HomeMy WebLinkAbout22- Task Order 2 - Baker Tilly - Bozeman Hotel TIF1
Scope of Work Bozeman Midtown TIF Assistance Request
City of Bozeman, Montana Financial Feasibility and Needs Analysis April 2022 The City of Bozeman (the “City”) received a request for TIF assistance from Bozeman Lodging Group, LLC (the “Developer”) for the proposed redevelopment of The Holiday Inn currently located at 5 East Baxter Lane, Bozeman, MT. The project is proposed to include demolition of the existing old Holiday Inn Hotel and replace it with a new mixed use commercial project composed of a new Holiday Inn Hotel, a Staybridge Suites extended stay Hotel, meeting room/conference space, and a restaurant will all be built in the same location. Each hotel will have approximately 100 rooms and the conference meeting space and restaurant will be approximately 15,000 square feet. Parking will be provided to accommodate the hotel, restaurant, and event center guests with over 336 parking spaces. The Developer has indicated there is a financial gap based on the current project scope, for which tax increment financing could be a tool to assist with using. The purpose of this document is to outline a scope of work, estimated fee and time frame for completion. Baker Tilly’s proposed scope of work includes the following activities: Phase 1: Preliminary Revenue Projections and Financial Feasibility Objectives
To prepare preliminary tax increment revenue projections based on developer provided information
To provide initial project financial feasibility
Analysis
1) Preparation of tax increment revenues a. Review developer-supplied information for reasonableness b. Forecast the projected tax increment revenues to be generated over the life of the district based on those assumptions i. Developer provided total development costs and project assumptions ii. Tested against available comparable-type developments iii. Estimated range of available revenues based on valuations c. Financial Feasibility Review i. Assess the sufficiency of tax increment revenues to support costs Deliverable
Summary of preliminary revenue projections and initial feasibility
Preliminary financial feasibility analysis
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Phase 2: Financial Review and Needs Analysis and Development Agreement Objectives
To review and analyze the request for assistance as related to the proposed development project to determine necessity and appropriateness
To assist in negotiations of the development agreement, as applicable
To provide draft term sheet Analysis 1) Financial Feasibility Review a. Suggest alternative assumptions and provide sensitivity analysis b. Assess the sufficiency of the tax increment revenues to support costs with considerations for timing of bond issuance to provide financial support
c. Prepare cash flow analysis based on sensitivity analysis 2) Financial Needs (But For) Analysis a. Review developer information and comment on the reasonableness of
assumptions i. Suggest alternative assumptions and provide sensitivity analysis as necessary
b. Complete a rate of return calculation i. Cash-on-Cash Return ii. Internal Rate of Return iii. Identify alternative assumptions if appropriate iv. Recalculate the return with alternative assumptions, as necessary v. Define appropriate level of assistance based on developer’s rate of return c. Compare developer rate of return to the “market” return for similar projects, comment on reasonableness of return considering type of project, current market and developer at risk equity d. Complete sensitivity analysis with respect to developer return and need for assistance (as appropriate)
3) Development Agreement Negotiations a. Provide proposed business points between the City and the developer in conjunction with City staff b. Assist City staff with review of developer request as it relates to business points for the development agreement to maximize redevelopment and maintain City security – including:
i. Pay as You Go Financing shifts financing risk from City to developer ii. Look Back Provisions to verify actual returns to projected returns following project commencement iii. Claw Back Provisions to ensure developer proceeds as proposed c. Assist in negotiation of the development agreement, and prepare financing exhibits as necessary Deliverable
Financial analysis with determination of need for public assistance
Preliminary term sheet with recommended public assistance amounts Compensation The work as described will be completed with an estimated fee in the range of $4,500 - $6,500. Excluded from the fee indicated above is any out-of-pocket expenses such as travel, copies, faxes, conference calls, or other expenses necessary to complete the project. Additional work
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requested and authorized by the City outside the scope of services described in this proposal will be invoiced at our standard hourly rates.
Completion Date
Upon full receipt of the requested information, Baker Tilly will complete Phase 1 of the above work processes and outcomes within 1-2 weeks, subject to receipt of all information. The remaining phases and steps of analysis will be subject to outcomes of phase 1 and timing
needs of both the City and developer. We will be successful in meeting the requested time frames for completion recognizing it is highly dependent on the timing and completeness of the information received. A delay in receipt of critical material may result in an extension of the completion date.
Sincerely,
Mikaela Huot, Director
Signature Section:
The services and terms as set forth in this Scope Appendix are agreed to on behalf of the Client by:
City of Bozeman
Name: _____________________________
Title: ______________________________
Date: ______________________________
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City Manager
4/27/2022
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Financial Feasibility Review: Additional Details for Financial Analysis Project Details
• To include # of hotel rooms, commercial square footage, etc.
• To include cost of construction for each development type
• To include information for any commercial, civic or other uses
• To include site improvement and public infrastructure costs
• To include detailed breakdown of all costs Project Phasing
• To include commencement and completion for each building construction, or each site improvement, or public infrastructure
• To include date for sale of unit or lease of unit, occupancy start and full occupancy, etc. Project Financing
• To include development of complete sources and uses of funds
• To include detail on bank financing, i.e., principal, term, rate
• To include equity amount and timing of equity in project
• To include take-out source of bank financing for construction period, if applicable
• To include letters of commitment or interest from financial institutions
• To include amount of public financing request, and form of request, i.e., bonds, pay-go-note, etc.
• To include gap amount to match public financing request (all equity and private sources are insufficient to pay all costs)
• To include description of and rationale behind proposed governmental financial assistance Public Financing Revenue Assumptions
• To include estimated assessed value per type of construction
• To include sales per square foot estimates (if applicable)
• To include any growth assumptions Project Operation
• To include operating assumptions, etc.
• To include revenue and expense assumptions and increases
• To include reserve assumptions (capital, operating, etc.)
• To include rent and/or sale assumptions
• To include lease commission, sales commission assumptions
• To include complete operating pro-forma calculating internal rate of return with and without requested financial assistance
• To include sale assumptions in appropriate future year (10 or 15), including capitalization rate
• To include proposed tenants, job and wage information General Information/Assumptions
• Provide sources of data used in any of the above
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