New Moran Nov. 15 report

8/10/2019 New Moran Nov. 15 report

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New Moran, Inc.

PO Box 8502

Burlington, VT 05402

MoranPlant.org

steel columns for tenant use optimization, and providing current, safe access to the roof

areas for public viewing. NMI expects to contract with EV for both Civil and Structural

Engineering services.

c. NMI contracted historic preservation consultant Emily Wadhams to review conceptual

designs with regards to the Secretary of the Interior's Standards for Rehabilitation,

confirm the suitability of the project for Rehabilitation Investment Tax Credits (RITC), and

produce a preliminary report for review and approval by the Vermont Division for Historic

Preservation and the National Park Service. While this scope was not required in NMIsMOU with the City until March, it proved to be a critical path component of thorough

diligence with regards to both design and financing.

d. John Sandor, the National Park Service (NPS) reviewer for the State of Vermont, visited

the site on October 30th with Caitlin Corkins, the tax credit reviewer for the Vermont

Division for Historic Preservation. Following this visit, NPS assessed NMIs preliminary

plans with regard to the feasibility of receiving the Federal Rehabilitation Investment Tax

Credit (see Addendum C). The results of this preliminary review letter are encouragingwith respect to tax credit feasibility. Despite the positive preliminary review, significant

evaluation and design work are still ahead. In particular, the ability to achieve net-zero

energy use will be particularly challenging to complete within traditional NPS guidelines.

NMI has arranged for a comprehensive engineering and design study to address these

variables.

e. Pending the completion of the predevelopment diligence phase of the project, NMI will

resume schematic design with SBA in December, 2014, in line with anticipated

submission of permit applications in March, 2015.

2. Conceptual Site Plan


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New Moran, Inc.

PO Box 8502


MoranPlant.org

3. Development Budget

a. Sources (Addendum E):

i. Specific requests for City infrastructure investment

1. $6.3M of TIF Allocation as approved by public vote in March, 2014.

2. As part of the diligence completed in the last eight months, NMI is

confident the landscape surrounding Moran on the northern waterfront

represents an essential piece of creating a viable and vibrant campus for

the Moran Plant, surrounding stakeholders and the public at large. Inaccordance, we have reflected an additional $2,854,187 within the NMI

project budget to complete a combination of $230,000 in environmental

remediation and $2,624,187 in site work and landscape architecture for

the proposed site and public green space immediately surrounding the

Moran building. The current sources for this work are charitable

contributions and the resulting tax credit equity; our existing budget

includes no additional City sources above $6.3M in TIF. If additional TIFor City funds were available for infrastructure investment, a cost share of

the $2,854,187 necessary complete the undeveloped waterfront acreage

surrounding Moran would leverage tax credit investment, reduce strain on

the Moran Plant operations, and increase the creditworthiness of NMI.

Please refer to Addendum D for proposed site boundaries, and proposed

terms in Section 4, and Section 6 for discussion of operating reserves.

b. Uses (Addendum E)

4. Financing Plan

a. Credit Enhancement Assumptions:


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New Moran, Inc.

PO Box 8502


MoranPlant.org

and reserve funding formulas. The funds would be advanced at construction

closing, and administered by an agreed-upon agent acting as a fiduciary on

behalf of all the sources of financing.

ii. Regarding any shared additional infrastructure investment discussed in Section

3, the funds would offset existing sources for site work and environmental

remediation. Pending an agreement with the City, those offset sources would

create additional operating reserves and reduce required debt service carried by

NMI. City funding would be requested in a similar fashion to the alreadyapproved TIF funds, as described above.

c. Capital Fundraising Campaign Plan and updated milestones are detailed in Addendum

F.

5. Operating Budget & Pro Forma (see Addendum G)

6. Determination of sufficient operating reservesa. The Development Budget (Addendum E) indicates an Operating and Lease-Up Reserve

of $1.7M. As detailed in Addendum G, this reserve is adequate to capitalize

approximately $1M in anticipated expenditures during years 1-5 of operation, plus a

reserve equaling approximately one year of additional building operating expenses and

the required distributions to the historic tax credit investor.

b. The existing reserve detailed in Addendum E is, by our determination, the minimum

viable amount without which we would reduce the scope of the project.

c. The challenge of securing sufficient operating reserves and additional capital investment

is an area of focus for the team. While elements of the project could be downsized to

reduce total expenditure, NMTC and RITC funding provides direct leverage of

$ $


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New Moran, Inc.

PO Box 8502


MoranPlant.org

McArdle joined RP after thirteen years at the Vermont Community Foundation. McArdle

assumed the lead role on the Moran project in August, while Richard Russell worked

directly with prospective leadership donors.

b. After more than seven months of research, prospect identification and fundraising visits,

RP is confident in the ability to attract a total of $11M in charitable support for the Moran

Plant redevelopment. The summary, conclusions and a gift structure for the campaign

are attached (see Addendum I).

8. Ground Lease and Property Tax Liability Assumptions (see Addendum J).

9. Updated Project Schedule (see Addendum K).

a. To date, NMI has tracked on schedule across the board.Following the delivery of this

report, NMI will work with CEDO and the Mayor's Office to review a term sheet for City

Council approval in January, followed by Development Agreement approval in March,

2015. Simultaneously, we anticipate resuming schematic design with our design team inDecember, 2014, in line with anticipated submission of permit applications in March,

2015. This puts NMI on track for a construction start in Spring 2016 and a grand opening

in Spring, 2017.

10. Letters of interest for project funding from a CDE for NMTC (see Addendum L).

a. After preliminary discussion with multiple CDEs beginning in October, 2013, NMI

retained the Washington, DC based The Binnick Group (TBG) in August to evaluate the

availability of NMTC allocation from national CDEs. TBG reviewed the Moran Plant

project to date, and developed a comprehensive Sell Sheet, which was distributed to

seven CDEs across the country including Housing Vermonts Vermont Rural Ventures.

$


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New Moran, Inc.

PO Box 8502


MoranPlant.org

iii. A separate review was completed with the Flynn Center with regards to operating

expenses. The Flynn campus is within 10% of the projected square footage of

Moran, and represents similar use classes across their properties. Projected

Moran expenses are proportionally appropriate to those of the Flynn Center, with

some revisions made and an additional contingency included.

c. While not a traditional market study, this review provided a representative evaluation of

rent and occupancy assumptions given projected tenant mix on the Moran site. The

conclusions from these three reviews, with discussion and subsequent revisions to theoperating model, are attached as Addendum M.

12. Proposed Tenant Mix

a. NMI continues to engage significant interest from prospective tenants and in multiple

cases is advancing in-depth dialogue with regard to lease, terms, and intent. Multiple

Letters of Intent are currently under negotiation, representing approximately 40% of

annual operating revenue. The attached occupancy schedule (see Addendum N),reflects these dialogues and terms.

13. Preliminary Review with Planning & Zoning Staff

a. NMI initiated a review with Sandrine Thibault on June 4th, 2014, and completed a

preliminary review with the Burlington Department of Planning & Zoning on October

14th, 2014. Those present included Director David E. White, Zoning Administrator Ken

Lerner, and Senior Planners Mary ONeil and Scott Gustin.

b. Based on the October 14th review, NMI began a comprehensive Public Trust Doctrine

investigation with legal counsel at Dinse Knapp McAndrew. Research began with a

focus on the Public Trust Doctrine under Vermont State statute and case law and, more


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ADDENDUM A

Champions Council


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New Moran, Inc.

PO Box 8502


MoranPlant.org

Champions Council for the Moran Plant

From the initial conception of the New Moran concept, we have received extraordinary support for the

project from a number of business-owners and community leaders, which prompted the assembly of a

team of ambassadors and advisers that we call our Champions Council.

The Champions Council is a collection of community leaders willing to lend their name in support of thenon-profit New Moran, Inc. and the redevelopment of the Moran Plant.

We are have asked for support, both on a letterhead and in everyday conversation, from individuals

who offer perspective, bring gravitas, and demonstrate a range of support for the project. There is no

fiduciary or governance responsibility associated with this role.

We have asked all Champions to make a charitable contribution towards the project of an amount that

is meaningful for them at this point in the project, and that amount has varied for each champion. The

intended term of this support is through the opening of the building, Spring 2017, though the role is at

the discretion of each individual.

TheChampions Council includes:

! Benjy Adler, Skinny Pancake

! Jill Badalato, Dealer.com;

! Brian Boardman, Hickok and Boardman Real Estate;! Paul Bruhn, Preservation Trust of Vermont;

! Alex Crothers, Crothers Management Group;

! Marguerite Dibble gametheory;


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ADDENDUM B

Conceptual Building Design


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ADDENDUM C

National Park Service Review


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Emily Wadhams

Historic Preservation Consulting

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ADDENDUM D

Conceptual Site Plan


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ADDENDUM E

Development Budget


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Addendum E - New Moran - Development Budget11/14/2014 % of Total C

Sources Of Funds Equity

Federal Historic Tax Credit (RITC) 4,106,019 12%

State Historic Tax Credit 250,000 1%

New Markets Tax Credit (NMTC) 9,586,007 29%

Senior Loan 1,875,000 6%

Charitable 11,000,000 33%

TIF Allocation 6,300,000 19%

Total Sources: 33,117,025 100% $

Uses of Funds

Acquisition Environmental Remediation 230,000 1%

Closing Costs 65,000 0%

Total Acquisition Cost 295,000 1% $

Hard Costs

Building Reconstruction 8,791,344 27%

Building Additions 3,397,808 10%

Demolition 545,058 2%

Site Work & Landscaping 2,624,187 8%Contingency & Escalation 3,071,679 9%

FFE - Public Spaces & Tenant Space Allow 300,155 1%

Living Machine 230,000 1%

Energy Production/Upgrades 1,320,372 4%

IT Infrastructure 100,000 0%

Tenant Fit-Up - Allowance 2,491,920 8%

Total Hard Costs 22,872,524 69% $

Design Architectural & Engineering 1,179,792 4%

Civil Engineering 117,920 0%

Commissioning 60,031 0%


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Other Soft Costs

Accounting & Audit 80,000 0%

Capital Campaign 145,000 0%

Clerk of the Works 75,000 0%

Community Engagement 75,000 0%

Legal 900,000 3%

Marketing & Market Studies 85,000 0%

Permit Fees 424,737 1%

Program Development & Administration 260,000 1%Project Management & Financial Admin. 350,000 1%

Property Management 40,000 0%

Testing 25,000 0%

Contingency 125,000 0%

Total Other Soft Costs 2,584,737 8% $

Financing, Reserves & Carrying Charges

Reserves

NMTC Reserves 1,338,924 4%Operating/ Lease-Up Reserves 1,730,000 5%

Financing

Construction Period & Bridge Loan Interest 878,954 3%

Loan Fees & Expenses 125,000 0%

NMTC Audit & Fees during Const 17,500 0%

Carrying

Builders Risk & Liability Insur 112,000 0%

Maintenance & Security 27,000 0%

Utilities 18,000 0%Taxes 0%

Total Financing, Reserves & Carrying 4,247,378 13% $


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ADDENDUM F

Financing Plan


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Addendum F - New Moran - Capital Fundraising Plans11/14/14

Completed Q1 - 2015 Q2 - 2015

Source of Funds Amount

Federal Historic Tax Credit (RITC) $ 4,106,019

NPS review confirmsRITC eligibility.

Preliminary

discussions with

potential investors.

Coordinate with design

team.

Update regulators and

potential investors on

progress.

State Historic Tax Credit $ 250,000 Eligibility Confirmed.Meet with program

leaders. Identify and court

potential investors.

Submit application.

New Markets Tax Credit (NMTC) $ 9,586,007Prepare projectbrochure. Obtain

letters of interest from

CDEs.

Meet with CDEs. Review

multi-CDE projectstructure options.

Confirm application

timelines.

Update on progress.

Senior Loan $ 1,875,000

Debt service capacity

confirmed.

Preliminary discussion

with loan

administrator.

Confirm slow money loan

structure options.

Charitable $ 11,000,000 Campaign Feasibilityconfirmed. Initialpledges secured.

Donor cultivation andcampaign.


TIF Allocation $ 6,300,000 Voter Approval. Negotiate terms. Execute Agreement.


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Q3 - 2015 Q4 - 2015 Q1 - 2016 Q2 - 2016

Submit Part 2

Application to NPS.

Underwriting completed byInvestors. Commitments,

subject to standard

contingencies, issued.

Approved Part 2 issued by

NPS.Closing.

Award. Investor commitment. Closing.

Submit applications toCDEs. Identify and

court potential

investors.

Underwriting completed by

CDEs and Investors.Commitments, subject to

standard contingencies,

issued.

Closing.

Distribute Offering. Secure commitments. Closing.



Donor cultivation andcampaign. Arrange bridge

financing.

Closing.

Update Update Confirmation Closing.


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ADDENDUM G

Operating Budget and Pro Forma


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ADDENDUM H

Fundraising Feasibility Study


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ADDENDUM I

Campaign Gift Structure


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ADDENDUM J

Ground Lease and Property TaxLiability Assumptions


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New Moran, Inc.

PO Box 8502


MoranPlant.org

Ground Lease and Property Tax Liability Assumptions

New Moran, Inc.

November 14, 2014

The northern waterfront is a complex site, and the Moran Plant is a uniquely challenging historicbuilding. Ground lease and property tax assumptions for the project are based on three areas offocus: Site Boundary, Allowable Uses and Property Tax Liability.

New Moran project principals retained Dinse Knapp McAndrew in April of 2014 as legal counsel. Inevaluating Ground Lease and Property Tax Liability Assumptions, DKM reviewed two relevant areasof interest: allowable uses under Public Trust Doctrine, and property tax liability.

With regards to ground lease, New Moran has assumed a long-term lease of the Moran Plantbuilding at $1/year. We assume the term of this lease will be negotiated, and propose a thirty yearlease, with an option to renew for an additional thirty years. We also propose a shared management

or licensing agreement for the currently undeveloped landscape surrounding the Moran Plant, asindicated in Addendum D and discussed below.

Site Boundary:

The site plan attached to this report as Addendum D outlines a 1.532 acre site directly surroundingthe Moran Plant (1.922 acres including the building). This site includes pedestrian, bike andvehicular access to Moran and the surrounding campus. It creates dramatic public space, directly on

the shoreline, and abuts the combined educational and recreational resources of the CommunitySailing Center, the new Burlington SkatePark, the expanded bike path, and the proposed BurlingtonHarbor Marina to the south. As designed, the site increases public access to the lakeshore, createsnew play space for children and families, manages stormwater, offers opportunities for


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New Moran, Inc.

PO Box 8502


MoranPlant.org

Allowable Uses

The Moran plant is located in the Downtown Waterfront Public Trust District (DW-PTD).According to the Burlington Comprehensive Development Ordinance (CDO), Section4.4.1(d)(2)(A), land in this zone may only be used for:

- Governmental facilities

- Indoor or outdoor parks and recreation uses and facilities

- Arts, educational and cultural activities

- Fresh water and other environmental activities

- Services accessory to a permissible use;

- Railroad, wharfing and storage uses; or

- Publicly accessible restrooms.

The Moran Plant and site as proposed includes two major uses: the preservation of a historicbuilding for arts, education and cultural activities, and an outdoor public space suited to recreational

uses, arts and cultural activities, environmental activities, including public education. It will alsoinclude public bathrooms.

Based on our preliminary research, it is our assumption that the Moran Plant building represents acohesive whole, serving as an allowable primary use under the Public Trust Doctrine.

Property Tax Liability

Property tax liability is not a black and white determination given the proposed use and managementstructure for the Moran Plant. After preliminary research, we are confident NMI will receive 501c3designation and the Vermont public, pious or charitable Vermont property tax exemption.


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ADDENDUM K

Updated Project Schedule


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MORAN PLANT PROJECTED SCHEDULE 11.14.14 DRAFT

Scope Milestone Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

P roposa l Pub li c T IF Vo te

Managament Incorporate New Entity

MOU (NMI and City of BTV)

Findings Report

Preliminary Market Analysis

Parking Study

Project Term Sheet

Development Agreement

Major Tenant Commitments

Begin Formal NM/BTV Lease

Commence Full Operation

Finance Capital Campaign Feasibil ity

Major Donor Cultivation

Capital Campaign

Financing Commitments

Closing

Design Assemble A&E P roposa ls

Historic Preservation Analysis

Schematic Design

Design Development

Construction Drawings

Permi ts DRB - Des ign Permi ts

DPW - Construction Permits

Construction Contractor Selected

Construction

Grand Opening

2014 2015 2016 2017


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ADDENDUM L

New Market Tax CreditsLetters of Interest


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Moran Plant Redevelopment - Summary of New Market Tax Credit Letters of Interest

Name of CDE Service Area Status Amount

Vermont Rural Ventures (VRV) Statewide Received N/A Letter of Engagement*

Urban Action Community Development LLC (UACD) National Received $7MM*

Urban Research Park CDE, LLC (URP) National Received $7MMUSBCDE, LLC National Received $5MM*

CCG Community Partners, LLC (CCG) National Received $7MM

MHIC NE New Markets CDE II LLC (MHIC) Multi-State Received $10MM*

HEDC New Markets, Inc. (National Development Council) National Received $7MM*

Total 41-43MM**

*Denotes probable long-term interest in project

**Indicates 36M in levels of interest plus an estimated 5-7M from VRV


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ADDENDUM M

Preliminary Market Analysis Report


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New Moran, Inc.

PO Box 8502


MoranPlant.org

i. Projected recoverable expenses for the Moran building include in-house

management, programming and marketing. While in one building, the services are

loosely comparable to those of Church Street Marketplace, and the included

recoverable expenses echo the Marketplace fee structure. While introducing an

additional expense, the presence of programming and marketing have been

deemed essential to commercial viability of many prospective tenants at Moran,

and particularly in the winter.

ii. With that, recoverable expenses were adjusted based on operating expenses for

comparable spaces on the waterfront, resulting in a ~15% decrease in recoverable

expenses.

iii. Non-recoverable expenses, which represent the administrative, staff and

professional costs of operating New Moran, Inc. were increased to reflect

additional marketing, community engagement and professional services, along

with a greater annual contingency.

d. Finally, the process by which tenants are reviewed under the Public Trust Doctrine willhave an effect on the ease of securing new tenants over time. This can be addressed

through a clear articulation of an agreed upon framework for tenant evaluation and

acquisition which is both adaptable and enduring. There is more discussion in Addendum

J of the report to which this is attached.

2. Two members of the NMI Board of Directors with significant experience in creative office and

incubator spaces provided insight and financial modeling to project potential use, tenant structure

and alternative financing structures within the Burlington community. The conclusions were:

a. The Moran Plant represents an iconic, dynamic and potentially highly desirable space for

creative collaboration, cultural and educational programming, and further development of

Burlington as a hub for technology environmentalism and social innovation The unique

N M I


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New Moran, Inc.

PO Box 8502


MoranPlant.org

3. A separate review was completed with the Flynn Center with regards to operating expenses. The

Flynn campus is within 10% of the projected square footage of Moran, and represents similar use

classes across their properties. As a non-profit managed historic structure, with significant

programming on an annual, and even daily basis, the Flynn provided a unique comparison.

Projected Moran expenses are proportionally appropriate to those of the Flynn Center, with some

revisions made and an additional contingency included.

While not a traditional market study, this preliminary review provided a representative evaluation of rentand occupancy assumptions given projected tenant mix on the Moran site. As the building design

advances, and relationships with potential tenants mature, the operating model and projected rents will

be refined. As detailed in the MOU signed between NMI and the City in August, 2014, a more thorough

market study confirming updated projections will be conducted during the Development phase of the

project.


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ADDENDUM N

Proposed Tenant Mix


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