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01-08-18 City Commission Packet Materials - C10. Task Order 4 with Leland Consulting Group for Conference Center Feasibility Study
Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: David Fine, Economic Development Specialist Brit Fontenot, Economic Development Director SUBJECT: Task Order # 4 with Leland Consulting Group for a Hotel Conference Center Feasibility Study MEETING DATE: January 8, 2018 AGENDA ITEM TYPE: Consent RECOMMENDATION: Authorize the City Manager to sign Task Order # 4 with Leland Consulting Group. BACKGROUND: In 2013, the Bozeman Tourism Business Improvement District (TBID) commissioned a feasibility study for a site specific, stand-alone convention center. The proposal for a stand-alone convention center was partly based on a proposed model in which the TBID would fund construction and maintenance of a stand-alone facility. The stand-alone model produced a building that was expensive to build at the outset and placed liability for marketing, maintenance, and operation of the proposed facility on the City. These considerations made the proposed convention center functionally and financially infeasible and the proposal did not progress. The Economic Development Department is commissioning an updated feasibility and market study to assess the viability of large conference facilities in Bozeman. Staff believes that recent developments in the regional conference market (Missoula, Billings) and the emerging potential for public-private partnerships creates the need for a timely policy discussion on Bozeman’s conference facilities. Accurate data and analyses are essential for informing that policy discussion. City Staff would lead the project and split costs in partnership with the Bozeman Area Chamber of Commerce, Tourism Business Improvement District, and the Midtown Urban Renewal District. Task Order #4 provides a summary of the scope of the study and its proposed approach. 129 UNRESOLVED ISSUES: Staff is uncertain whether a partnership model for a large conference center is feasible or desirable from a policy or fiscal perspective. Staff expects the study to provide the foundation for a policy discussion on the merits of partnering to create such a facility in Bozeman. FISCAL EFFECTS: The total cost of the study is not to exceed $23,000. Leland Consulting Group will be providing their knowledge of the City of Bozeman and the Midtown Urban Renewal District to their sub consultant HVS Convention, Sports, and Entertainment Facilities Consulting. Costs will be split between the following funding partners: • Bozeman Area Chamber of Commerce, $5,000 • Bozeman Tourism Business Improvement District, $5,000 • Bozeman Midtown Urban Renewal District, $5,000 • City of Bozeman, Economic Development Department, not to exceed $8,000 ATTACHMENTS: 1. Task Order 04 with Leland Consulting Group 2. HVS Convention, Sports, and Entertainment Facilities Consulting Scope of Services LINKS: Midtown Urban Renewal Plan (2015) Convention Center Feasibility Report (2013) ARTICLES: “Riverfront Triangle development includes 10-story Hotel Fox with condos, conference center”. Missoulian. November 1, 2017. “Group considers changing One Big Sky Center project into a district rather than a skyscraper”. Billings Gazette. October 25, 2017. 130 Midtown Task Order Number 04 1 Task Order Number 04 Issued under the authority of Professional Services Agreement with Leland Consulting Group for Economic Development and Corridor Revitalization Services in the Bozeman Midtown Urban Renewal District dated September 19, 2016 (“Agreement”). This Task Order is dated December 15, 2017 between City of Bozeman (City) and Leland Consulting Group (Contractor). The parties agree as follows: The following representatives have been designated for the work performed under this Task Order: City: David Fine Contractor: Alisa Pyszka, Leland Consulting Group SCOPE OF WORK: Contractor agrees to perform the work for Task Order No. 4 (the “Work”) as detailed in the attached Bozeman Midtown Scope of Work – Task Order No. 4 which is the hotel conference center feasibility study incorporated herein and made a part of the Agreement by this reference. COMPENSATION: Leland Consulting Group’s total billing for the scope of services included with this task order is not to exceed $23,000. Leland Consulting Group shall submit invoices to the Client for work completed during the prior calendar month. Invoices will be due and payable 30 days after receipt of the invoice by the City. The provisions of the Agreement shall govern the Work. IN WITNESS WHEREOF, the parties authorized to commit resources of the parties have executed this Task Order: City of Bozeman Contractor By: By: Title: Title: Date: Date: 131 Midtown Task Order Number 04 Scope of Work 1 Bozeman Midtown Scope of Work – Task Order No. 4 Hotel Conference Center Feasibility Study HVS will prepare a hotel conference center feasibility study for the Midtown Urban Renewal area. Three areas are under consideration: 7th and Baxter, 11th and Tschache, Main and 7th. All areas are within the Midtown TIF district and the City is interested in determining feasibility and possible public private partnership opportunities for development of a hotel conference center in Bozeman. Background: It was determined in the 2013 study that a stand-alone conference center is not financially feasible. Therefore, the city would like to understand if a public-private partnership with a hotelier is feasible. The City wants to determine the appropriate level of public involvement that may be needed for the project to succeed, if any. The City of Bozeman is requesting analysis of the hotel conference center, including a market assessment, program recommendations, site analysis financial proforma statement, and financing options. The outcome of this study will be summarized in a report that will serve as a necessary foundation for solicitation of developers for a hotel convention center within the Midtown District. The intended use of this independent feasibility study is for planning purposes and use by the City. Study Elements: HVS will prepare a report that studies the three above sites. The final report is indented to be a stand-alone document that can be utilized to solicit developers if it is determined such a project is viable. Certain types of hotels are necessary to support a conference center. Therefore, the study will evaluate a holistic hotel and conference center project at one type as the subject of the study. HVS will approach the study development through the completion of the following tasks. 1 Project Orientation and Fieldwork 2 Market Assessment 3 Conference Center Event Demand and Room Night Projections 4 Hotel Supply and Demand Analysis 5 Building Program Recommendations 6 Site Analysis 7 Occupancy and ADR Estimates 8 Financial Projections and Feasibility 9 Financing Strategies 10 Reporting Leland will coordination with HVS to provide background documents and information, review of study, and coordination with other city policies and investments. HVS assumes that the Chamber and City stakeholders will provide the logistics, communication, and meeting arrangements with key stakeholders to facilitate the background research. 132 Midtown Task Order Number 04 Scope of Work 2 Study Parameters: The study will pertain to three areas within the Midtown Urban Renewal area: 7th and Baxter, 11th and Tschache, Main and 7th, as generally identified below. Assumptions: Work complete within eight weeks of signing contract and HVS receives $10,000 retainer. Budget: Task Provided By Budget Hotel Conference Center Feasibility Study HVS $20,000.00 Project Management Leland Consulting Group $3,000.00 133 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Alisa Pyszka, Principal Leland Consulting Group, Inc. 610 SW Alder Street Portland, OR 97205 503-222-1600 apyszka@lelandconsulting.com Re: Hotel Conference Center Feasibility Study Dear Ms. Pyszka, HVS Convention, Sports & Entertainment Facilities Consulting (“HVS”) is pleased to present this proposal to provide a Feasibility Study of a hotel and conference center venue in Bozeman, Montana. The City of Bozeman seeks a feasibility analysis of a hotel conference center. Three areas are under consideration are: 7th and Baxter, 11th and Tschache, and Main and 7th. All sites are within the Midtown TIF district and the City is interested in determining feasibility and possible public private partnership opportunities for development of a hotel conference center in Bozeman. It was determined in the 2013 study that a stand-alone conference center is not financially feasible. Therefore, the city would like to understand if a public-private partnership with a hotelier is feasible. The City wants to determine the appropriate level of public involvement that may be needed for the project to succeed, if any. The City of Bozeman is requesting analysis of the hotel conference center, including a market assessment, program recommendations, site analysis financial proforma statement, and financing options. The outcome of this study will be summarized in a report that will serve as a necessary foundation for solicitation of developers for a hotel convention center within the Midtown District. The intended use of this independent feasibility study is for planning purposes. The intended user is the City. On behalf of our team, we are excited about this important project, and we look forward to hearing from you. Very truly yours, Thomas Hazinski, Managing Director HVS Convention, Sports & Entertainment Facilities Consulting thazinski@hvs.com 205 West Randolph Suite 1650 Chicago, Illinois 60606 +1 312-587-9900 +1 312-488-3631 FAX www.hvs.com 134 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 2 1. Firm Overview Since 1980, HVS, the leading global hospitality consulting organization, has provided financial and valuation consulting services for over 35,000 assignments throughout the world for nearly every major industry participant. Our professional staff of more than 450 industry specialists offers a wide range of services, including market feasibility studies, valuations, strategic analyses, impact studies, advisory and development planning, and litigation support. With over 51 offices in 13 countries, we offer one of the most comprehensive knowledge bases in the industry. Last year alone, HVS completed more than 3,000 feasibility studies, appraisals, and consulting engagements. HVS is respected worldwide by developers, underwriters, operators, and investors. We operate independently as consultants and have no ownership in any venues. By engaging HVS for this assignment, you will benefit from access to some of the most experienced hospitality consultants in the industry and the industry’s most comprehensive databases. Our reputation among investors, bankers, rating agencies, developers, and public officials is extremely important to us and ensures that we pay close attention to each engagement we accept. HVS offer a wide range of skills and experience in the analysis of a variety of land uses including hotels, convention and conference centers, civic and event centers, water parks, entertainment and arts centers, sports facilities, restaurants, casinos, and other land uses related to hospitality and tourism. Since 2001, HVS has served public and private owners of convention, sports and entertainment facilities. We have completed hundreds of assignments throughout the world analyzing the feasibility of convention and conference facilities, event and performing arts centers, hotels, water parks, mixed-use hospitality developments, civic centers, sports facilities, tourism attractions, and other public assembly facilities. We serve owners through the life-cycle of public facilities ownership from the project inception and throughout their operation and ongoing improvement. HVS Firm History HVS Convention, Sports & Entertainment Facilities Consulting 135 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 3 We have performed numerous market, operational, feasibility, and economic impact studies of public assembly projects. Our studies often appear in municipal bond offering statements, and our staff has presented these studies to rating agencies, bond insurers, and investors. As a global hospitality consulting firm, HVS has many resources at its disposal that our competitors lack. HVS prides itself on providing public sector clients with analysis and recommendations designed to result in the most efficient use of public resources. We regularly recommend against projects and suggest modifications to prior assumptions whenever necessary. The HVS team regularly works for municipal clients - approximately 90 percent of our work is conducted for public-sector clients. Objective Advice to the Public Sector 136 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 4 2. Scope of Work We designed our scope of services to meet your goals and allow us to provide our findings and recommendations according to schedule. The figure below summarizes the tasks involved in our proposed scope of services. SUMMARY OF THE SCOPE OF SERVICES Task Description 1 Project Orientation and Fieldwork 2 Market Assessment 3 Conference Center Event Demand and Room Night Projections 4 Hotel Supplyand Demand Analysis 5 Building Program Recommendations 6 Site Analysis 7 Occupancyand ADR Estimates 8 Financial Projections and Feasibility 9 Financing Strategies 10 Reporting Optional Services 1 Development & Negotiation Assistance HVS will meet with you and/or your representatives in Bozeman to discuss our study in more detail and to formulate a schedule for performing the engagement. At this time, we will gather any information from you that may assist us in performing this assignment, including data and key contacts. We will conduct interviews, collect statistical data, and investigate the market area. Primary types of information HVS will gather will include: 1. Prior to our initial visit to the market, we will provide an information request letter and set up a meeting schedule. 2. HVS staff will meet with client representatives to discuss the project, establish lines of communication, and gather any information from you, which may assist us in performing this assignment. 3. Review any previous analysis prepared for the project, including the 2013 project study, the Economic Development Strategy study, and others as applicable. 4. HVS will contact and interview City Council members and other governmental officials, local hotel operators, business leaders, and other project stakeholders. Approach to the Scope of Services Task 1: Kickoff Meeting and Fieldwork 137 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 5 5. The market orientation of nearby lodging facilities will be evaluated to determine their competitive position with respect to the subject hotel property. Those properties displaying similar market attributes will receive a physical inspection, along with selective management interviews, to estimate levels of occupancy, room rates, market segmentation and other pertinent operational characteristics. Some of the competitive factors that will be specifically reviewed include: location, type and quality of facilities, physical condition, management expertise, and chain affiliation. 6. The demand for transient accommodations will be investigated to identify the various generators of visitation operating within the local market. The current and anticipated potential of each of these market segments will be evaluated to determine the extent of existing and future demand. Interviews with officials of business and government, as well as statistical data collected during the fieldwork, are useful in locating and quantifying transient demand. In conjunction with the identification of potential demand, an investigation will be made of the respective strengths of these markets in terms of seasonality, weekly demand fluctuations, vulnerability to economic trends and changes in travel patterns and other related factors. 7. Gather statistical data relating on economic and demographic trends. Interviews with local Chambers of Commerce, economic development agencies and other related organizations, along with an investigation of the subject's primary market area will reveal patterns reflecting growth, stability or decline. 8. Expense factors relating to local conditions such as labor, food and beverage costs, energy rates, assessed values and taxes will be researched. 9. Through interviews with hotel operators, developers, governmental officials and others, we will ascertain the status of projects under construction, proposed, or rumored that might be competitive with the subject hotel. HVS will evaluate the market area conditions and recent trends in the local economy, which are critical to understanding the potential for a proposed new conference center. HVS will assess key market variables and economic data for Bozeman in general, and the site area in particular, culminating in an analysis of the following: Local area economic trends Demographic and economic characteristics Work force characteristics Projected economic growth Business climate Corporate and institutional presence Task 2: Market Assessment 138 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 6 Dining, cultural and entertainment offerings Hotel supply Leisure and tourism industry statistics Proposed development initiatives Transportation/air access statistics HVS aims to gain a thorough understanding of the characteristics and conditions of the Bozeman market area, thereby providing a sound basis for our overall market conclusions about supply and demand. Because HVS conducts more than 4,500 market studies, appraisals, and planning analyses each year, we have recent market data pertaining to almost every local market area in the United States, including Bozeman. HVS has conducted 8 hotel studies in Bozeman since 2011. This will allow us to gain a more thorough understanding of the market area as we can benefit from an extended history of evaluating this market during various economic cycles over the past decade. Comparable Conference Venue Analysis - HVS will identify and analyze competitive hotel conference center facilities. HVS will gather data on selected competitive and statewide facilities including facility size, flexibility, and overall quality; number of supporting hotel rooms; rates, surrounding amenities; and if available, levels of event demand by event type and revenue and expenses. HVS will also compile and analyze data on conference facilities that may not be competitive but are comparable (located in other parts of North America). HVS will analyze this data on comparable markets and their facilities and use it as a basis for developing the demand and induced room night projections for the proposed meeting and event space in the hotel conference center. Interviews - HVS will interview key informants in person or over the phone. Possible interviews include representatives from the Bozeman CVB, Bozeman Chamber of Commerce, Economic Development representatives, tourism stakeholders, hospitality business leaders and hoteliers, and associations to identify local and regional event requirements. We will also interview meeting and event planners active in the area and existing venues that reflects primary segments of current and potential demand. Induced Group Demand Projections - HVS will quantify the event demand in several different event categories for the conference center space. Demand projections will include the number of events, number of event days, and number of attendees for the first 10 years of operation. Room Night Projections - Our demand projections will provide the basis for room night demand estimates. We will create a statistical model of the number of room nights generated by events held in the conference center space. These room Task 3: Conference Event Demand and Room Night Projections 139 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 7 night demand estimates will be incorporated into HVS hotel analysis as an important component of the overall room night demand in the hotel market. HVS will thoroughly analyze supply and demand for lodging in the area. We will provide an overview of regional and national trends; we will also provide analysis pertaining specifically to how the proposed hotel is likely to perform in the local market. Key steps of our analysis include the following: Competitive Set Analyses – We define a set of local area hotels that will compete most directly with the proposed hotel conference center, as well as hotels that compete on a secondary basis. Our consultants will analyze how each of these competitors performs, including information about their historical occupancy and average daily rates. Through interviews with hotel operators, developers, government planning officials, and others, we will also ascertain whether any potentially competitive projects are under construction, proposed, or rumored. We will identify the degree to which these properties would compete with the proposed hotel. Accommodated Demand – Using the occupancy levels and market segmentations of the competitive properties, the number of room nights actually accommodated in each segment is calculated by multiplying each property's room count by its occupancy, market segmentation, and 365 days. This yields the accommodated room night demand in the competitive set. The annual number of room nights occupied per room in each segment is also calculated (room nights occupied per year divided by the room count), and the results serve as a competitive index. SegmentationAnalysis–HVSwillevaluatewhichdemandsegmentsare currently served by the competitive set of hotels and we will quantify accommodated room night demand in each of several demand segments, such as: commercial; leisure; and meeting and group. Demand Growth Rates – Growth rates are projected for each of the market segments. Penetration Analysis – HVS then determines the appropriate penetration rates for the proposed hotel within each of the defined demand segments. The appropriate positioning of these penetration rates will depend on the subject’s relative advantages and disadvantages compared to the defined competitive set of hotels. Latent Demand – Latent demand may be “Unaccommodated” or “Induced” demand. Unaccommodated demand represents potential lodging demand that historically has not been served because of lack of available rooms during periods of peak demand. Induced demand represents additional lodging demand that may result from the addition of the proposed hotel property or other major developments Task 4: Hotel Supply and Demand Analysis 140 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 8 in the area. HVS factors estimates of these additional types of potential demand in our room night analysis. Accurate data and competent analysis are critical to developing accurate forecasts of supply and demand. Using market data from our proprietary SPIDER© database, industry data purchased from Smith Travel Research, and information from our fieldwork interviews with hotel managers, HVS will estimate existing and future room night demand in the market area. We will also provide an overview of historical performance for these hotels. HVS sets the industry standard for thoroughness in hotel supply and demand analyses. Our proprietary market segmentation models and penetration analysis models are preferred by most, if not all, lenders and investors working in the industry. Our report would provide a thorough explanation of these models and their outputs. The match between the market demand and the quality and size the proposed hotel and conference center is essential to its financial success. Based on our market research, HVS will provide recommendations regarding the building program, as well as the appropriate service level for the hotel. The recommended facilities may include an analysis of the following elements: The number of rooms by type (king, double, suite, etc.), Number and size of conference and event space including exhibition, meeting rooms, and banquet space, Kitchen/banquet facilities, Types of restaurant and lounge facilities, Concierge floors and amenities, Quantity and location of prefunction/lobby space, Support spaces, Number of required parking spaces, Technology requirements, Health, fitness and spa facilities, Business services and amenities, and Others as appropriate. The building program should meet the needs of customers, maximize revenue opportunities, and foster an efficient hotel operation. HVS will analyze three site areas for the recommended venue: the two I-90 locations (Holiday Inn or Bennett) and the Midtown location to determine the Task 5: Building Program Recommendations Task 6: Site Analysis 141 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 9 most appropriate area for development to meet the current and potential demand in Bozeman. HVS will review the sites and based on specific criteria, determine with the City the most appropriate area for new development. HVS will analyze the following variables to help determine the best general site: Proximity to other hotels, retail, restaurants, and demand generators Availability and cost of land Access Visibility Compatibility with nearby land uses Circulation and parking HVS will discuss our site assessment with the City and determine the most appropriate area/corridor for future hotel development. Once the site area is determined, HVS will conduct the feasibility study focusing on that area of town. Based on our market research, supply and demand analysis, and facility recommendations, HVS will provide a projection of occupancy and average daily rates at the proposed hotel. Our projections will show annual occupancy and average rate for the opening year all the way through stabilization. Thereafter, occupancy will stabilize, and room rates are expected to grow with inflation. As new competitive supply or additional demand generators open in the market area, particular years may experience substantial positive or negative changes in occupancy or average daily rates. Our analysis will attempt to model these changes over the projection period, based on the most current available information and planning data. HVS will provide a 10-year projection of occupancy and average daily rates (ADR) for the proposed hotel. Revenue per available room (RevPAR) is a third variable we analyze, which can be calculated by taking the product of the occupancy and ADR for a given year. The occupancy and average rate projections allow us to calculate annual room revenue at the proposed hotel. Our analysis will assume that the hotel and conference center will be operated as a single property, with the conference center considered a department of the hotel. Annual room revenue (occupied room night multiplied by ADR) is the starting point of our forecast of income and expenses. But other potentially important revenue categories, such as food and beverage sales and other sources need to be forecast. HVS will identify each key revenue category for the proposed facility and forecast annual revenue levels in each category for a 10-year period. Task 7: Occupancy and ADR Estimates Task 8: Forecast of Income and Expense 142 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 10 HVS will also project fixed and variable expenses for the proposed hotel conference center. The HVS proprietary SPIDER© database allows us to analyze actual financial operating statements of over 60,000 of hotels around the country. From this vast financial data library, we will select a highly relevant set of “comparable facilities” as the basis of a detailed analysis of expense ratios appropriate for the proposed hotel. HVS will identify each expense category for the proposed hotel and forecast annual expense levels in each category for a 10- year period. Our forecast of income and expenses will be consistent with the Uniform System of Accounts for the Lodging Industry. Following the recommended procedures and industry standards set forth in the textbook Hotels and Motels: A Guide to Market Analysis, Investment Analysis, and Valuations that HVS authored for The Appraisal Institute, a feasibility analysis will be performed to determine whether the proposed hotel has economic justification. The feasibility conclusion will be documented from several points of view including return on investment, cash flow analysis and IRR calculations. Components of the feasibility analysis such as cost of capital, relative risk, holding period, and leverage will be discussed and supported by market data. HVS will identify alternative methods of financing the construction of the facility. Case studies from financing plans used in other markets (including facilities in Montana, as well as nationwide) will help to illustrate various options. HVS will identify various innovative approaches to project financing, including various forms of public/private partnerships. Before our initial fieldwork, we will provide a detailed information request letter, establish an agenda for a project kick-off meeting, and schedule all other necessary meetings. Upon completion of our study, we will submit a draft report. After you have had the opportunity to review it, we will convene a conference call to discuss our findings. After our conference call, we will incorporate any agreed-upon changes and issue a final report. We will provide a fully-documented narrative report that will explain our findings, assumptions, and recommendations. Reports will be provided electronically in PFD format. OPTIONAL SERVICES HVS can provide the follow services as needed in assisting the City in the negotiation of the project with private sector developers. Creation of Request for Proposals HVS can provide the following services: Identify information to be solicited from developers, in order to receive comparable information from all developer proposals. Task 8: Feasibility Analysis/ROI Task 9: Financing Options Reporting Development & Negotiation Assistance 143 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 11 Identify data from the HVS Feasibility Study to be included in the Request for Proposals. Develop the Request for Proposals based on City of Bozeman input. Develop ranking criteria in accordance with the goals and objectives of the City of Bozeman. Develop ranking instrument to evaluate and rank each of the responses to the Request for Proposals. Solicitation of Responses Develop a comprehensive list of developers from the HVS contacts database, as well as development companies active in the region known to the City. The RFP would be emailed to the list of potential hotel and conference center developers. With client assistance, HVS will also identify local developers that may have an interest in the project. Evaluation of Request for Proposals HVS will provide the following services in evaluation of developer proposals: Review all developer proposals for the hotel and conference center and discuss the project with the developers to gain a full understanding of the plans. After an initial review of each proposal, HVS will formulate a list of questions for each development team, which may seek clarification and/or additional information. These questions will form the agenda for a meeting (by phone or in person, depending on the needs of the City) with each of the development teams, City representatives, and HVS to discuss their proposals. Based on our review of the proposals and our discussions with each team, HVS will draft a memorandum that summarizes our evaluation of the proposals. The memorandum will provide clearly articulated comparisons under each selection criteria, analyze the strengths and weaknesses of each proposal, and culminate in a recommendation for a proposal selection. In the event that none of the proposals adequately address the selection criteria, HVS will be available to assist the City in soliciting revised proposals from each development team. Negotiation Services HVS will provide assistance during negotiations with the selected developer. If requested, HVS can provide the following services: 144 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 12 1. Analyze and report on the advantages and disadvantages of the developer proposal or studies prepared by private development teams for reasonableness: i. Financing assumptions ii. Hotel and conference center market factors iii. Long-term performance and review and provide comment on conference center financial pro formas provided by the developers iv. Implications for the City 2. Assist and advise City staff on negotiation approach and strategy in preparation for meetings with the private development team. 3. Participate in negotiation and strategy meetings as requested by the City. 4. Develop or respond to business terms and positions that reflect the City’s goals for the project. 5. Prepare memos or reports as requested by the City. 6. Make presentations at meetings as requested by the City. 7. Review draft development agreements, room block agreements and related real estate and financing documents that may be necessary to facilitate the transaction and work with the City’s legal team to facilitate completion of required documents. 8. Other tasks as they may arise to support production of a final series of agreements for presentation to the City Council for approval. 9. Participate in conference calls with City’s Financial Advisor and Bond Counsel, if requested. HVS will assist, review, and make recommendations in the development of various agreements between the City and selected developer, as needed. We can work with the City to negotiate the agreements and create a term sheet or memorandum of understating summarizing salient transaction terms and conditions and work with the City’s legal team to facilitate completion of the documents. We can explain the advantages and disadvantages of certain terms from the City’s perspective based on our experience in other deals. We will remain available throughout the project to answer questions, and provide information, analysis, and guidance as requested. 145 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 13 3. Schedule and Fees We propose an 8-week schedule, beginning from the date of our fieldwork. The figure below illustrates our proposed schedule. PROPOSED SCHEDULE Task Description W-1 W-2 W-3 W-4 W-5 W-6 W-7 W-8 Project Orientation and Fieldwork M Market Assessment Conference Center Event Demand and Room Night Projections Hotel Supplyand Demand Analysis Building Program Recommendations CC Site Analysis Occupancyand ADR Estimates Financial Projections and Feasibility Financing Strategies Reporting DR,CC Optional Services Development & Negotiation Assistance TBD M=Meeting CC =ConferenceCall DR=Draft Report We propose to perform the scope of services presented in the proposal for cost of of $20,000 – including fees and expenses. A retainer of $10,000 will be due upon authorization to proceed. The remaining fees will be billed monthly on a percent completion basis. Fees for the Optional Services: Development & Negotiation Assistance will require separate authorization. To engage our services, please return an executed agreement. Upon authorization to proceed, a retainer is due in the amount of $10,000. After this initial payment, the remainder of the fees will be due before delivery of the final report. All outstanding invoices must be paid in full before delivery of report products. 146 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 14 Until the time that all professional fees and other charges have been paid in full, the draft report, which is provided to you as a professional courtesy, remains the intellectual property of HVS and shall not be utilized in attempting: a) to obtain financial capital (whether debt or equity); b) to further any litigation, mediation, or arbitration processes; or c) to assist the client in any cause, action, or endeavor. If HVS has not been paid in full for its outstanding professional fees and other charges, and the draft report is used in violation of this agreement, HVS will be entitled to seek injunctive relief, monetary damages, and the cost of attorney fees and collection expenses. The following are our hourly rates for HVS staff for services requested outside our scope of services: HVS HOURLY RATES Position Hourly Rate Managing Director $350 Senior Director $300 Director $250 Project Manager $200 Associate $150 Staff $90 HVS shall submit invoices to LCG on or before the 3rd day of the month covering services for the preceding month. LCG shall make payment to HVS within 10 business days of LCG’s receipt of payment from the City. In no event shall LCG be obligated to make any payments to HVS unless and until the City makes payments to LCG for HVS’ services, nor will LCG pay interest/finance charges on outstanding HVS invoices that are outstanding with the City. HVS agrees to be bound to LCG and the City to the same extent and in the same manner that LCG is bound to the City under the Prime Agreement. The Prime Agreement, including, but not limited to, its indemnity, insurance, invoicing, disputes and ownership of documents provisions will control in the event there is a conflict or inconsistency between the terms of the Prime Agreement and this Agreement. Unless otherwise required by the Prime Agreement, each party (“Indemnifying Party”) agrees to indemnify the other party, its officers, directors and employees (“Indemnified Party”) from any claims, damages, losses and costs (including reasonable attorney fees and costs of appeals) to the extent arising out of the Restrictions on Use of Draft Reports Rates Additional Terms and Conditions 147 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 15 negligent acts or omissions of the Indemnifying Party, its officers, directors, employees, affiliated companies and subcontractors. The Indemnified Party must give reasonable notice to the Indemnifying Party of any claim, and must not act or fail to act in any manner that would compromise the Indemnifying Party’s position with respect to resolution or defense of the claim. HVS shall, prior to commencing work under this Agreement, provide to LCG certificates of insurance evidencing the insurance requirements as set forth in the Prime Agreement. Said insurance policies shall name LCG as an additional insured. It is agreed that LCG will be given not less than thirty (30) days advance written notice of any termination of policies. 148 Convention, Sports & Entertainment Facilities Consulting Chicago, Illinois December 11, 2017 Hotel Conference Center Feasibility Study Bozeman,Montana 16 AUTHORIZATION Client: Alisa Pyszka, Principal, Leland Consulting Group, Inc. Date: December 11, 2017 Your signature beneath the words “Agreed to and Accepted” signifies your agreement to employ HVS for the services described in the accompanying proposal titled ” Hotel Conference Center Feasibility Study”. To schedule our assignments and perform your study in accordance with our proposed schedule, we ask that you return an executed copy of this agreement as authorization to proceed with the proposed scope of work. This proposal will remain effective for 30 days from of the date at the top of this page. Payment must be made in U.S. dollars, using either a check drawn on a U.S. bank or a wire transfer of funds to the account of HVS Convention, Sports & Entertainment Facilities Consulting. If after completing the fieldwork phase of this assignment it becomes necessary to alter the parameters of the study, HVS will be entitled to charge an additional fee based on our current per diem rates and the time required to incorporate the necessary changes into our analysis and reports. Material changes to the scope may include changes to the property description, financing conditions, management or ownership structure, or other factors that could change the final projections. In addition to adjusting our fees, we will adjust the project schedule to reflect the time required to complete the revised scope of services. Notwithstanding the proposed fee payment schedule, if, at any time while performing this assignment, it becomes necessary to suspend work for a period of 30 days or more, then HVS will be entitled to bill for the portion of the assignment completed up to the suspension (less any retainer paid) at its current per diem rates. It is agreed that the liability of HVS, its employees and anyone else associated with this assignment is limited to the amount of the fee paid as liquidated damages. You acknowledge that any opinions, recommendations, and conclusions expressed during this assignment will be rendered by the staff of HVS acting solely as employees and not as individuals. Any responsibility of HVS is limited to the client, and use of our product by third parties shall be solely at the risk of the client and/or third parties. The study described in this proposal will be made subject to certain assumptions and limiting conditions. A copy of our normal assumptions and limiting conditions will be provided upon request. President HVS Convention, Sports & Entertainment Facilities Consulting AGREED TO AND ACCEPTED: Alisa Pyszka, Principal, Leland Consulting Group, Inc. Signature: ____________________________________________________ Date: ___________________________________ 149