Loan Report and Application  $4,750,000 Section 108 Loan Guarantee 

  

Submitted by: City of Hartford, Connecticut 

 

  

 To:  

U.S. Department of Housing and Urban Development  

July 2019       

   

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 I. PROJECT SUMMARY  The City of Hartford (City) is applying to the U.S. Department of Housing and Urban Development (HUD) for a $4,750,000 Section 108 loan. It proposed to relend the proceeds to 315 Trumbull Street Associates, LLC (315TSA), DBA Hilton Hartford, to fund necessary interior capital improvements that are required by its franchise agreement with Hilton Hotels and Resorts. 315TSA is the owner of the Hilton hotel property at 315 Trumbull Street  in downtown Hartford. It  is an affiliated entity of the Waterford Hotel Group, a widely experienced  lodging company that owns and manages hotels throughout the country,  including the Marriott in downtown Hartford.    The full‐service hotel, constructed in the 1980’s, features 393 guestrooms, 15,000 square feet of state‐of‐the‐art meeting space, spa/pool/gym, and a bar and a restaurant. An agreement with  the Hartford Parking  Authority  and  Capital  Regional  Development  Authority  also  provides  parking  options  in  an adjacent parking garage. 315TSA acquired the hotel in 2004, completed an extensive rehabilitation, and reopened it in 2005. The funds to acquire and renovate the hotel included over $11 million in equity and a $22 million loan from GE Business Financial Services, Inc. (GE).   The capital  improvements are necessary to maintain Hilton flag and franchise at the property. 139 FTE existing  jobs will be retained, and  the hotel will continue  to be an  important element of  the Hartford central business district by servicing the business and leisure customer base, a large part that comes to Hartford for convention center and XL Center activities. The hotel’s centrality also gives it easy access to Xfinity Theater, restaurants, clubs, and the Dunkin Donuts Park, a recently opened minor league baseball stadium. It enjoys good vehicular accessibility given its proximity to Interstates 84, 90, and 91 as well as  Route 2.  

Location of Hartford Hilton 

 In 2010, the City of Hartford (City), and 315 Trumbull Street Associates (Owner, Operator, or Borrower) entered  into a previous $7 million U.S. Department of Housing and Urban Development (HUD) Section 108 loan agreement. Proceeds of this previous Section 108 loan were used to fund a highly discounted payout on a  loan  from GE Business Financial Services  (GE), who released  the mortgage  lien  (over $20 million  in principal,  interest and  fees)  in exchange  for  the $7 million discounted payout. 315TSA also invested $4.7 million in equity in capital improvements at the time of the refinancing.  While the owner has withstood several operating challenges in the last decade, it has invested nearly $4 million over  the  last nine years  for various capital  improvements,  including $1 million  in  its  food and beverage operation in the last year.  The owner currently lacks necessary reserves to fund the remaining required capital improvements and furniture, fixtures, and equipment (FF&E) required by the Hilton and 

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seeks an additional $4.75 million in Section 108 long‐term debt.   

Exterior view of Hartford Hilton  Interior View of Hartford Hilton  

While 315TSA has withstood its share of operating difficulties and market downtowns in the past, to its credit,  it  has  demonstrated  commitment  by  continually  reinvesting  in  the  property  and  remaining current on all payments under the existing Section 108 loan and land lease with the City. It expects that some of  its  cost  cutting measures,  including  scaling down  food and beverage operations  (full  service restaurant to a grab‐n‐go eatery), contracting such services such as laundry, and reducing employment levels, combined with modest increases to the average daily rate (ADR) will produce improved financial results. 

While occupancy  levels may  slip  in  the period during which  interior  capital  improvements  are done, projections  indicate the ability to absorb operational expenses and current and projected debt service.  Ownership  will  also  expense  4%  of  revenues  in  a  “repair  and  replacement  fund”  for  non‐routine maintenance and future capital improvements.  The new $4.75 million loan has been structured with a five‐year  interest only period to keep debt service  levels manageable  in the beginning years of  its new collective bargaining agreement with its employees. The loan will self‐amortize from years 6 – 20. 

Although the City is required to pledge its annual CDBG entitlement, it is expected that the loan will be repaid from project  income.   The City will also retain  its first mortgage  lien on the property. With the proposed new $4.75 million loan added to the current loan ($5.6 million balance), there will be $10.35 million due to the City. While the updated appraisal is not complete, it is expected that the total debt to value will be less than 80%, per HUD underwriting guidance for Section 108 loans. 

II.  ELIGIBLE ACTIVITY  Projects  funded under  the Section 108  loan guarantee program must meet an eligible CDBG activity.  This project is an eligible economic development activity, per 24 CFR 570.703(i).   Section 108 funds will be used to fund the cost of capital  improvements and FF&E replacement  in the hotels’ 393 guest rooms and suites. The Section 108 guarantee fee, project soft costs and professional fees will also be funded with proceeds of loan.    

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III.  NATIONAL OBJECTIVE  

This project must meet one of three CDBG national objectives pursuant to 24 CFR 570.208. This project will result in “benefit to low‐ and moderate‐income persons.”  

 The  proposed  economic  development  project  complies  under  the  national  objectives  per  24  CFR 570.208(a)(4)(ii)(A)  “Job  Retention  Activities”.    This  project  involves  an  activity  designed  to  retain permanent jobs where at least 51 percent of the jobs, computed on a full‐time equivalent basis, involve the employment of low – moderate income persons. This will be an existing job retention activity. At the time the new 108 loan is made, at least 51% of the total jobs will be held by a low‐ or moderate‐income person.   New job creation is not expected immediately.    315TSA  eliminated  room  service  and  the  traditional  restaurant  operations  and  substituted  it with  a packaged  pick  up  and  delivery  operation  within  the  hotel.  The  effectuation  of  this  limited  service operations was agreed to by HT‐315 Trumbull Street Associates, LLC (“Employer”), and Unite HERE Local 217  (“Union”)  in  a Memorandum  of Agreement  (“Agreement”)  as  a  supplemental  agreement  to  the parties current Collective Bargaining Agreement (“CBA”).     Without the availability of a long‐term credit facility through the Section 108 loan, the hotel will lose its Hilton designation, which could lead to the hotel’s closure, the loss of all the jobs, and a default of the existing 108 loan.   To ascertain that at least 51% of the current 139 employees are low and moderate income and will be retained as a result of  the new  loan,  the City will require  the developer  to collect and submit  income data collection current employees prior to the proposed loan is closed and for the remaining life of the term per a Job Retention Agreement.   IV.  PUBLIC BENEFIT 

 Given that the eligible activity is economic development, the City is responsible for ensuring that at least a minimum level of public benefit is obtained from the level of expenditure of CDBG/Section 108 funds. The  loan  balance of  the  existing  108  loan  is  $5,600,000.  Should  the new  108  loan of  $4,750,000 be approved,  that aggregate amount of  the  two  loans  is $10,350,000. With  FTE  totaling 139  this equals $74,460 per one FTE job. This exceeds the $50,000 maximum per job under 24 CFR 570.209 (b)(2)(v)(e) requirements, one Full Time Equivalent  (FTE)  job per $50,000  in assistance. Based on census data and (American Communities Survey (ACS), the poverty rate for the census tract (5021) in which the hotel is located is more than 20%.  

 

Existing 108 Loan Balance $5,600,000

Proposed New 108 Loan $4,750,000

Total  Outstanding Balance $10,350,000

 / Number of FTE Jobs 139

 = Dollar amount per one FTE $74,460

HUD Maximum Individual  Job Standard $50,000

FULL TIME EQUIVALENT JOB CALCULATION

   Because  the  public  benefit  standard  exceeds  $50,000  per  job  for  the  combined  108  loans,  the  City respectfully requests a waiver to this standard. Without the new 108 loan, the hotel and all the existing jobs are in danger of being lost.     

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 V.   SOURCES AND USES   The following represents the Sources and Uses of funds. While most of the Section 108  loan will fund the necessary capital improvements in the guestrooms, bathrooms rooms and suites, the developer has already invested over $1 million in the hotel based upon the reprogramming and downsizing of a hotel, from  the  full‐service  restaurant  (Kitchen  and Herbs).  The  developer will  also  pay  the  soft  costs  and professional fees, including HUD Section 108 Guarantee Fee (2.47% of loan) and closing fees.   

USES  OF FUNDS $ % Per Room

Herb & Kitchen Improvements $1,000,000 17% $2,545

Guestrooms $3,570,000 60% $9,084

Bathrooms $650,000 11% $6,989

8 Guest Suites $280,000 5% $956

Contingency $225,000 4% $573

Soft Costs  and Professional  Fees $275,000 5% $700

TOTAL $6,000,000 100% $18,301

SOURCES OF FUNDS $ %

Section 108 $4,750,000 79%

Owner Equity $1,250,000 21%

TOTAL $6,000,000 100%   VI.  THE BORROWER   315TSA  is an affiliate of The Waterford Hotel Group, (WHG), a privately held company with thirty‐five years of experience  in  the hospitality development and management business. Presently, WHG has a portfolio of more than forty‐one properties with 6,229  lodging rooms. Besides the Hilton Hartford, the 409 room Marriott Hartford is also part of the WHG portfolio. The Hilton’s immediate proximity to the Convention Center and the benefit of being under the same WHG umbrella results  in the Hilton being the first option for overflow guests from the Convention Center.   WHG owns and operates several hotel brands, including those under the Hilton flag. Its strategy focuses on a balanced portfolio of properties ranging from major mixed‐use projects, brand developments and conversions, and the development and enhancement of small independent and boutique properties.   The leadership team of WHG consists of the following individuals;    

Len Wolman Forty years  in  the hospitality  industry  is Chairman and CEO of Waterford Group, LLC, a group of  companies and partnerships  specializing  in  the development, ownership,  and management of hotel, venue, and gaming projects.   Mark Wolman Principal and Director of the Waterford Group. Thirty years of experience in residential and commercial development and construction, asset management, hospitality development and operations.  

 Robert Winchester Past President of the Waterford Group. Currently Senior Advisor provides ongoing transitional support to the new president and executive leadership.  Raj Dansinghani Chief Financial Officer responsible for all corporate and property level finance, debt, and audit and risk management for the organization. Key financial link between Waterford 

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Hotel Group, and the property owners, managers, controllers and accountants for its various properties.  

 Under the umbrella of the WHG, the Hilton Hartford has been owned and operated since 2005 by the related entities of 315TSA (the property owner and  lessor) and HT‐315 Trumbull Street Associates, LCC (the hotel operator and  lessee) which operates under  the name Hilton Hartford Hotel.  It has a hotel management agreement with WHG 315 Trumbull Management,  LLC  (wholly owned  subsidiary of  the Waterford Hotel Group,  LLC. Although WHG  315  is management  company  and  the  employer  of  the Hilton Hartford employees, it is 315TSA (the borrower of the existing 108 loan) which is currently party to the existing 108 job retention agreement with the City of Hartford.    Both 315TSA and HT‐315 Trumbull have investment partners, including Albemarle Hotel Associates LLC, and  the Mystic  Partners, which  owns  88%  of  315  Trumbull  and HT‐315  Trumbull  See Organizational Chart below.   

  Reviews of recent Dun and Bradstreet reports on the entities below found overall good credit profiles on the affiliated entities of ownership.  

Payment Behavior Risk of Bad Debt Write‐off Overall Business Risk

315 Trumbull Street Associates low risk, pays  on time low risk low risk

HT‐315 Trumbull Street Associates, LLCmoderate risk moderate risk moderate risk

Waterford Hotel Group, Inc.low to moderate risk. No l iens, 

judgements  or lawsuits

no l iens, judgements, or 

lawsuits

no lawsuits. One minor 

l ien. 

 VII.  RECENT FINANCIAL PERFORMANCE AND NEAR‐TERM PROJECTIONS  

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The consolidated  internally prepared balance sheet and profit and  loss statement  for 315TSA and HT‐315 Trumbull are found below.   Of  note  on  the  balance  sheet  is  a  change  from  a  negative  net worth  (equity)  position  in  2016  to  a positive  equity  position  in  2017.  This  was  due  to  the  expiration  of  the  contingent  liability  and  its conversion to income in 2017. This was a substantial favorable change to the balance sheet by restoring a positive net worth.  

2016 2017 2018

Cash  $1,455,438 $1,137,469 $682,119

Accounts  Receievable $188,712 $307,787 $459,872

Other Curent Liabil ities $203,145 $172,221 $369,390

Current Liabil i l ities $1,847,295 $1,617,477 $1,511,381

Long Term Assets $9,935,094 $9,787,462 $9,402,882

Total  Assets $11,782,389 $11,404,939 $10,914,263

Accounts  Receivable $1,475,630 $1,760,168 $1,879,409

Accrued Liabil ities $808,019 $789,911 $692,204

Long Term Liabil ities $26,758,959 $5,761,048 $5,425,582

Total  Liabil ities $29,042,608 $8,311,127 $7,997,195

Owner's  Equity ($17,444,914) ($17,260,218) $3,093,812

Net Income/(Loss) $184,696 $20,354,030 ($176,744)

Total  Owner's  Equity ($17,260,218) $3,093,812 $2,917,068

Total  Liabil ities  & Equity $11,782,390 $11,404,939 $10,914,263

Debt to Equity Ratio N/A 2.69 2.74

Days  Receivable 28 35 36

HARTFORD HILTON CONSOLIDATED HISTORICAL BALANCE SHEET

 

From an operating standpoint, the hotel has posted profitable results in the last three years, as can be seen  in  the  recent  healthy  debt  coverage  ratios  posted. While  profitable,  315TSA  was  not  able  to adequately fund a repair & replacement reserve in the last three years, impacting its ability to fund the improvements needed now and required by Hilton.  The challenge going  forward will be  to  increase  revenue  (by modest  rate  increase and  lower vacancy rates) and decrease expenses (subcontracting and  lower F&B expenses)  in order to generate sufficient net income to cover additional debt service and repair and replacement reserves. The R&R reserves will be expenses at 4% of revenue. The flexibility for structuring the 108  loan  is advantageous to both the City and borrower. Debt service additions will be gradual, as the proposed new Section 108 loan will be interest only for five years.  Debt  coverage will  be  the  tightest  next  year  in  2020 when  the  capital  improvements will  be  done. Ownership  and  management  expect  higher  vacancy  next  year  due  to  the  improvement  occurring throughout the year. After the  improvements,  it expects to pursue a more aggressive pricing structure and hopes for a lower vacancy with projected expanded programming at the XL Center and Convention Center.  The 2021 year  is  considered  the  stabilization year and  its NOI  is used  for purposes of estimating  fair market value.      

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2016 2017 2018 2019 2020 Stabilized 2021

Number of keys 393 393 393 393 393 393

Rooms  available 143,838 143,445 143,445 143,445 143,838 143,445

Rooms  sold 89,567 89,650 96,139 96,337 97,608 97,341

Rooms  occupied 90,335 90,461 96,640 96,731 98,001 97,734

Occupancy % (Sold) 62.30% 62.50% 67.02% 67.16% 67.86% 67.86%

Average Daily Rate (ADR) $163 $156 $152 $155 $155 $162

RevPAR $101 $98 $102 $104 $105 $110

Rooms  Income 14,592,556$  14,018,307$     14,567,549$  14,892,340$  15,088,819$     15,799,972$   

Food and Beverage Income 3,524,580$     3,498,631$        3,346,723$     2,545,721$    2,299,185$        2,350,226$      

Other 750,248$        714,534$           704,475$        688,656$       697,651$           713,299$         

Total  Income 18,867,384$  18,231,472$     18,618,747$  18,126,717$  18,085,655$     18,863,497$   

Departmental  Expenses (9,412,670)$   (9,426,414)$      (9,531,965)$   (8,464,027)$   (8,290,397)$      (8,501,401)$    

Undistributed Operating Expenses (6,622,122)$   (6,552,126)$      (6,478,115)$   (6,577,787)$   (6,526,189)$      (6,725,412)$    

Gross Operating Profit 2,832,592$     2,252,932$        2,608,667$     3,084,903$    3,269,069$        3,636,684$      

Fixed Expenses, including RE Taxes & Lease (1,450,144)$   (1,436,469)$      (1,476,863)$     (1,824,312)$   (1,809,186)$      (1,508,277)$    

EBITDA 1,382,448$     816,463$           1,131,804$     1,260,591$    1,459,883$        2,128,407$      

Repair Replacement Reserve ‐$                 ‐$                    ‐$                 (725,069)$      (723,426)$          (754,540)$        

Net Operating Income 1,382,448$     816,463$           1,131,804$     535,522$       736,457$           1,373,867$      

Existing Debt Service (534,205)$       (529,935)$          (524,545)$       (518,350)$      (511,175)$          (502,600)$        

New Debt Service ‐$                 ‐$                    ‐$                 ‐$                (190,000)$          (190,000)$        

Total  Debt Service (534,205)$       (529,935)$          (524,545)$       (518,350)$      (701,175)$          (692,600)$        

Cash Flow 848,243$        286,528$           607,259$        0 17,172$          35,282$             681,267$         

Debt Coverage Ratio (DCR)  2.59  /1 1.54  /1 2.16  /1   1.03  /1 1.05  /1 1.98  /1

PROFIT AND LOSS STATEMENT

Historical Projected 

   

X.  OPERATING BUDGET – ABILITY TO REPAY  

The primary source of repayment for the loan will be revenue derived from hotel operational revenues which  are  comprised  of  rooms,  food  and  beverage,  other  operated  departments,  and miscellaneous income. Projected hotel revenues and expenses are calculated on a middle  (base) case based on past operational performance. The borrower believes  that  the combination of  the  labor cost  reductions  in the  food  and  beverage  unit,  together with  expected  increase  revenue  due  to  the  upgrades  to  the guestrooms  and  suites will  enable  them  to  achieve  its  revenue  goals,  and  thereby  generate  enough income to repay the existing and new 108 debt service and retain 139 FTE jobs over the life the loans.   The borrower prepared projections  that  expect  the Average Daily Rate‐(ADR)  for 2020  to be $155  a night.  The  ADR  generates  enough  revenue  to  support  the  project.  Developer  projected  ADR  and Revenue Per Available Room (RevPAR) are based upon the middle‐tier projections.       The City presently has an eleven‐year Ground Lease with the hotel that expires after June 30, 2022 the borrower  is current  in  its PILOT payments.     The annual Ground Lease payment  is formulaic and varies year to year. In 2018 it was $531,365.   One of  the  largest credit risks  is  the $1.75 million balloon payment on the  first Section 108  loan. This balloon payment occurs half way  into the term of the new $4.75 million  loan. The $2.2 million annual debt  service payment  in 2030  is a 160%  increase above  the $837,000 payment due  in 2029. 315TSA expects to place in escrow a separate account that will be used to pay the balloon payment in 2030. 

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After the balloon payment, the debt service payments are modest and revenue projections suggest that ownership will have healthy cushions with debt coverage ratios for the balance of the loan until 2040.  As another option, ownership could refinance all remaining debt  in 2030 when the balloon payment  is due. There would be no prepayment penalty if the entire loan balance ($4.6 million) was refinanced with another credit facility in 2030.  A twenty‐year operating pro forma assembled by National Development Council on behalf of the City is included in Exhibit A.   XI.   CITY PLEDGE OF CDBG  In  the  instance  the project  is  in default and unable  to repay either Section 108  loan,  the debt service payments would be made by the City community development block grant (CDBG) Line of Credit. With this  application,  the  City will  complete  a  separate  form which  pledges  its  CDBG  line  of  credit  as  a replacement source of repayment. The City has not had to use any of its CDBG for a repayment source for the existing Section 108 loan as 315TSA has been current on that loan since closing.  The City’s CDBG 2019‐2020 annual allocation is $3,517,190   XII.  ADDITONAL SECURITY FOR CITY  Given that the CDBG program  is a function of annual congressional appropriation and CDBG funds are not  guaranteed  to be  available  to  the City over  the  term of  the  loan,  the City must have  additional security for the loan.  The City will  retain a  first mortgage  security  interest  in  the property. Prior  to  the  loan closing, a MAI certified appraiser will affirm the valuation for the hotel and supporting collateral.  Section 108 underwriting guidance suggests for the entitlement city applicant to have a security interest in  real property  that demonstrates a  loan  to value  (LTV)  ratio not exceeding 80%. The City’s  security interest  in the real property for the combined principal balance of both 108  loans  is estimated at 65% LTV based on an income based Fair Market Value (FMV) calculation.    If the income approach to valuation is used and the 2021 represents the stabilized net operating income to  be  capitalized,  the  property would  likely  have  a  “as  stabilized”  fair market  value  exceeding  $15 million, as evidenced with the following.  

2021 As  Stabil ized NOI $1,204,322

Capitalization Rate 9.00%

Valuation $13,381,361

Existing and New Loan Balance $10,350,000

Loan (Total  Debt) to Value (LTV) 0.77 /$1

LOAN TO VALUE ESTIMATE

  XIII.  GUIDELINES FOR EVALUATING ECONOMIC DEVELOPMENT PROJECTS per 570.209(a) –   HUD  has  developed  guidelines  that  are  designed  to  provide  the  recipient  with  a  framework  for financially  underwriting  and  selecting  CDBG‐assisted  economic  development  projects  which  are financially viable and will make the most effective use of the CDBG funds, per CFR 570.209(a) 

10

 Below are the guidelines and the comments and findings to each of the findings:  

GUIDELINES   FINDINGS (1) That project costs are reasonable;  

The leasehold costs are from a qualified general contractor. The FF& is based on price quotes from a supplier approved by the Hilton flag. For 393 rooms, the cost per room averages $11,450 per room.  

 (2) That all sources of project financing are committed; 

The total project sources total $6,000,000 of which $1,250,000 is borrower equity, and $4,750,000 is the new Section 108 Loan. At least $1 million of the owner equity has already been expended on restaurant improvements.  

(3) That to the extent practicable, CDBG funds are not substituted for non‐Federal financial support  

Section 108 funding is required to fill the funding need. Conventional debt is not available to cover project costs due to substantial write‐off of loan and lack of consistent profitability record.  

(4) That the project is financially feasible;  

Yes. The projection indicates an ability to support existing and new debt service. Of challenge will be management’s ability to expense enough repair and replacement reserves to fund future capital improvements.  

(5)  That to the extent practicable, the return on the owner's equity investment will not be unreasonably high 

Return on equity will not be unreasonably high. Owners have been investing in property continually since acquisition and returns for such investment have been below market.   

(6) That to the extent practicable, CDBG funds are disbursed on a pro rata basis with other finances provided to the project.  

Release of funding is contemplated as follows: Both the $4,750,000 new 108 loan and the $1,250,000 in owner equity has and will be invested pari pasu. 

 XIV.  DEBT SCHEDULES AND PRINCIPAL REDUCTION SCHEDULES   The term of the loan is 20 years. The rate is 4%. The City’s permanent rate will not be known until the public offering of the notes but is assumed that the city’s rate will be below the proposed 4% to 315TSA.  The  debt  schedule  for  the  new  loan  is  structured with  a  five‐year  interest  only  payment  schedule. Principal and  interest payments will commence  in year 5  (2025) and amortize over a  fifteen  (15) year period  

11

Year Year Payment Type Beg Balance Annual D/S Interest Principal BalanceHUD PRINCIPAL 

REDUCTION SCHEDULE

1 2020 Interest Only $4,750,000 $190,000 $190,000 $0 $4,750,000

2 2021 Interest Only $4,750,000 $190,000 $190,000 $0 $4,750,000

3 2022 Interest Only $4,750,000 $190,000 $190,000 $0 $4,750,000

4 2023 Interest Only $4,750,000 $190,000 $190,000 $0 $4,750,000

5 2024 Interest Only $4,750,000 $190,000 $190,000 $0 $4,750,000

6 2025 $4,750,000 $427,220 $190,000 $237,220 $4,512,780 $240,000

7 2026 $4,512,780 $427,220 $180,511 $246,709 $4,266,071 $250,000

8 2027 $4,266,071 $427,220 $170,643 $256,577 $4,009,493 $260,000

9 2028 $4,009,493 $427,220 $160,380 $266,840 $3,742,653 $270,000

10 2029 $3,742,653 $427,220 $149,706 $277,514 $3,465,139 $280,000

11 2030 $3,465,139 $427,220 $138,606 $288,615 $3,176,524 $290,000

12 2031 $3,176,524 $427,220 $127,061 $300,159 $2,876,365 $300,000

13 2032 $2,876,365 $427,220 $115,055 $312,166 $2,564,199 $310,000

14 2033 $2,564,199 $427,220 $102,568 $324,652 $2,239,547 $320,000

15 2034 $2,239,547 $427,220 $89,582 $337,638 $1,901,909 $340,000

16 2035 $1,901,909 $427,220 $76,076 $351,144 $1,550,765 $350,000

17 2036 $1,550,765 $427,220 $62,031 $365,190 $1,185,575 $360,000

18 2037 $1,185,575 $427,220 $47,423 $379,797 $805,778 $370,000

19 2038 $805,778 $427,220 $32,231 $394,989 $410,789 $400,000

20 2039 $410,789 $427,220 $16,432 $410,789 $0 $410,000

    $7,358,303 $2,608,303 $4,750,000 $4,750,000

Self‐ Amortizing 

Payments  over 15 

years

DEBT SCHEDULE FOR NEW SECTION 108 LOAN

The previous Section 108  loan was also structured with a  five‐year  interest only period, 2010 – 2015. The  principal  reduction  schedule  was  not  based  upon  a  straight  amortization  schedule.  It  calls  for principal payments of $350,000  in years 6 – 19 (2016 – 2029) and a balloon payment of $1,750,000  in year 20 (2030). As previously covered, this balloon payment represents one of the largest credit risks as the annual debt service payment is substantially higher in this year than other years  

Year Year Beg Balance Annual D/S Interest Principal Balance

1 2010 $7,000,000

9 2019 $4,750,000 $518,350 $168,350 $350,000 $4,400,000

10 2020 $5,250,000 $511,175 $161,175 $350,000 $4,900,000

11 2021 $4,900,000 $502,600 $152,600 $350,000 $4,550,000

12 2022 $4,550,000 $493,640 $143,640 $350,000 $4,200,000

13 2023 $4,200,000 $484,190 $134,190 $350,000 $3,850,000

14 2024 $3,850,000 $474,005 $124,005 $350,000 $3,500,000

15 2025 $3,500,000 $463,645 $113,645 $350,000 $3,150,000

16 2026 $3,150,000 $453,110 $103,110 $350,000 $2,800,000

17 2027 $2,800,000 $442,295 $92,295 $350,000 $2,450,000

18 2028 $2,450,000 $431,445 $81,445 $350,000 $2,100,000

19 2029 $2,100,000 $420,210 $70,210 $350,000 $1,750,000

20 2030 $1,750,000 $1,808,800 $58,800 $1,750,000 $0

DEBT SCHEDULE FOR PREVIOUS SECTION 108 LOAN

  XV.  ENVIRONMENTAL REVIEW  Per 24 CFR 58 – See Exhibit D  XVI.  CITIZEN PARTICPATION 

 The City Council public hearing and community meeting schedule is as follows:   Public Hearing and City Council    Monday, July 8, 2019      Community Meetings       July 17, July 18, and July 24.   

12

 XVII.  CONTACT FOR ADDDITIONAL INFORMATION  Erin Howard, AICP Director of Economic Development Department of Development Services 250 Constitution Plaza, 4th Floor        City of Hartford  Hartford, CT 6103  1‐860‐757‐9071 Erin.Howard@hartford.gov                       XIX.  EXHIBITS  Exhibit A    MAI “As Completed” Appraisal  Exhibit B    108 loan Term Sheet  Exhibit C    Environmental Review – 24 CFR Part 58  Exhibit D     Citizen’s Participation and Community Participation  Exhibit E Collective Bargaining Agreement  Exhibit F    Agreements between City and 315 Trumbull Street Associates, LLC   Exhibit G    SF – 424 Application for Federal Assistance  Exhibit H    Lobbying Certification Statement for Loan Guarantees  

EXHIBIT A: 20‐ YEAR OPERATING PRO FORMA  

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Number of keys 393 393 393 393 393 393 393 393 393 393 393 393 393 393

Rooms  available 143,838 143,445 143,445 143,445 143,838 143,445 143,445 143,445 143,838 143,445 143,445 143,445 143,838 143,445

Rooms  sold 97,608 97,341 97,341 97,341 97,608 97,341 97,341 97,341 97,608 97,341 97,341 97,341 97,608 97,341

Rooms  occupied 98,001 97,734 97,734 97,734 98,001 97,734 97,734 97,734 98,001 97,734 97,734 97,341 97,608 97,341

Occupancy % (Sold) 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86% 67.86%

Average rate $155 162.32$          166.37$          170.53$          174.80$          179.17$          183.64$          188.24$          192.94$          $198 $203 $208 $213 $218

RevPAR $105 $110 $113 $116 $119 $122 $125 $128 $131 $134 $138 $141 $145 $148

Total  departmental  revenue $18,085,655 $18,863,497 $19,335,085 $19,818,462 $20,369,404 $20,821,771 $21,342,316 $21,875,874 $22,484,011 $22,983,340 $23,557,923 $24,146,871 $24,818,141 $25,369,306 $25,876,693 $26,394,226 $26,922,111 $27,460,553 $28,009,764 $28,569,960 $29,141,359

Total  departmental  expenses ($8,290,397) ($8,501,401) ($8,713,357) ($8,930,597) ($9,169,712) ($9,381,461) ($9,615,358) ($9,855,087) ($10,118,956) ($10,352,624) ($10,610,735) ($10,860,454) ($11,151,271) ($11,408,749) ($11,636,924) ($11,869,662) ($12,107,056) ($12,349,197) ($12,596,181) ($12,848,104) ($13,105,066)

Operating Profit $9,795,258 $10,362,096 $10,621,728 $10,887,865 $11,199,692 $11,440,310 $11,726,957 $12,020,786 $12,365,054 $12,630,715 $12,947,188 $13,286,417 $13,666,870 $13,960,558 $14,239,769 $14,524,564 $14,815,055 $15,111,356 $15,413,584 $15,721,855 $16,036,292

Total  undistributed expenses ($6,526,189) ($6,725,412) ($6,893,360) ($7,065,503) ($7,262,601) ($7,422,823) ($7,608,191) ($7,798,191) ($8,015,691) ($8,192,532) ($8,397,129) ($8,606,836) ($8,846,896) ($9,076,501) ($9,258,031) ($9,443,191) ($9,632,055) ($9,824,696) ($10,021,190) ($10,221,614) ($10,426,046)

Gross operating profit $3,269,069 $3,636,684 $3,728,368 $3,822,362 $3,937,091 $4,017,488 $4,118,766 $4,222,596 $4,349,364 $4,438,183 $4,550,060 $4,679,581 $4,819,974 $4,884,057 $4,981,738 $5,081,373 $5,183,000 $5,286,660 $5,392,393 $5,500,241 $5,610,246

Fixed Charges ($1,809,186) ($1,508,277) ($1,542,230) ($1,777,001) ($1,614,382) ($1,649,084) ($1,686,440) ($1,724,701) ($1,965,844) ($1,804,033) ($1,845,152) ($1,887,274) ($1,932,579) ($2,182,011) ($2,225,652) ($2,270,165) ($2,315,568) ($2,361,879) ($2,409,117) ($2,457,299) ($2,506,445)

EBITDA ‐ (UNADJUSTED) $1,459,883 $2,128,407 $2,186,138 $2,045,361 $2,322,709 $2,368,404 $2,432,326 $2,497,895 $2,383,519 $2,634,150 $2,704,907 $2,792,307 $2,887,394 $2,702,045 $2,756,086 $2,811,208 $2,867,432 $2,924,781 $2,983,276 $3,042,942 $3,103,801

Replacement Reserve ($723,426) ($754,540) ($773,403) ($792,738) ($814,776) ($832,871) ($853,693) ($875,035) ($899,360) ($919,334) ($942,317) ($965,875) ($992,726) ($1,014,772) ($1,035,068) ($1,055,769) ($1,076,884) ($1,098,422) ($1,120,391) ($1,142,798) ($1,165,654)

Net operating income $736,457 $1,373,867 $1,412,735 $1,252,622 $1,507,933 $1,535,533 $1,578,634 $1,622,860 $1,484,159 $1,714,816 $1,762,590 $1,826,432 $1,894,669 $1,687,273 $1,721,018 $1,755,439 $1,790,548 $1,826,358 $1,862,886 $1,900,143 $1,938,146

Exisitng 108 Debt Service ($511,175) ($502,600) ($493,640) ($484,190) ($474,005) ($463,645) ($453,110) ($442,295) ($431,445) ($420,210) ($1,808,800) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New 108 Debt Service ($190,000) ($190,000) ($190,000) ($190,000) ($190,000) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220)

Total  108 Debt Service ($701,175) ($692,600) ($683,640) ($674,190) ($664,005) ($890,865) ($880,330) ($869,515) ($858,665) ($847,430) ($2,236,020) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220) ($427,220)

Cash Flow $35,282 $681,267 $729,095 $578,432 $843,928 $644,667 $698,303 $753,345 $625,493 $867,386 ($473,430) $1,399,212 $1,467,449 $1,260,053 $1,293,798 $1,328,219 $1,363,327 $1,399,138 $1,435,665 $1,472,923 $1,510,926

Debt Coverage Ratio 1.05 1.98 2.07 1.86 2.27 1.72 1.79 1.87 1.73 2.02 0.79 4.28 4.43 3.95 4.03 4.11 4.19 4.27 4.36 4.45 4.54   

For more than 30 years, Waterford has established itself as a leading

company in the hospitality industry through steady growth and strict

adherence to industry fundamentals. Waterford keeps its owners’ and

customers’ best interests at heart. We provide value to the customer as

well as the owner, while providing career growth for associates.

This three-pronged commitment translates into business success.

w w w . w a t e r f o r d h o t e l g r o u p . c o m

EXCELLENCE IN HOSPITALITY

OPERATIONS

Waterford’s philosophy of the day-to-day running of a

hotel or convention facility is simple: “hands-on hospi-

tality”. This hospitality management style is rooted in

property-level empowerment, aided by the expert sup-

port from our corporate office in areas such as:

• Business Planning

• Brand Standards

• Budgetary Guidance

• Property Oversight

• Short and Long-term Operational Planning

HOSPITALITY MANAGEMENT

SALES & MARKETING

To outperform the competition, it takes a top-down

approach to product positioning and smart marketing.

Waterford-managed properties reach or exceed sales

goals and maintain an edge over competitors through:

• Sales and Marketing Planning

• Direct Sales

• Franchise Channels

• Market Share Focus

• Marketing and Advertising

• Public and Media Relations

• Revenue Management

• E-Commerce

HUMAN RESOURCES

Waterford understands that effective associates who

communicate well with guests and co-workers are the

most valuable assets of all. Our comprehensive human

resources department assists in developing a motivated

and productive staff through:

• Associate Recognition Program

• Recruitment and Retention

• Orientation

• Training

• Benefit Administration• Salary and Benefit Surveys• Opinion Surveys

• Career Advancement

• Internships

Waterford is one of the nation’s top hotel and

convention center management companies. The

collective expertise of our team and track record

of success has earned us the distinction as an

approved operator for the leading hotel brands.

HOSPITALITY MANAGEMENT

FINANCE

Waterford provides financial support to our properties

through a variety of accounting and finance functions

and controls. With the power of current information at the

fingertips of our executives and our strong collective back-

ground in financing, refinancing, hotel construction, and

day-to-day accounting, Waterford can apply sound fiscal

management to leverage resources and raise funds, cut

costs, grow returns, and act opportunistically during favor-

able market changes. Our financial services include:

• Centralized and Decentralized Accounting

• Internal Audit

• Cash Management

• Daily and Monthly Reporting

• Financial Reporting for Public (SEC) and Private

Companies

• Financial Analysis

• Operating Budgets

• Flexible Budgeting

• Labor Analysis

• Information Technology

• Flow-Through Analysis

• Insurance Procurement and Risk Management

Whether the involvement begins at conception or

during operation, Waterford strives for successful

performance and profitability of each managed

property, while maintaining the highest standards

of quality, service, and cleanliness.

FOOD AND BEVERAGE

Waterford’s extensive experience in food and beverage

operations comes from successfully managing numerous

outlets, including award-winning restaurants, lounges and

bars, cafes, and more than 300,000 square feet of func-

tion space. For more information, visit:

www.waterfordgrouprestaurants.com

HOSPITALITY MANAGEMENT

VENUE MANAGEMENT

In an effort to take advantage of the growing public facili-

ties management market, Waterford formed Waterford

Venue Services to manage large-scale public assembly

facilities. We provide facility management expertise in

many areas, such as:

• Operations

• Sales and Marketing

• Human Resources

• Finance and Accounting

• Technical Services

• Food and Beverage

TECHNICAL SERVICES

Waterford offers project management, value-engineering,

architectural and plan review expertise, and draws from vast

experience in a number of successfully executed develop-

ment and renovation projects. We work closely with own-

ership in determining appropriation of revenues to be set

aside for capital expenditures, with a shared goal of maxi-

mizing revenues and return on investment. Other variables,

such as life safety and ever-changing franchise require-

ments, are continually reviewed. Our services include:

• Project Budgeting

• Project Management

• Construction Management

• Design Review

• Engineering

• Capital Planning

• FF&E Procurement and Installation

Len Wolman

Chairman and CEO

Len Wolman has more than 40 years of experience in the hospitality industry. He

serves as Chairman and CEO of Waterford Group, LLC, a group of companies

and partnerships specializing in the development, ownership, and management

of hotel, venue, and gaming projects. Under his leadership, Waterford Group has

been involved in developing and operating projects totaling more than $3 billion.

Len holds a National Diploma in Hotel Management from the Hotel School of

Technikon Witwatersrand in South Africa.

Mark Wolman

Principal and Director

Mark Wolman is a Principal and Director of Waterford Group. He has more than 30

years of experience in land development, residential and commercial construction,

hospitality development and operations, as well as asset management. In his

role with Waterford, Mark has been integrally involved in the development and

supervision of projects totaling more than $3 billion.

Robert Winchester

Past President and Senior Advisor

Rob Winchester joined Waterford Hotel Group in 1990. He served in numerous

roles with the company before assuming the position of President in 2000. In

December 2017, Rob retired from his position as President and currently serves

as Past President and Senior Advisor. In his new role, Rob provides ongoing

transitional support to the newly appointed President and executive leadership.

He holds a Bachelor of Science degree in Accounting from the University of

Connecticut.

Michael Heaton

President

Since joining Waterford Hotel Group in 1997, Michael Heaton has held numerous

management positions at Waterford-managed properties before assuming the role

of Vice President, Operations in 2009. In January 2018, Michael was promoted

to the position of President for Waterford Hotel Group and is responsible for all

aspects of on-going operations for the company. Michael holds a Bachelor of Arts

degree in Economics from the State University of New York.

LEADERSHIP

Raj Dansinghani

Chief Financial OfficerRaj Dansinghani is responsible for all corporate and property level finance, debt, and audit and risk management for the organization. He serves as a key

financial link between Waterford Hotel Group, property ownership, managers, controllers, and accountants. Raj joined Waterford in 2005 as Chief Accounting

Officer for Waterford Group, working with ownership and management in multiple areas, including financing, franchising, financial reporting, compliance, audit/tax coordination, and strategic analysis. Previously, Raj worked as a

senior manager at PricewaterhouseCoopers. He holds a Bachelor of Science

degree in Accounting and Finance from Nichols College and is a Certified Public Accountant in the State of Connecticut.

Gary Avigne

Vice President, Acquisitions and Development

Gary Avigne, Vice President of Acquisitions and Development, directs and

coordinates the growth of Waterford Hotel Group. Gary works with institutional

investors, lenders, partners, and third party owners, arranging property

acquisitions, management contracts, joint venture partnerships, and selective

new development. Gary has more than 35 years of respected hotel experience

and expertise in virtually all disciplines of the industry.

Duane Schroder

Vice President, Operations

Duane Schroder is Vice President, Operations for Waterford Hotel Group and

is responsible for the oversight of the portfolio's operations. Duane joined

the organization in 2002 as part of an International Training Program with

the University of Johannesburg. He has filled many positions since that time, including Regional Hotel Director and General Manager of numerous hotels

in our portfolio. Duane received his Hospitality Degree from Witwatersrand

University.

Judith Moran

Vice President, Human Resources

Judy Moran joined Waterford Hotel Group in 2004, bringing more than 25 years

of hospitality experience to the organization. Judy’s focus at Waterford is on

employee and labor relations, executive recruitment, compensation and benefit design, performance management and organizational strategic goals. Her past

experience includes operations and human resources positions with Hyatt, Le

Meridien and Sonesta. Judy holds a Bachelor of Science degree in Psychology

from Emory University in Atlanta, Georgia.

LEADERSHIP

Karen Bachofner

Vice President, Sales and Marketing

Karen Bachofner has more than 25 years of sales experience in the hospitality

industry. She first joined Waterford Hotel Group in 1987 and has held several sales positions at Waterford-managed properties before joining the corporate

team to direct the sales, marketing and revenue management efforts of

Waterford's managed portfolio. Karen is a member of Hospitality Sales &

Marketing Association International (HSMAI) and is certified to teach Achieve Global’s Professional Selling Skills.

Lisa Beers

Vice President, Marketing and Communications

Since joining the company in 1987, Lisa has worked in various capacities

and functions, giving her a global understanding of the company’s goals and

objectives. In addition to strategic business development activities, she directs

media relations, branding, advertising, and digital marketing. Lisa holds a

Bachelor of Science degree in Business Management from the University of

Phoenix, and is a member of the Public Relations Society of America.

John DelGrosso

Vice President, Construction, Engineering and Technical Services

John DelGrosso has more than 25 years of experience in the construction

industry. His wide range of experience in construction and project management

includes numerous commercial and hotel projects, with direct oversight of more

than 20 new-build hotels and $100 million in capital projects. John attended

Mitchell College and the Hartford Graduate Center.

Michael Scott

Vice President, Information Technology

Michael Scott has been with Waterford Hotel Group for more than 15 years. He

manages brand standards, system security, and technology infrastructure with a

focus on improving workflow productivity. Michael holds a Bachelor of Science degree in Accounting from Eastern Connecticut State University.

LEADERSHIP

PROPERTY LOCATION ROOMS

ARKANSASDoubleTree by Hilton Little Rock 288

CONNECTICUTCourtyard by Marriott Cromwell 145Hilton Garden Inn Danbury 158Hilton Hartford Hartford 393Marriott Hartford Downtown Hartford 409SpringHill Suites Milford 124Residence Inn by Marriott Milford 74New Haven Village Suites New Haven 112Coutyard by Marriott Shelton 161Hyatt Place Uncasville 176 Microtel Uncasville 120Hyatt House Windsor 132Sheraton Hartford Hotel at Bradley Airport Windsor Locks 237Connecticut Convention Center Hartford ------

FLORIDAFairfield Inn & Suites Boca Raton 119Fairfield Inn & Suites Jupiter 110Courtyard by Marriott Stuart 120Ramada West Palm Beach 162

ILLINOIS

DoubleTree by Hilton Mt. Vernon 200DoubleTree by Hilton Skokie 369

MASSACHUSETTSInn on Boltwood Amherst 49 Andover Inn Andover 30Fairfield Inn & Suites Hyannis 125Courtyard by Marriott Marlborough 202Sheraton Needham 247New Bedford Harbor Hotel New Bedford 70Hyatt House Waltham 135DoubleTree by Hilton Westborough 223Williams Inn Williamstown 116

NEW YORKTownePlace Suites Albany 106Homewood Suites by Hilton Ithaca 91Courtyard by Marriott Lake Placid 96Hilton Garden Inn Riverhead 114Residence Inn by Marriott Riverhead 131

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OUR PORTFOLIO

Waterford provides value to

the customer, creates value for

the owner, and provides career

growth for associates. This three-

pronged commitment translates

into business success.

www.waterfordhotelgroup.com

914 Hartford TurnpikeP.O. Box 715

Waterford, CT 06385Phone: (860) 442-4559

Fax: (860) 437-7752

EXCELLENCE IN HOSPITALITY

PROPERTY LOCATION ROOMS

OHIOAloft Beachwood 135Westin Columbus 188Comfort Inn Piqua 101

PENNSYLVANIA

Courtyard by Marriott Coatesville 125Gettysburg Hotel Gettysburg 119

RHODE ISLANDCourtyard by Marriott Warwick 92Hyatt Place Warwick 120

TOTAL PROPERTIES LOCATIONS ROOMS

41 9 States 6,229

OUR PORTFOLIO

Waterford provides value to

the customer, creates value for

the owner, and provides career

growth for associates. This three-

pronged commitment translates

into business success.

www.waterfordhotelgroup.com

914 Hartford TurnpikeP.O. Box 715

Waterford, CT 06385Phone: (860) 442-4559

Fax: (860) 437-7752

EXCELLENCE IN HOSPITALITY

w w w . w a t e r f o r d h o t e l g r o u p . c o m

LLC

914 Hartford Turnpike · P.O. Box 715

Waterford, CT 06385

Phone: (860) 442-4559

Fax: (860) 437-7752

315 TRUMBULL STREET ASSOCIATES, LLCDBA HILTON HARTFORD

ORGANIZATIONAL CHART

Hartford MHI, LLC Mystic Hotel Investors, LLC

Mystic Partners, LLC

88%

13.87% 86.13%

Albemarle HotelAssociates, LLC

315 Trumbull StreetAssociates, LLC

(Lessor)

HT – 315 Trumbull StreetAssociates, LLC

(Lessee)

Mystic Partners, LLC

Hartford MHI, LLC

Mystic Hotel Investors, LLC

Albemarle HotelAssociates, LLC

12%

100% 12%

13.87%

86.13%

Mystic Partners Leaseco, LLC

88%