Economic Impacts Discussion – Fort Monroe Federal Area Development Authority September 19, 2008

1. Economic Impacts Discussion – Fort Monroe Federal Area Development Authority September 19, 2008

2. Today’s Agenda BAE’s role in FMFADA/City of Hampton discussions. Fort Monroe Capital Requirements Need for Strategic Plan for Fort Monroe’s Real Estate Assets Lessons Learned from Presidio of San Francisco and NASA Research Park

3. FMFADA/City of Hampton Work • Incorporate revised infrastructure cost estimates into the Fort Monroe financial model • Refine and update fiscal impacts (revenues and expenses) • Identify business decisions related to municipal services: • Who owns system/provides service? • Who operates? • What standards? • Whose cost? • The answers to these questions will guide how FMFADA and City of Hampton structure their relationship

4. Fort Monroe Capital Requirement • Planning-level estimate of required capital to implement Fort Monroe Reuse Plan: $500 Million • This includes: • Historic rehabilitation/reuse ($126M) • New construction ($223M) • Infrastructure ($33M; ex. electrical system) • Cultural facilities ($66M) • Seed capital for FMFADA ($11M) • 10% contingency • These are preliminary “order of magnitude” estimates and will be refined and updated as the FMFADA continues its implementation planning.

5. Public and Private Funding But to attract private investment and charitable contributions, the Commonwealth must make an initial investment. • The bulk of required capital costs of Fort Monroe will be funded by the private sector: Private Public • Infrastructure (partial) • Historic rehabilitation & adaptive reuse • New Construction • Cultural facilities • Infrastructure (partial) • FMFADA seed capital • Infrastructure (partial)

6. Potential Public Investments • Contribution to FMFADA’s operating expenses in early years, including pre-transfer period FY2009-2012 • Acceptance of Fort Monroe roads for VDOT funding • Contribution to cover potential shortfalls in revenue to the City of Hampton. (FY2012 and next few fiscal years) • One-time investment in revolving capital improvement fund to invest in start-up of Interim Leasing and Residential Leasehold Programs. (FY2012) • Specific dollar estimates will be prepared this fall

7. Need for Strategic Real Estate Plan • To implement the Fort Monroe Reuse Plan, the FMFADA needs to prepare a strategic real estate plan that: • Formulates a strategy for management and development of Fort Monroe’s real estate assets • Evaluates alternative business/legal relationships with master developer/manager • Develops scope and process for selection of master developer/manager • Identifies early capital requirements and sources • Proposes a specific five-year series of goals and actions • Happens parallel to and coordinated with Interpretive Master Plan

8. Time is of the Essence The scheduled date of transfer is in three years, September 2011 During this time the FMFADA needs to: Work with the City of Hampton to establish a mutually agreeable partnership to support implementation and ongoing provision of public services Undertake a competitive process to engage one or more master developers/managers Identify marketing opportunities/prospective anchor tenants Formulate planning and permitting procedures Establish historic preservation guidelines Complete its Interpretive Master Plan Ideally, a master developer/manager will have at least one year prior to transfer to complete due diligence and its own projecting planning –critical to “hit the ground running.”

9. What did the Presidio and NASA Do? There are “lessons learned” from experience with the Presidio of San Francisco and NASA Research Park (Silicon Valley) Both projects completed extensive strategic planning for the management of real estate assets at the Presidio of San Francisco and NASA Research Park, respectively. The following are BAE’s own observations about what the Presidio Trust and NASA have done and why. Presidio of San Francisco NASA Ames Research Center

10. Presidio of San Francisco Quick Profile: Trust established by Congress in 1996 with seven member board Flexible authority to conduct business $25M annual appropriations; $50M Treasury loan authority Financial self-sufficiency by 2013 1,168 acres of Presidio total of 1,450 managed by Trust 5.6 million sq.ft. of existing and limited new development 470 historic structures, including 303 historic residences $585 million in capital required in 1994 dollars

11. Presidio Implementation Timeline • BRAC action announced in 1989 • Pre-transfer planning by National Park Service 1990-1994 • NPS General Management Plan Amendment for the Presidio of San Francisco adopted in 1994 with transfer from Army: • NPS management 1994-1998 • Congress established Presidio Trust late 1996 • Trust Board appointed and convened in mid-1997 • Early 1998 Trust staff hired; housing management company engaged; Trust leasing under NPS GMPA • 2000-2002 new Presidio Trust Management Plan adopted

12. Presidio Approach to Public-Private Partnerships • Both the NPS and Presidio Trust adopted a mix of self-funded direct rehabilitation, property management contracts, and long-term leases with multiple developers: • NPS and Trust have invested federal funds for historic building rehabilitation directly leased by corporation • NPS and Trust managed RFQ/P processes to engage developers for specific building or clusters of structures • Trust hired housing manager to lease existing housing in “as is” condition - rehabilitation later • Trust ultimately hired CBRE to handle commercial leasing • The NPS and Trust could do this because: • Had access to federal appropriations • Established large organizations

13. Presidio Leasing and Financial Results • Under NPS management by the end of 1997: • 1.3 million sq. ft. leased • $7 million in total revenues U.S. Army Thoreau Center Presidio Golf Course Gorbachev Foundation USA • Under Trust management, in 2008: • 4+M sq.ft. leased • $60 million in total revenue • (ex. Appropriations) Presidio Residences ($36M) Non-residential ($17M) SDC/Other ($7M) Letterman Digital Arts Center SF Film Society Bay School (HS) Disney Family Museum

14. NASA Research Park Quick Profile: NASA Ames Research Center established by Congress in 1939 Federal-to-federal transfer of Naval Air Station Moffett Field NRP concept: “World class shared-use R&D and education campus targeted to government, industry, academia and non-profit organizations.” NRP Business Plan mandates financial self-sufficiency 2,000 acres, including airfield and core NASA Ames campus 5.2 million sq.ft. of existing and new development in NRP Shenandoah Plaza National Historic District w/22 contributory structures, including Historic Airship Hangars 1, 2 and 3 Over $2 billion in capital required in 2008 dollars

15. NRP Implementation Timeline • BRAC action for NAS Moffett announced in 1989 • Pre-transfer planning as joint federal use facility managed by NASA • Navy property transferred in 1994 with Moffett Field; Comprehensive Use Plan adopted • Managed as joint federal property 1994-1997 • Air cargo controversy –Citizens Advisory Committee formed and identifies preferred uses of former Navy Property in 1997 • NASA Ames conducts feasibility study of proposed NASA Research Park concept 1998-1999. • NASA Ames Development Plan and EIS formulated and adopted 2000-2002 • Enhanced Use Leasing legislation adopted for NASA in 2003

16. NASA Approach to Public-Private Partnerships • NASA adopted a mix of self-funded direct rehabilitation, and long-term leases with end users: • “Pay as you go” historic building repairs and improvements • Leasing focus on small technology start-ups • Long-term leases with Carnegie Mellon and Google Inc. • Now negotiating with University of California to select master developer for a 70-acre portion of NRP • Leasing and property managed by civil-servants and on-site contractors (approx. 12 staff) • NASA took this approach because: • Had existing buildings in good condition and requiring minimal renovation • Preference to transact with end users to achieve collaborative research goals

17. NRP Leasing and Financial Results • FY 2004-2008 results: • 625,000 sq. ft. leased - 50+ tenants • 42.2 acres of land/1.2M office/R&D • $7 million in total revenue • (ex. appropriations) Carnegie Mellon University UC Santa Cruz Bloom Energy Apprion Inc. U.S. Army (Wind tunnel) Airship Ventures Inc . N211 Hangar LLC Mars institute

18. Observations Infrastructure • Presidio: $90M Army - $100M environmental remediation • NASA: $160M to be funded by end users/developers • Land value issues Asset Management • Leasing existing buildings versus new development/full rehab • Different economics • Trade-off between # direct deals and size of organization • Mixed-use projects need specialized real estate managers/developers Marketing Experience • Historic preservation and building “stories:” marketing plus • The Presidio and NASA brands: powerful • Keep your Post Office

19. Observations Organizational Structure • NPS: McKinsey recommendation to create “project office” • NPS/NASA: Entrepreneurial spirit but “flat” federal organization results in too many decision-makers • NPS/NASA: Hesitant to make decisions - fear of “getting in trouble” • Trust: Opportunity to establish “mission and commercial” staff culture • Trust: Board involvement in leasing double-edged sword Planning • NPS Presidio plan unrealistic and relied upon permanent federal support

20. Lessons for Fort Monroe • Adoption of a realistic, practical reuse plan • Strong support from stakeholders • Clear lines of decision-making authority • Adequate capitalization • Immunization against traditional ways of doing government business • FMFADA must be independent, but accountable • Must be able to make decisions quickly • Capacity to respond opportunistically to market conditions • Ensure FMFADA staffing is adequate to implement plan • Utilize professional leasing and development services • Many pieces are in place to shorten start-up time