MarketFront Financing
PDA Council Meeting
February 26, 2015
MarketFront Financing
MarketFront Financing
Funding Sources
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•
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City Funding - $34 million
PDA Equity - $3 million
WSDOT - $6 million
Housing Grants - $9.2 million
Philanthropy - $2.1 Committed, $3.9 million remaining*
State Grants - $2-2.5 million*
NMTC - $4 million*
PDA Debt - $8.5 - $18.9 million (short and long term)
(See MarketFront Project Flow of Funds Chart)
*indicates funding not yet secured
MarketFront Financing
PDA Debt History
• PDA Debt History from 1999 – 2015 and
projections through 2022
(see PDA Debt History and Financing Capacity Chart)
MarketFront Financing
PDA Debt – Refinancing and Retirement
• 1st & Pine Loan and Bond – To be refinanced –
current interest rate of 5.4% and 5.12% –
Projected interest rate for refinancing below 4%
• Garage Bond – $2.2 million callable now and note
due to City of $680,692 to be paid from bond
reserves of $441,166 and $2,299,526 from the
CRRF. Remaining CRRF Balance after payment $8,418,769
• Series 2009 Bond – Current annual debt service
of $472k – paid off in 2021
MarketFront Financing
Current Financing Market Analysis
• Current interest rate levels
– Still historically low below 4%
• Options for debt
– Direct Placement - variable loan (fixed for 7),
lower initial interest rate
– Public Offering - Bond (fixed for 20), higher
interest rate
MarketFront Financing
Financing Scenario – Direct Placement
Amortization:
Expected Term:
20 Years
7 Years
Projected Rate:
Base (67% 30-Day LIBOR)
Projected Credit Spread
0.17%
Current
0.11%
1.50%
1.61%
Annual Debt Service:
$18,000,000
$22,000,000
1.83%
3.03%
10-Year Avg
20-Year Avg.
1.23%
2.03%
1.50%
1.50%
2.73%
3.53%
$1,179,379
$1,441,463
$1,269,721
$1,551,881
Pros:
1) Fastest transaction completion timeframe
2) Least transaction costs
3) Greatest extraordinary redemption flexibility
Cons:
1) Loan maturity expected to be less than full desired amortization term
2) Interest rate expected to be variable
MarketFront Financing
Financing Scenario – Public Offering
Amortization:
Expected Term:
20
20
Years
Years
Projected Rate:
Rating
A3.55%
Annual Debt Service:
$18,000,000
$22,000,000
$1,265,750
$1,545,500
Pros:
1) Rate is fixed for full term
2) Full desired term
Cons:
1) Decreased extraordinary redemption flexibility
2) Greater transaction completion timeframe
3) Increased transaction costs
Baa-1
3.74%
$1,287,500
$1,575,250
MarketFront Financing
PDA Debt Capacity
• Assumptions
– Current Garage Bond Paid off in 2015
– 1st & Pine Loan and Bond refinanced
• Maximum capacity - $24 million – additional
$500k approx. per year in debt service
• Medium – $22 million – does not include
project alternates or TI Funds
• Low – $18 million – does not include above
plus PDA carry on NMTC and portion of
Philanthropy
MarketFront Financing
Market Pro-Forma with MarketFront
• Summary of Expense and Revenue – from
2005-2021
• Modeled with $18, $20, $22 and $24 million in
debt/refinancing
(See Financing Option – All PDA Charts)
MarketFront Financing
Project Cost
• Total Project Cost - $73,205,983
• Alternates - $1,192,923 million
• TI Funds - $1.3 million
• Contingencies
– Construction Contingency - $4.5 million (10%)
– Owner Contingency - $3.9 million (8.5%)
• Base Project without TI funds and Alternates $71,763,250
(See MarketFront Total Budget Summary Chart)
MarketFront Financing
Project Debt and Long Term Risk – Best Case
Best Case (Base project cost of $71,763,250)
City of Seattle
$34,000,000
WSDOT
$6,000,000
PDA Equity
$3,000,000
Housing Grant
$9,200,000
PDA Philanthropy
$6,000,000
New Market Tax Credit
$4,000,000
State and Other Grants
$2,000,000
Subtotal
Long Term Debt
$64,200,000
$7,563,250
MarketFront Financing
Project Debt and Long Term Risk – Mid-Range
Mid-Range - assume no future philanthropy or grants (Base project
cost of $71,763,250)
City of Seattle
$34,000,000
WSDOT
$6,000,000
PDA Equity
$3,000,000
Housing Grant
$9,200,000
PDA Philanthropy
$2,000,000
New Market Tax Credit
$4,000,000
State and Other Grants
$0
Subtotal
$58,200,000
Long Term Debt
$13,563,250
MarketFront Financing
Project Debt and Long Term Risk – Worst Case
Worst Case - assume no future philanthropy, tax credit , or grants
City of Seattle
$34,000,000
WSDOT
$6,000,000
PDA Equity
$3,000,000
Housing Grant
$9,200,000
PDA Philanthropy
$2,000,000
New Market Tax Credit
$0
State and Other Grants
$0
Subtotal
$54,200,000
Long Term Debt
$17,563,250
MarketFront Financing
Future Related Costs
• Cooling Tower Relocation - $840,000
–
(Upon notice from City of commencement of Overlook Walk)
• South Walkway - $540,000
–
(Part of future Heritage House Remodel – and informed by Overlook Walk)
• Retail space fronting Overlook Walk - $200,000
–
(Dependent on Overlook Walk)
• Vertical Green-scape infill on west face of garage - $350,000
–
(dependent on Overlook Walk)
• Shared responsibility for driveway connecting to new Alaskan Way $400,000
• Signage Plan Integrated with existing Market Signage - $200,000
Total Future Related Costs - $2,530,000 ($1,930,000
dependent on Overlook Walk)
MarketFront Financing
Key Decisions and Recommendations
• Variable Loan vs. Long Term Bond
– Recommendation - Pursue fixed rate long term Bond over
variable rate loan
• Will take additional time to finalize. Potential short-term savings with
variable loan not significant enough to outweigh value of long term
predictability.
• Total Amount of Debt Required
– Recommendation - Total debt including refinancing of 1st &
Pine Loan/Bond not to exceed $24 million
• Exercise all prudent project cost control efforts. Base project cost not
including TI funds and Alternates in favor of robust contingency during
early work.
• Secure corresponding debt required to bridge funding gap with early
call options for Philanthropy, Grants, and NMTC projected funding
amounts and timing.