax
▪ Gardening, amphitheater, site Site development work 5.9 infrastructure
▪ Was checked by engineer Shai High voltage line move 6.0 Harpaz with IEC
▪ Concrete fence with decorative Fence 0.4 covering
Annex buildings 0.5 ▪ Mainly gates and electricity room
Total 14.8
SOURCE: Construction model McKinsey & Company | 125 Construction – Horizontal belt plan cost estimation
Work Input : None. Assumption 2 floors * 7,500 Sqm = 15,000 sqm Dimensions : 100*75, Avg. H = 7 m 7,500 sqm exhibitions, ,7500 offices, classes ect. Description Unit Unit rate Amount Total Fixed cost $14,374,521 Parking $18,750,000 Total for Skeleton : $7,662,500 Total for finishing : $12,497,500 Total for mechnical systems : $3,715,000 Total for Hvac : $4,275,000 Total for Electricity, com, LV $8,205,000 Total for building equipment $33,105,000
Summery : Total cost for building (A-E) : $36,355,000 Total cost for building equipment (F) : $33,105,000 Extra for green building : $3,600,000 G. Total cost for building : $73,060,000 Total cost for building + 15% design, supervision $84,019,000
Estimation For : Mesuem - Horizontal Belt - high end Extras Description Unit Unit rate Amount Total Total for Skeleton $10,500,000 Total for finishing $15,710,000 Total + high end + 15% design & supervision $30,141,500 Final Summery : Total Cost for building include fix costs : $98,393,521 Total cost for building + high end : $128,535,021 Total cost for high end + 100 m tower $142,429,827
SOURCE: Construction model McKinsey & Company | 126 Construction – Vertical belt cost estimation
Work Input : None. Assumption 10 floors * 1,500 sqm/floor = 15,000 sqm Dimensions : 40*37.5, Avg. H = 5 m 7,500 sqm exhibitions, ,7500 offices, classes ect. 7,500 sqm exhibitions, ,7500 offices, classes ect. Description Unit Unit rate Amount Total Fixed cost $14,374,521 Parking $18,750,000 Total for Skeleton : $7,485,000 Total for finishing : $13,595,105 Total for mechnical systems : $5,520,000 Total for Hvac : $4,275,000 Total for Electricity, com, LV $7,860,000 Total for building equipment $32,760,000
Summery : Total cost for building (A-E) : $38,735,105 Total cost for building equipment (F) : $32,760,000 Extra for green building : $3,600,000 G. Total cost for building : $75,095,105 Total cost for building + 15% design, supervision $86,359,371
Estimation For : Mesuem - Horizontal Belt - high end Extras Description Unit Unit rate Amount Total Total for Skeleton $7,200,000 Total for finishing $19,787,000 Total + high end + 15% design & supervision $31,035,050 Final Summery : Total Cost for building include fix costs : $100,733,892 Total cost for building + high end : $131,768,942 Total cost for high end + 100 m tower $145,663,748
SOURCE: Construction model McKinsey & Company | 127 Construction – Ralf Appelbaum plan cost estimation
Work Input : RAA Brochure. Assupmtion 7 building, each building 2140 sqm. Dimensions : each building, 25X21, 4 floors, total H = 18 m 7,500 sqm exhibitions, ,7500 offices, classes ect. 7,500 sqm exhibitions, ,7500 offices, classes ect. Description Unit Unit rate Amount Total Fixed cost $14,374,521 Parking $18,750,000 Total for Skeleton : $7,375,225 Total for finishing : $15,450,600 Total for mechnical systems : $6,495,000 Total for Hvac : $4,425,000 Total for Electricity, com, LV $8,355,000 Total for building equipment $33,345,000 Total for Bridges $9,000,000 Summery : Total cost for building (A-E) : $60,850,825 Total cost for building equipment (F) : $33,345,000 Total cost for bridges (G) : $9,000,000 Extra for green building : $3,600,000 H. Total cost for building : $106,795,825 Total cost for building + 15% design, supervision $122,815,199 Estimation For : Mesuem - Horizontal Belt - high end Extras Description Unit Unit rate Amount Total Total for Skeleton $8,996,000 Total for finishing $15,432,800 Total + high end + 15% design & supervision $28,093,120 Final Summery : Total Cost for building include fix costs : $137,189,720 Total cost for building + high end : $165,282,840 Total cost for high end + 100 m tower $179,177,646
SOURCE: Construction model McKinsey & Company | 128 Construction – Tower cost estimation
Estimation For : Mesuem - Tower Preaperd by : Chen Yaron & Zvi Hemly Date : 5/23/2013 Work Input : None. Assumption 12X12 tower, with 26X26 upper part H tower : [m] 70 Dimetions : [mXm] 12 12 Description Unit Unit rate Amount Total Ground work m^3 $500 1000 $500,000 Walls m^3 $650 1344 $873,600 Inner Walls M^3 $650 780 $507,000 Intermediate slabs m^3 $650 288 $187,200 Upper part floor m^3 $650 405.6 $263,640 Upper part roof m^2 $850 676 $574,600 Ebtrance Building (include everyting) m^2 $2,500 2000 $5,000,000 Building facade cladding m^2 $200 3360 $672,000 Systems & finishing work m^2 $1,000 1396 $1,396,000 Elevatiors com $1,000,000 1 $1,396,000
Total $11,370,040 Design, managmet & inspecion 15% $1,705,506.00
SOURCE: Construction model McKinsey & Company | 129 Content of final report
1 Proposed concept
2 Overview of museum landscape
3 Financial assessment of proposed concept – operations
4 Financial assessment of proposed concept – construction
5 Country/city business case
6 Governance and funding strategy
7 Going forward and implementation plan
McKinsey & Company | 130 2 As tourism recovers from 2002 lows - leisure, recreation and religion visits and organized tours increases Percent
Tourist visiting for religion, tourism and Tourist visiting via organized tours or Tourist visiting Israel for the first time recreation purposes packages
70 66 66 64 63 64 60 61 59 58 56 56 55 53 50 50
43 44 41 38 37 35 29 27
2000 01- 05- 07 08 09 10 2011 2000 01- 05- 07 08 09 10 2011 2000 01- 05- 07 08 09 10 2011 04 06 04 06 04 06
Share of “classical” tourists who are more likely to visit the museum increases
SOURCE: Tourism in Israel report, Central Bureau of Statistics, November 2011 McKinsey & Company | 131 COUNTRY/CITY BUSINESS CASE Proposed approach – impact of tourism
Number of Assumes no domestic night stays of # of Domestic tourists domestic incremental tourists (day tourists intl. tourists visitors) Spend per day/ driven by the tourist museum TLV nights per tourist Nights from incremental Other dest. Tourism visits nights per impact tourist Number of Number of intl. tourists incremental Tel # of tourists visiting Israel Aviv hotel stays visit the museum % visiting the International Additional museum tourists nights from planned visits % Incremental % staying in night Spend/ days town % On expense of other dest.
SOURCE: Team McKinsey & Company | 132 2 Tel Aviv captures quarter of all intl. tourists night stays in Israel; Over half the tourists visit Tel Aviv
Share of total Share of tourists Night stays by place, intl. tourists who visit millions, 2010 nights, Percent Percent
Jerusalem 3.3 33% 80%+
Tel Aviv 2.3 23% 54% Limited Eilat 1.0 potential for 10% 15% incremental visits in Tel Dead Sea 0.6 Aviv driven 8% 49% by the Tiberius 0.8 museum 6% 42% Kibutz’s 0.5
Other 1.4 5% n/a
Total 9.9 14% n/a
SOURCE: Tourism in Israel report, Central Bureau of Statistics, November 2011 McKinsey & Company | 133 2 Almost 75% of tourists are not frequent visitors ESTIMATE
Total international 100% tourists
Recent returns ▪ Multiple opportunities (previous visit in 25% to attract to the museum the last two years)
Non-recent return 15-25% ▪ Single opportunity to attract to museum First time 50-60%
Museum needs to be positioned as top attraction to attract one-time or non-frequent international tourist
SOURCE: Tourism in Israel report, Central Bureau of Statistics, November 2011 McKinsey & Company | 134 We have conducted over 35 interviews with all relevant stakeholders
Role Name Role Name ▪ Yad Vashem Manager ▪ Avner Shalev ▪ Tel Aviv City Properties ▪ Eli Levi
▪ Yad Vashem VP ▪ Zach Granit ▪ Tel Aviv City Engineer ▪ Oded Gvuli ▪ Tel Aviv strategic planning ▪ Tzili Bar Yosef ▪ Israel Museum Manager ▪ James Snyder Cons- truction ▪ Engineering Consultant ▪ Chen Yaron ▪ Beit Hatfutsot CEO ▪ Dan Tadmor ▪ Head of Israeli ▪ Danny Marian ▪ National Library Manager ▪ David Blumberg Engineers Union
▪ Begin Museum Manager ▪ Hertzy Makov ▪ Architect ▪ Avner Yashar ▪ Principal, Paris ▪ Bruno Faucher Museum ▪ Tel Aviv Museum VP ▪ Shuli Kislev ▪ Associate Principal, Hamburg ▪ Andres Serr managers ▪ Bloomfield Science CEO ▪ Maya Halevi McKinsey ▪ Principal, New York ▪ JJ Kasper ▪ MadaTech CEO ▪ Ronen Mir experts ▪ Engagement Manager, Chicago ▪ Andrew Simnick ▪ Erez Israel Museum VP ▪ Zachi Becker ▪ Principal, Brussels ▪ Benoit Gerard
▪ Palmach Museum CEO ▪ Zeev Lachish ▪ Director, Munich ▪ Dieter Dusedau ▪ Curator ▪ Orit Shaham Gover ▪ Rabin Museum VP ▪ Danny Danush ▪ Curator ▪ Tami Freiman Katz ▪ Bible Lands Museum CEO ▪ Amanda Weiss ▪ RAA ▪ Ralf Appelbaum/Paul Williams ▪ CEO of ORPAN ▪ Yaron Meiri ▪ Zahal Disabled Veterans Fund ▪ Ilan Egozi ▪ Former Head of Cultural ▪ Zach Granit ▪ Director of the Pincus fund for ▪ Miriam Barkai Govern- Department and VP of Jewish education in the ment Israel Museum diaspora officials Others ▪ PM Secretary ▪ Zvi Hauser ▪ Tourists/donors perspective ▪ Rivka Kidron ▪ Manager of the Center for Je- ▪ David Nekrutman ▪ TLV Foundation ▪ Zvi Kanor wish-Christian Understanding Munici- ▪ TLV – Global City (tourism ▪ Hila Oren ▪ Chairman of Committed to ▪ Shuki Ehrlich pality and culture) Give ▪ TLV– Social eco. research ▪ Etel Feldman ▪ CEO of Jewish Funders ▪ Maya Natan Network
SOURCE: Team analysis McKinsey & Company | 135