HR&A Advisors, Inc.

Equine Quarantine Feasibility StudyFauquier County Board Meeting – February 9, 2017

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Agenda

1. Introduction

2. Industry Background

3. Economic Impact

4. Facility Requirements

5. Business Model

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Establish Design and Development

Guidelines

Introduction I Equine Quarantine Facility Study Goals

Determine a Feasible Site

Identify a Viable Business Model Quantify Direct and Indirect

Economic Benefits

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Introduction I HR&A interviewed key stakeholders to inform the evaluation of the Equine Quarantine Facility.

Interviewee Organization

Rob Banner Great Meadow

Diane Jones VA Gold Cup

Mary Page-Schmidt Fauquier Equestrian Forum

John Cuticelli The ARK at JFK

John Coles Industry Expert

John Nicholson Virginia Horse Center

Dr. Kent Allen USEF Veterinary Committee

David Hasenauer Jet Pets Quarantine

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Industry Background I Pleasure segments have seen tremendous growth in Virginia, with a concentration of activity in Fauquier and Loudoun counties.

Sources: Center for Economic and Policy Studies, Weldon Cooper Center for Public Service (2010)

Virginia Horse Shows and Competitions by Locality, 2010

Researchers identified almost 1,200 horse shows and competitions in 2010.

1 - 9

10 - 24

25 - 49

50 -99

100+

Fauquier County

Loudoun County

An equine quarantine facility would benefit the entire state of Virginia, as well as the mid-Atlantic region.

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Industry Background I Virginia-based competition venues, including facilities in Loudoun and Fauquier counties, support a large and growing number of events.

Venue Location Number of Events

Virginia Horse Center Rockbridge County 83

Morven Park Loudoun County 32

Great Meadow* Fauquier County 24

Source: Interviews with venue operators.

Key Virginia Horse Show and Competition Venues, 2016

*Great Meadow hosted the FEI Nations Cup CICO*** event which drew approx.15,000 attendees.

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Hunter/Jumper54%

Dressage17%

Western9%

Other20%

Virginia Horse Shows and Competitions by Discipline, 2010

Sources: Center for Economic and Policy Studies, Weldon Cooper Center for Public Service (2010)

Industry Background I The majority of Virginia horse shows were hunter/jumper events which often feature sport horses at the elite levels.

Note: Western-themed shows include cutting, reining and barrel racing, while “Other” is comprised of breed shows, mixed theme shows, pleasure/fun events, or races and mounted games.

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Industry Background I An equine quarantine facility in or near both counties could facilitate European import activities, as well as attract world class competitors and events.

Shutterstock Image Shutterstock Image Shutterstock Image

Equine Imports

The facility would facilitate the following:• Import of European-bred sport horses• Import/export of Thoroughbreds for

racing• Export of reining horses• Import of horses from Asia and the

Middle East

Elite Events

The facility would help local venues attract world class events and competitors in the following categories:

• Hunter/Jumpers • Eventing• Dressage

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Sources: US Census Bureau Trade Data; HR&A Advisors

Imports from the European Union have increased by 41% since 2012.

Industry Background I The facility would facilitate the import of European sport horses to the region, likely to have a ripple effect on the industry’s pleasure segments.

4,1004,746

5,1465,771

2012 2013 2014 2015

US Imports of Horses from the European Union, 2012-2015

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Industry Background| In addition, an equine quarantine facility would help local venues attract prestigious world-class events and competitors.

Three-day Eventing Hunter/Jumper Shows

Great Meadow CCI***

Morven Park CIC***

HITS Saugerties CSI 5*

Upperville FEI****

HITS Culpeper Series***

Rolex Kentucky CCI****

Great Meadow is one of two venues to be shortlisted for further consideration as a host venue for a new CCI**** event.

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Industry Background| Hosting just one of these events would raise Virginia’s profile on an international level; a local equine quarantine facility is key to winning a bid.

Ranking: CCI****

Duration: 4 days

Attendance: 84,000

Participants: 68-72 riders

Prize Money: >$370K

% International Horses: 30%

Rolex Kentucky Three-Day Event

Ranking: CSI 5*

Duration: 1 day

Attendance: 5,000

Participants: 85 riders

Prize Money: $1M

% International Horses: 14%

HITS Saugerties Grand Prix

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Economic Impact | The new facility’s economic impacts would derive from construction and ongoing operations as well as its role in attracting world-class equine events to Virginia.

Quarantine Facility

• One-time employment and spending impacts from construction

• Ongoing impacts of import/export facility

Equine Events

• Key factor in world-class event status bids

• Incremental visitor spending associated with premier events

Economic Impacts

• New jobs, wages, follow-on spending

• Indirect and induced economic output

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Economic Impact | Economic impacts are comprised of both the direct impacts and multiplier effects – or the sum of indirect and induced impacts – owing to the new facility.

INDUCED

INDIRECT

DIRECT

Effects from direct operations at new facility and incremental spending at world-class equine events

Effects from spending among businesses servicing and/or supplying direct activities

Effects from household spending among those working in industries directly or indirectly affected by new facility and incremental event activity

SPIN

OFF EFFEC

TS

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Economic Impact| HR&A conservatively estimated economic impacts for a CCI**** event and a CSI 5* event only. An equine quarantine facility would likely drive additional competitive events, breeding, and related industry activities.

Three-Day Eventing – CCI****

• 84,000 attendees• 80% of visitors from outside VA• >70 competitors, 30% from abroad

Hunter/Jumper Shows – FEI CSI 5*

• 1 day Grand Prix• 5,000 attendees• 85 competitors

$16.4 millionDIRECT ATTENDEE SPENDING

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Economic Impact | The proposed quarantine facility would create one time and ongoing economic benefits in both counties.

Facility construction

Facility operations

CSI 5* Hunter/Jumper Event

CCI**** Three-Day Event

$17.8M

$9.4M

$1.1M

$17.0M

ONE-TIME

ANNUAL

Loud

oun

Fauq

uier

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Facility Requirements| Proximity to the airport tarmac and major access roads is a key consideration, as reflected in the recently-developed ARK animal terminal at JFK.

The ARK at JFK

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Miami Animal Import Center

Facility Requirements| Similar to The ARK plan, the Miami Animal Import Center is located adjacent to the tarmac at Miami International Airport.

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Facility Requirements| Jet Pets Quarantine Facility in Los Angeles is also proximate to the tarmac at LA International Airport.

Jet Pets Quarantine Facility

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Facility Requirements| Based on interviews with operators and developers, HR&A developed operating assumptions to help inform the feasibility assessment and site selection.

Horse quarantine facility at Dubai International Airport.

• 48 horse stalls• 50,000 sq. ft. facility• ~15 acres

• 1,500+ horse imports/year• 1,700+ horse exports/year• 5,000+ companion animals/year

KEY ASSUMPTIONS

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Facility Requirements| The Western Lands Area at Dulles Airport could support an equine quarantine facility with similar programing as The ARK.

Administration

Western Lands is a prime development site:

• Location is proximate to the tarmac and road network

• NEPA review is expected to be completed in the Spring of 2017

• Metro Washington Airport Authority issued an Unsolicited Proposals Request in 2015

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Facility Requirements| A proposed quarantine facility could be sited in the southwest corner of Dulles Airport’s Western Lands Area.

Administration

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Facility Requirements | The proposed location could accommodate a 125,000-175,000 GSF facility on a 14.5 acre parcel.

Administration

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Business Model Review | A proposed Equine Quarantine Facility is financially viable, though public assistance has been required for similar facilities.

Debt service payments and required developer returns included as part of development cost category.Sources: Mid-Atlantic Animal Import Center Feasibility Study (2008); The ARK at JFK; MWAA; USDA – APHIS; HR&A Analysis

Annual RevenueEquine Import/Export

Equine Export OnlyCompanion Animal

Operating ExpensesOperating Costs (20% of revenue)

Annual Rent

Net Operating Income

Development Costs

Total Cash Flow

$4.2 M$3.7 M$90 K$440 K

($1.8 M)($840 K)($1 M)

$2.3 M

($2.2 M)

$120 K

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Business Model Review | The ARK at JFK, for example, relied on public and private funding sources. Similar economic development incentives can be employed in Virginia.

Sources: The ARK at JFK; NYCEDC

ARK Development, LLC

ARK Source Comparable Source at DullesDescription

Pri

vate

Pub

lic

Private equity Private equity

BuildNYC(NYC Economic Development Corp.)

Tax-exempt municipal bonds financing;mortgage recording tax exemption

Empire State Development Corporation

Low-cost loan for up FF&E in exchange for job creation

Port Authority of NY & NJ

Free rent until beginning of operations

Potential sources could include:• Tax-exempt municipal bond

financing

• State grant and loan programs

• Metro Washington Airport Authority potential incentives

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Questions/Discussion