California Counties Architects & Engineers Association Conference (CCAEA)

1. California Counties Architects & Engineers Association Conference(CCAEA) Public Private Partnerships February 25, 2011

2. California Counties Architects & Engineers AssociationConference (CCAEA) Public – Private Partnerships What is it? • The investment of governmental capital and other resources leveraged with those of a private entity to achieve a public benefit that could not otherwise be achieved.

3. California Counties Architects & Engineers AssociationConference (CCAEA) Public – Private Partnerships Why use Public-Private Partnerships? • Method for government to achieve greater benefit with fewer public funds • Creative way to finance public projects when public funds are not sufficient • Achieve capital or strategic program objectives not otherwise possible • Leverage public capital, assets or other resources • Obtain experienced financing/development staff not available internally

4. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships What are the Benefits? • Stimulates economic development by encouraging/incentivizing private investment to: • Create jobs • Increase tax revenues • Expand socio-economic base • Improve quality of life • Allows for collaboration between government and business • Bridges gap between community needs and government budgets

5. California Counties Architects & Engineers Association (CCAEA) Conference Public – Private Partnerships Reasons for Considering • Request for new facilities • Expansion or redevelopment of existing facilities • Consolidation or relocation of existing facilities • Long term cost savings or revenue generation • Improved employee working environment & public access • Leveraging excess real estate for public benefit • Economic development

6. California Counties Architects & Engineers Association (CCAEA) Conference Public – Private Partnerships Characteristics • Creates a “true” partnership between public and private sector • Each partner must have “skin in the game” • Every deal is different – Few cookie cutters • Limited by constitutional, legislative & legal restrictions

7. California Counties Architects & Engineers Association (CCAEA) Conference Public – Private Partnerships Types of Projects • Mixed-use / commercial • Residential • Public buildings / facilities • Hotels / conference centers • Sports and entertainment facilities • Airport facilities • Technology and bio-tech developments • Transportation related projects

8. California Counties Architects & Engineers Association (CCAEA Conference) Public – Private Partnerships Advantages from a Public Perspective • Reduces ownership and development risk • Reduces capital investment • Generates net tax revenues • Utilizes private partner expertise and creativity • Accelerates implementation schedule • Capitalizes on excess of underutilized assets • Leverages in-house staff • Cost savings and efficiencies

9. California Counties Architects & Engineers Association (CCAEA Conference) Public – Private Partnerships Advantages from a Private Perspective • Involves high profile projects • Joint control of government owned real estate/asset • Provides public capital • Reduced cost of capital for project • Reduces development cost/risk • Enhances project cash flow • Approval process accelerated • Reduces tax liability

10. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Disadvantages from a Public Perspective • Potentially reduces control over design, operation & maintenance • Reliance on unknown/unproven private partner • Economic return based on private partner’s performance • Private Partner’s Right to Sell Project to Unknown 3rd Party • Deal Structure Perceived as Not Balanced with Risk / Return • Public Perception with Use of Public Resources

11. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Disadvantages from a Private Perspective • Substantial cost in time and capital • Development site issues – ownership, entitlements, environmental • Public partner’s experience with deal structure • Public partners expectation not in sync with marketplace • Change in political/administrative leadership

12. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Establishing the Scope • Conduct needs assessment • Cost estimating and Cost-Benefit/Life Cycle assessment – near term & long term • Alternatives analysis (do nothing, rehabilitation of existing, new construction or combination) • Search for comparable transactions with creative solutions

13. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Pre RFQ/RFP Process • Public partner needs to be in position of strength • Determine alternatives for procurement – PCC or Real Estate Process • Determine advantages/benefits before RFQ/RFP is issued • Describe major deal points in RFQ/RFP • Control selection of private partner (unless sole source) • Consultant advisor

14. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Selecting the Right Partner • Who will lead the project for the developer (principal in charge) • Experience with public – private partnerships • Experience with similar projects (product types) • Interviews & ranking of developer-partner candidates • Financial capacity • Use diverse selection committee • Form of agreement for PPP transaction

15. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Negotiation Process • Development Agreement – Key Provisions • Performance requirements • Clawback provisions • Penalty clauses • Schedule of Performance • Method of Financing “Be Willing to Walk Away from the Deal!”

16. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Spectrum of Financing Options

17. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Financing Tools • Certificates of participation • Special districts • Improvement districts • Community facilities districts (CFD) • Tax Increment Financing (TIF) • Tax Abatement • Lease revenue bonds • Enterprise zones • Federal Programs • New market tax credits • Recovery zone bonds

18. California Counties Architects & Engineers Association Conference (CCAEA) Public – Private Partnerships Case Studies

19. San Diego County Operations Center • San Diego County Operations Center and Annex: • San Diego, California • Public Partner • County of San Diego • Project Type • Government Office • Mixed-use • Program Elements • COC • 900,000 SF Office • 20,000 SF Conference Center • Two 7-level Parking Structures • Campus Central Plant • Annex • 425,000 SF Office • 300 Apartments • Lowe Development Services • Project Concept • Bond Financing • Entitlements • Development Management • Construction Management • Project Schedule • Award: December, 2007 • Entitlements: June, 2008 • Ground Breaking: October, 2008 • Projected Completion: January, 2013 Lowe Enterprises is currently developing this 900,000 square foot government office project, to serve as a consolidated campus for the County of San Diego. This phased construction project, situated on 38-acres, includes the demolition of almost all existing buildings, new construction of six (6) four-story 150,000 square foot office buildings, one(1) 20,000 square foot conference center and cafeteria, two (2) multilevel parking structures and a central plant to service the entire campus. The design and construction of the buildings is heavily influenced by the County’s commitment to a sustainable and well-designed government campus that provides long term value to the many users of the campus. The first phase achieved LEED Gold Certification. As a part of the financing structure, Lowe will be acquiring the 20 acre Annex site from the County. This site is being planned for a private mixed-use project anticipated to include office and residential.

20. Smart Corner • Smart Corner: • San Diego, California • Public Partner • San Diego Housing Commission • Metropolitan Transit System • Project Type • Mixed-use • Program Elements • 171 Residential Condo Units • Four (4) Levels Subterranean Parking • 5 Story Office Building • Trolley Station • Retail / Restaurants • KMA assisted San Diego Housing Commission (Commission) with relocation and development of a new five-story headquarters facility at 12th Avenue and C Street in downtown San Diego. KMA’s services included: • Analysis of development options available to the Commission • Developer solicitation and selection • Commission selected Lankford & Associates to develop “Smart Corner” for Commission Hq & other nonprofit tenants • Also on site development of a 171-residential tower in a separate bldg • Four levels of subterranean parking & a trolley station running diagonally through the site. • KMA also represented the Centre City Development Corporation (CCDC) in negotiations of the business transaction with Lankford and Associates

21. Brea Place • Brea Place • Brea, California • Public Partner • Brea Olinda School District • Project Type • Mixed-use • Program Elements • 52 Acres • Low and Mid Rise Office • Promotional Retail • 229 Room Hotel • Lowe Development Services • Project Concept • Financing • Entitlements • Development Management • Construction Management • General Contracting • Property Management • Leasing • Project Schedule • Completion: 1995 • Brea Place is a 1.7 million square foot mixed-use development which includes 1.1 million square feet of Class-A office space, 350,000 square feet of service, entertainment and promotional retail and a 229-room hotel with 10,000 square feet of conference facilities. • At Brea Place, Lowe developed on-site amenities including day-care, health club, retail, restaurants, entertainment and hotel facilities. The mixed-use project was developed through a public-private partnership with the Brea Olinda Unified School District on a former high school site. The complex has received national awards for its financing structure, which resulted in the funding of a modern new high-school at no taxpayer expense. Brea Place has provided Class-A office space for major international companies including General Electric, The Capital Group, The Travelers, Toyota and Hitachi, and is recognized as the premier mixed-use project in the North Orange County.

22. MTS Headquarters • MTS Headquarters • San Diego, California • Public Partner • Metropolitan Transit Center (MTS) • Project Type • Office • Program Elements • Headquarters Office Building • Parking Structure • Retail and Restaurant • Public Restroom • KMA services for MTS Headquarters included: • Review of potential office sites in downtown San Diego • Recommendation of the 12th Street and Imperial Avenue site • Evaluation of development proposals • Assistance to MTDB in structuring a public/private transaction • Development contains an office building and adjacent parking structure • Construction is on the air rights over trolley ROW • Project is viewed nationally as a model for mixed use & financial creativity

23. City Vista • CityVista • Washington, DC • Public Partner • District of Columbia • Project Type • Urban, Mixed-use • Program Elements • 692,920 RSF • 243 Apartment Units • 453 Condominium Units • 113,000 SF Retail • 828 Parking Spaces • Lowe Development Services • Project Concept • Financing • Entitlements • Development Management • Construction Management • Property Management • Leasing • Schedule • Award: February, 2004 • Ground Breaking: August, 2005 • Completion: 2008 Lowe successfully competed and won the rights for the redevelopment of a 693,000 RSF mixed-use urban complex proposed on a major site owned by the District of Columbia. Lowe was the Master Developer for the project, orchestrating the design team, residential development partner, grocery anchor tenant, general contractor and equity sources. The site development also included extensive participation by LSDBE firms in order to meet participation, employment opportunities and community outreach goals set forth for the project by the District of Columbia. Total project costs are estimated to be $160 million. Lowe’s development program includes a mix of community-based retail and amenities, including a full-service Safeway; neighborhood retail, 244 rental and 441 for-sale residential dwellings that include a 20% affordable unit component. The project’s architecture is designed to create a new icon for the neighborhood setting, with major elements at the key corners at 5th and K and 5th and L Streets, as the new community anchor for the Mount Vernon neighborhood.

24. Heritage Park • Heritage Park • San Diego, California • Public Partner • County of San Diego • Project Type • Mixed-use • Program Elements • 12 Historic Bed and Breakfast • 4 Victorian Houses • Event Facility • KMA assisted the County of SD with the following: • Negotiations on ground lease transaction with developer/operator • Transaction involved rehab of 12 historic existing Bed & Breakfast units in 2 Victorian Houses • 5 commercial leases in 4 other Victorian Houses & former Congregation Beth Israel structure now available for event purposes.

25. Estancia La Jolla • Estancia La Jolla • La Jolla, California • Public Partner • University of California, San Diego • Project Type • Conference Hotel with Spa • Program Elements • 210-room Hotel • 26,000 SF Conference Center • 20,000 SF Spa • Lowe Development Services • Project Concept • Financing • Entitlements • Development Management • Construction Management • Hotel Operations • Project Schedule • Award: August, 1999 • Ground Breaking: June, 2002 • Completion: June, 2004 In a public/private venture with the University of California, Lowe executed a long-term ground lease from the University to build a 210-room conference resort. Lowe and the University of California partnered together to conceptualize and design a facility that would suit the lodging and conference needs of the University and, in order to ensure viability of the hotel as an investment, attract outside business. Following the design, Lowe worked closely with the University to complete the approval process, both formally with the City of San Diego and The California Coastal Commission and informally with the hotel’s neighbors. In the summer of 2004, Lowe completed development of the Estancia La Jolla Hotel & Spa, a 210-room conference resort in La Jolla. The hotel features a 26,000 square foot of state-of-the-art IACC certified conference facility, a full-service spa and fitness center and multiple restaurants and lounges. Estancia La Jolla Hotel & Spa was listed on the “Hot List” of the best new hotels in the world for 2005 by Conde’ Nast Traveler.