Public – Private Partnerships A Critical Component of the Georgia Tech’s Strategy for Success
National Association of College and University Business Officers Public-Private Partnerships for Facilities Conference April 2007 Public - Private Partnerships A Critical Component of the Georgia Tech’s Strategy for Success
• Presenters: Steven Swant - - Georgia Tech Pat McKenna - - Georgia Tech Kevin Byrne - - The University Financing Foundation, Inc. (TUFF) H. Jay Bellwoar - - UBS Financial Services, Inc. • Presentation: – Campus context and challenges – Approach taken with public - private partnerships – Project components and structures – Financial considerations • Tours: Technology Square Biotechnology Campus Technology Enterprise Park (TEP) Georgia Tech Profile
• Major research institution - engineering, sciences, computing, business, architecture and liberal arts • US News and World Report - # 8 Public University; top tier of engineering school #4 • According to latest NSF data - ranked 31st nationally & 19th among public universities in R&D • Strengths - quality, focus, interdisciplinary, industry, technology transfer, incubation and commercialization • Regional, national and global - Atlanta, Savannah, France, Singapore, Shanghai Georgia Tech Profile
• Enrollment - 17,935 students – 69% undergraduate – 31% graduate – Entering freshman SAT – 1342 • Faculty - 954 (2007) – Endowed chairs… 125 – Career Awards… 118 (since 1994) – National Academy members… 28 • Staff - 5,268 • Expenditures - $942.5 million FY06 (GT & affiliates) • Research - $445 million R&D expenditures in FY06 Georgia Tech Profile
• Location - urban, midtown Atlanta
• Campus - recent growth 1994 2006 Acres (GT & affiliates) 330 420 Academic & Research - gross sq ft 1,840,000 5,404,000 Other – gross sq ft 4,140,000 6,981,000 Total 5,980,000 12,385,000
• Only about 20% of new construction has been financed by state appropriations - - the remaining 80% has been financed by Georgia Tech and its affiliates. Georgia Tech Challenges and Opportunities circa. 1994 • College of Engineering - highly regarded graduates • College of Computing - new college and focus • Economic development - strong business incubation and R&D reputation • R&D funding - basic research funding • Search for new President • Administrative problems - significant audit issues; new financial system implementation failure • Antiquated business and financial systems • Incremental investment culture Georgia Tech Challenges and Opportunities circa. 1994 (cont.) • Control oriented - “silo mentality” / central administrative units and culture • We/they culture - in academic / administration • Performance reviews inadequate - no training • Shadow business and financial systems - duplication, inefficiencies, etc. • Large deferred maintenance problems - lack of significant investments • Piecemeal utility infrastructure - aged and failing • Safety / security problems - crime rate too high • Campus unattractive - largely asphalt parking City of Atlanta circa 1994
• High growth area - jobs; climate; Olympics; Buckhead; etc. • 1996 Centennial Olympic Games - new sports venues; limited urban renewal • Business emphasis - major transportation; logistics; warehouse; software; sports center; etc. • Significant issues - education; sewer; water; transportation Midtown Atlanta circa 1994 • GT site for Olympic Village - housing and related events • GT site for Olympic Venues - swimming; diving; water polo and boxing • Decaying Midtown & Downtown urban areas • Replacement of public housing, Techwood Homes - with Centennial Place mixed income housing • Campus surroundings unsafe in four directions • Midtown Alliance Board - local business concerns conceptualizing a revitalization GT Campus – early 1990’s GT Campus - 1990
Techwood Homes GT Campus - 1990
Home Park GT Campus - 1990
Industrial Zone GT Campus - 1990
Midtown Georgia Tech mid-1990’s… Envision the “transformation” • New President, Dr. Wayne Clough… – Initiated a strategic planning effort – Acquired new leadership - key areas of the administration – Revamped the budgeting and investment strategies – Identified the need to “partner” with others -to achieve success – Set out an ambitious plans – academic; administration; campus development; capital Vision and Mission
Envisioned that… Georgia Tech will define the technological research university of the 21st century and educate the leaders of a technologically driven world. Institute Strategies • Build on engineering/computing excellence - add depth • Bring science, business and architecture to Top Tier • Further enhance interdisciplinary collaborations • Become the defining global technological university • Help the State of Georgia compete in a technologically driven global economy - workforce education & innovative research • Maximize business industry collaborations - in research, tech transfer, incubation, economic development, education • Provide technology life-long learning - graduates and industry/business Mission Success Factors
• Excellence and innovation - e.g. MIT and Stanford • Attract the best faculty, students and staff • Provide the leading edge facilities and services • Enhanced live-work-play campus environment • Facilitated industry/community collaborations • Optimize technology transfer - product development; intellectual property commercialization; company formations GT Action Plan - Summary 1995 • Completed Strategic Plan • Administration review and assessment • Organization restructuring • Executive commitment • Human Resources – recruitment and retention • Business systems and process - re-engineering; modernization; etc. • Community – outreach and co-operation • Culture of continuous improvement –best practices; teamwork • Partnering – academic/administration initiatives & public/private projects • Facilities and infrastructure assessment • Comprehensive Development and Capital Plan Campus Buildings and Real Estate
“A platform for success” …up-to-date, functional facilities… …adequate, dependable network & infrastructure… …ideally, an attractive live, work and play environment… …a sustainable, healthy community… Campus Buildings and Real Estate 1994-95
The Institute initiated and completed a strategic plan… – Initial assessment was that “…we were behind and would fall further behind…” – Need to develop a comprehensive facilities plan guided by a thorough facilities and program assessment, an appropriate campus master plan, a creative financial plan, and an aggressive development and delivery process. Campus Buildings and Real Estate 1995-96 Completed a facilities assessment and program space needs study… – Deficient in overall academic facility square footage – Considerable backlog in capital renewal and deferred maintenance – Most existing academic space was adequate, but needs to be updated and upgraded for new programs – Space per faculty lagged considerably in comparison to competitors. – Comparison institutions were spending more on facilities and relied more on gift and borrowed funds Campus Buildings and Real Estate 1996
Formulated a long-range capital plan… determined near- term capital project requests and priorities… – Project types / categories: Major and minor projects Program expansion & renovation Infrastructure renewal / expansion – Project fund sources: State funds (generally bonds) Donor Campus Buildings and Real Estate 1996-97 Completed a comprehensive campus master plan… – Expanding campus boundaries “smartly” to accommodate future growth, enhance collaboration with the community and city, foster economic development, and enrich the local environment… amenities, opportunities, etc. – Creation of “place”… live, work, and play environment – Pedestrian focused, new transportation and parking strategies, etc. – Infrastructure needs and plans – Preliminary campus sustainability initiatives Campus Buildings and Real Estate 1997
Campus Master Plan 1997 Campus Buildings and Real Estate 1997 - 2000 Developed a multi-year capital program financing plan and alternative delivery strategies… – Third-party development partners … assisted with strategic real estate purchases; allow for alternative delivery methods and financing – Greater autonomy for project design and construction… expand staff capabilities – Created the Georgia Tech “Planning and Design Commission” Year 2000 & forward… Initiatives yielded significant results • Acquired 100+ acres… completed $1.0 billion of new buildings… a variety of fund sources and partners
• Planning and Design Commission - - CMP oversight, A/E selection, building and landscape design review
• Regular cycle of facilities condition assessments and needs assessments; complete annual updates of deferred maintenance and capital program
•Campus master plan sector analyses… to support placement of new buildings and landscape improvements Year 2000 & forward… Initiatives yielded significant results (cont’d)
• Update of the Campus Master Plan in 2004… significant sustainability initiatives… performance landscape strategies (www.space.gatech.edu/masterplan)
• Completed Campus Landscape Master Plan in 2006… guidelines for evolving to a more sustainable campus environment. (www.space.gatech.edu/LMP) Campus Buildings and Real Estate Updated Campus Master Plan - 2004 Year 2000 & forward… initiatives yielding significant results…
• Major capital initiatives: – Specialized research campus… North Avenue Research Area – Recreation and Athletic facilities… new football and baseball stadiums; new Campus Recreation Center and play fields – Infrastructure initiatives… modernization of central plants; replace main campus electrical substation… – New “university research park”… Technology Enterprise Park (TEP) – Expansion into Midtown Atlanta… Technology Square – Interdisciplinary facilities… Biotechnology Campus Technology Square Development Objectives
• Connector to Midtown community and transportation nodes • Lifelong learning • Retail center • Business school • Collaborative research • Incubation and economic development Technology Square Feasibility Studies
• Eight acres of • More scale abandoned land • Integration with • Highest and best use community • Continuing education • Integration with and distance learning business • Hotel market study Technology Square Feasibility Studies
• Retail market / GT bookstore • Academic components • Georgia Electronic Design Center • GT Economic Development Services • GT Business incubation • Gateway/urban village • Financial due diligence Technology Square—1996 Technology Square - The Vision Technology Square - 2003 Technology Square Components
Management Building Hotel Spec Office Space
Economic Development Bldg
ATDC Parking
5 th Global Tech Square S tre Learning Center Research Building et Technology Square Today… Global Learning Center and Tech Trolley
Technology Square Research Building Technology Square Today…
Fifth Street Bridge Improvements… connection back to campus Biotechnology Campus
• Objectives… – Support the juncture where Engineering, Science and Computing intersect… to define the interdisciplinary areas of biotechnology, environment and sustainability, and molecular/material sciences and engineering – Integrate teaching, research and incubator activities – Encourage interdisciplinary interaction among researchers, students and staff – Plan the complex buildings concurrently and construct in a timely manner… to assure maximum interaction and preserve disciplinary identity Biotechnology Campus
Before…. Biotechnology Campus
After… Biotechnology Campus
Biotechnology Building
School of Biomedical Engineering Biotechnology Campus
Molecular Science and Engineering Building
Ford Environmental Science and Technology Building Technology Enterprise Park
• Objectives… – Provide a place for bio-tech companies to go near Georgia Tech, in Atlanta… in Georgia –Provide much needed biotechnology research and development space – Plan the complex buildings concurrently and construct in a timely manner – Develop approximately 600,000 SF of flexible-use, multi-tenant laboratory and office space Technology Enterprise Park
Technology Enterprise Park First Building… occupancy summer 2007 Pat McKenna Executive Director for Affiliated Organizations Executive Director, Georgia Tech Facilities, Inc. Funding Strategies
• State funding • Institutional funding • Capital Campaign (gifts) • Revenue-based bonds • Institution-backed bonds (leases, guarantees) • Land/Equity-backed bonds/other financing • Joint ventures with developers Biotechnology Campus Molecular Science Petit Biotechnology And Engineering Building Building
U.A. Whitaker Building (Biomedical Engineering) Ford Environmental Science And Technology Building Campus Recreation Center Technology Square – South of 5th Street Management Building Bookstore Hotel
Economic Development Bldg
Parking
5 th Global Learning Center S tre Retail et NACUBO Public Private Partnership Conference April 13, 2007 Presented by: Kevin Byrne, The University Financing Foundation, Inc. Who is TUFF
• TUFF is a private operating foundation exempt from income tax under Internal Revenue Code Section 501(c)(3)
• Founded in 1982 with a national charter
• TUFF’s mission is to assist college and universities in obtaining facilities and equipment at below market pricing
• TUFF’s tax-exempt status provides access to tax-exempt bond financing thereby lowering TUFF’s cost of capital, the savings from which are passed directly to the institution
• TUFF’s focus is to provide alternative and creative solutions to complex problems facing University Presidents Who is TUFF
• TUFF operates its core business under four fundamental models:
1. Grants to study project feasibility and structure 2. Low cost lending for equipment purchases 3. Capital and operating lease financing 4. Structured and bridge financing methods
• TUFF has financed, developed and owned 29 capital projects totaling approximately $585 million ranging from renovation of a performing arts center to a broadband technology research center
• TUFF has made direct low-interest loans of over $40 million to 21 different colleges and universities across the country
• TUFF has made grants of over $2 million to 10 different colleges and universities across the country Orientation Orientation Orientation OrientationOrientation
TECHNOLOGY SQUARE 1 – GT Hotel and Conference Center 2 – GT Parking Deck 3 – GT Global Learning and Conference Center 4 – Technology Square Research Building and Parking Deck (TUFF) 5 – Centergy One (TUFF/Gateway) 6 – GT College of Management 7 – GT Economic Development Institute Before…
Before the arrival of Technology Square, the Downtown Connector isolated Tech's campus from Midtown for 50 years. Before…
Empty lots and warehouses dotted the site of the Fifth Street project in 1999. Before…
Before the arrival of Technology Square, this area was not people friendly at street level. Construction…
During construction, the activity on both sides of 5th Street was overwhelming. Construction…
Built in cooperation with Technology Square, Centergy One Building takes shape in October 2002. Construction…
The Technology Square Research Building nears completion, Centergy One continues to rise and Technology Square takes shape. Construction…
A new neighborhood begins to form in November 2002. After…
Over 1.8 million square feet of office, lab, classroom, hotel, conference and retail with over 3,000 parking spaces in 2 structured decks on 15 acres After…
All distressed property is now replaced with income producing and education buildings. After… (south of 5th)
When completed in the summer of 2003, Technology Square added an additional 1.12 million square feet to campus. After… (southof 5th)
The Economic Development Building is the headquarters for the Georgia Tech Foundation and centers devoted to regional planning, economic development and K-12 educational outreach. After… (south of 5th)
The Georgia Tech Hotel and Conference Center adds 252 guest rooms and 21,000 square feet of meeting space to the Atlanta / Midtown Market. After… (south of 5th)
The Global Learning and Conference Center doubles as the center for Tech's distance learning programs and as an executive conference center. After… (south of 5th)
With street level retail, the street experience is extremely people friendly. After… (south of 5th)
The bookstore is a favorite spot before and after (and sometimes during) class. After… (5th Street)
Students, residents and office users frequently use the streets, trolley and bridge. After… (north of 5th)
Tech Square Research Building (left) and Centergy One (right) provide 700,000 feet of Class A office and research space for a mix of non-profit and for-profit users The Final Product
Technology Square and Centergy contain 1.8 million square feet of multi- use space and 3,000 parking spaces all on 15 acres of land
Description of Multi-use Components Tech Square (South of 5th Street) Global Learning Center Georgia Tech Hotel and Conference Center Economic Development Institute College of Management Georgia Tech/Barnes and Noble Bookstore 25,000 square feet of retail Parking
Centergy (North of 5th Street) Technology Square Research Building Georgia Center for Electronic Design Centergy One office building Advanced Technology Development Center Busbee Center for Global Economic Development and Innovation 60,000 square feet of retail Parking The Theory
• Intellectual Property is born in the Technology Square Research Building
• A commercializable product is created and a company is spawned – IP and stakeholders literally walk out the door of TSRB through the Plaza into Centergy and the incubator
• The company graduates from ATDC – The company moves “upstairs” to commerical office space The Theory
Tech Square Research Building (left) and Centergy One (right) provide 700,000 feet of Class A office and research space for a mix of non-profit and for-profit users The Problem and The Solution • Commercial Developer/Owner is not patient – Can not leave space available for graduates – Not enough room to house all graduates
• Therefore, the solution: – Build combination commercial Class A office space and high-performance lab space for graduates – Use patient money – Led to the development of Technology Enterprise Park Technology Enterprise Park Technology Enterprise Park Technology Enterprise Park Cobbling together a deal Technology Square and Centergy
• Georgia Tech Foundation to be owner and provide bond enhancement guarantee for all facilities South of 5th Street. • Mix of Taxable and Tax-exempt financing with GT Foundation as borrower
• Private developer group to develop Centergy for scope beyond Georgia Tech Foundation - all facilities North of 5th Street. • Technology Square Research Building • Financed with approximately 85% Tax-exempt debt and 15% Taxable debt • Centergy One Office Tower • Condominium – multiple fee owners • Floors 1-5 financed with approximately 90% Tax-exempt debt and 10% Taxable Debt • Unique and creative since most occupants are For-profit start ups • Floors 6- 13 financed with commercial construction loan then permanently financed with 10 year debt Cobbling together a deal Technology Enterprise Park
• Neither Georgia Tech nor Georgia Tech Foundation want this facility on their balance sheet or on their credit.
• No credit enhancement • Affirmative statement of no assistance
• Private non-profit developer group develops, owns and leases 100% of facility to an affiliated 501c3
• 100% financing with Taxable bonds • Affiliate 501c3 has lease up risk because tenants will come from research associated with or performed by GT • Non-profit developer takes all delivery (construction, execution and interest rate) and all credit risk because no other entity has credit or is willing to use it Overall Project Success Factors
• Ownership Structure – All of Technology Square (south of 5th), Technology Square Research Building (north of 5th), Technology Enterprise Park and a portion of Centergy One office building stays occupied by government and occupational tenants more suitable for ownership by a not-for-profit entity. – A portion of Centergy One office building stays occupied by private for-profit companies more suitable for ownership by a for- profit owner – Condominium structure of Centergy One office building allows for dual ownership by for-profit and not-for-profit entities
• Key is that all stakeholders realized that no real estate project was a one-time event – rather the plan from the beginning was to promote Economic Development for the city and State Overall Project Success Factors
• Finance – Nature and expense of project presented funding challenges. – Unique mix of public and private financing Sources of Funding: • State of Georgia • Georgia Tech Foundation • Department of Transportation • Private Philanthropic Contributions • Private Commercial Financing • Bond Financing • City TIF/TAD Bond Financing
• Required TUFF to seek credit rating – Investment grade rating for TEP bond issue Questions
75 5th Street N.W. Suite 1050 Atlanta, GA 30308
404-214-9200 main 404-214-9201 fax www.tuff.org [email protected] H. Jay Bellwoar Managing Director Municipal Securities Group Developing a Plan of Finance
Three Sides of the Triangle:
Fi n s a t n n c e ia m l e G r i o u a q l e s o R f w In a s L t it te u a t t io S n
Credit Strength of Institution/Project Developing a Plan of Finance
The Building Blocks:
Credit Strength: State Law Requirements: Institution’s Financial Goals: • University/State rating • State G.O. debt • Accelerate project timing • Affiliated entity rating • All “legally available” revenue • Avoid state law restrictions • Project feasibility analysis • Appropriations • “Off balance sheet” • Moral obligation • Tuition and/or fees • “Off credit” • Limited support • Moral obligation • Avoid contractual restrictions • Asset value • Support of project • Control of project • Private partner rating • G.O. of “affiliated” entity • Ability to “walk away” •Ownership • Lowest cost of capital • Other Developing a Plan of Finance
The Trade Offs:
University/State G.O. Debt “Off-Credit”/ Limited Support Debt
Lowest Cost of Capital Highest Cost of Capital Developing a Plan of Finance
Georgia Tech, Certain Affiliated Entities and Certain Other Entities:
Georgia Tech State of Georgia Foundation
Georgia Tech Board of Regents Research Corp.
Georgia Tech Athletic Association Georgia Institute of Technology Georgia Tech Facilities Advanced Georgia Technology Tech Development Research Georgia Advanced Corporation Institute TEP1 (ATDC) (GTRI) Technology Ventures
The University Financing Foundation (TUFF) TUFF TEPB LLC Developing a Plan of Finance
The Georgia Tech Financing Structures:
BOR Annual Lease Debt = $283,660,000 Foundation-Guaranteed Debt = $227,765,000
GT Facilities Issues: $ 9,890,000 Series 1997A (Success Ctr) $ 68,885,000 Series 2003 (Family Housing) 42,605,000 Series 2001A (SAC II) 75,205,000 Series 2004 (M-Building) 111,090,000 Series 2002A (College of Mgt., etc.) 39,670,000 Series 2005 (E-Substation) 75,190,000 Series 2002B (Hotel debt, etc.) 75,000,000 Series 2007 (North Avenue Apts.) Other Structures Debt = $181,485,000 TUFF Issues: $ 18,115,000 Series 2002 (GTREP) Research Revenues: 77,785,000 Series 2005A&B $ 19,025,000 Series 1997B (GTRC Lease) (Tech Sq. Research Building) Athletic Revenues: 4,000,000 Series 2006 (Bullet Building) $ 106,710,000 Series 2001 (GTAA Lease)
Various: TUFF G.O. Debt $ 27,800,000 Series 2002A&B (ATDC)
$ 60,650,000 Series 2006 (TEPB) 12,910,000 Series 2005A&B (ATDC) 15,040,000 Series 2005C&D (ATDC)