Financial Model Update
Financial Model Update Board of Directors Meeting June 7, 2016
FINANCIAL MODEL OVERVIEW:
2
OPERATING EXPENSES UPDATE:
Operating budget
Expenses
1.
• Updated Phase-in schedule • Update growth projection due to new park visitation
Capital Maint. Reserve
• No Change
Maritime Repair Reserve
• No Change1
Previously, reactive maritime maintenance estimates were based on a price of $1,100/LF. Recent proposals received by BBP have indicated that these prices have increased to $1400/LF. However for the purposes of this estimate, we are still assuming $1,100/LF.
3
OPERATING EXPENSES UPDATE: Revised M&O Expense Projection Projected ann. opex ($M, nominal5)
$60
Projected build-out2
$50 $40 $30 $20 $10 $0 FY2012 FY2016 FY2020 FY2024 FY2028 FY2032 FY2036 FY2040 FY2044 FY2048 FY2052 FY2056 FY2060 FY2064
FY15 Projection
Current Projection
NOTE: FY12 to FY16 derived from approved BBP budgets, FY17 from proposed budget, and FY18 to FY65 from projections 1. Expense growth prior to projected build out based on (i) addition of new parkland, (ii) increased visitation at existing parkland, and (iii) projected inflation 2. Park construction projected to be completed during FY20 3. Expense growth during after projected build out projected to be 3% annually, the historical average rate of inflation in the US 4. Nominal values include inflation
4
REVENUES UPDATE: Upfront Rent
• No Change
PILOMRT
• No Change
One-Time Expenses Revenue PILOST
Participation
1.
• Reduced from $12.1M to $9M1
• No Change
Based on actual construction costs at John St, Empire Stores and Pierhouse development near the end of construction.
5
REVENUES UPDATE: Ground Rent • No Change
PILOT Recurring Expenses Revenue
1. 2. 3.
Market Value/SF • Residential2 • Hotel3 • Commercial3
Transfer Fees
• No Change
Other Revenue1
• No Change
Prev FY16 Projection $127/SF $221,000/Room $197/SF
Current Projection $134/SF $243,000/Room $257/SF
Other Revenue includes Concessions, License Fees, Permit Fees, and Events Fees Residential Properties include 1 John St, Pierhouse and One Brooklyn Bridge Park. Impact of the change from One BBP is limited due to J-51 exemption and abatement Impact of changes to hotel and commercial PILOT levels is limited due to expected ICAP exemption on both properties
6
REVENUES UPDATE: Market Value/SF for Comparable Residential Properties Manhattan Condo Projects $350
FY16 Market Value/SF1
$300
Brooklyn Heights/ DUMBO Condo Projects
$250 $200 $150 $100 $50 $0 192 Water 166 84 Front St BBP 360 205 Water 20 Henry St Montague Projection Furman St St Street Street
1.
15 Union Rosin 106 15 Central Square Projection Central Park West West Park South (Trump Parc)
FY16 Market Value/SF from DOF Cooperative/Condominium Comparable Rental Income Archives http://www1.nyc.gov/site/finance/taxes/propertycooperative-and-condominium-comparables-archives.page
7
REVENUES UPDATE: Market Value/Room for Comparable Hotel Properties $300,000
FY16 Market Value/SF1
$250,000 $200,000 $150,000 $100,000 $50,000 $0 Aloft Brooklyn
1. 2.
Sheraton Brooklyn
Marriott Brooklyn Bridge
Rosin Projection 2
BBB Projection
FY16 Market Value/SF from January 15, 2016 DOF Notice of Property Value The Rosin report combines the residential and hotel components of Pier 1 into 1 market value. BBP has calculated Rosin’s hotel MV by assuming that Rosin was applying the John Street projections to the residential component of Pier 1 and then subtracting it from the total.
8
REVENUES UPDATE: Market Value/SF for Comparable Office Properties Manhattan Office Buildings $450 $400
FY16 Market Value/SF1
$350 $300
DUMBO Office Buildings
Downtown Brooklyn Office Buildings
$250 $200 $150 $100 $50 $0
1.
20 Jay St
55 Washington St
45 Main St
1 Metrotech
1 Pierrepont Plaza
16 Court St
BBP Projection Empire State Empire Stores Building
7 World Trade RosinProjection 4 Times Square Center Empire Stores
FY16 Market Value/SF from January 15, 2016 DOF Notice of Property Value
9
$100 $90 $80 $70 $60 $50 $40 $30 $20
FY 15 Projected Recurring Revenue 1. 2.
FY2064
FY2062
FY2060
FY2058
FY2056
FY2054
FY2052
FY2050
FY2048
FY2046
FY2044
FY2042
FY2040
FY2038
FY2036
FY2034
FY2032
FY2030
FY2028
FY2026
FY2024
FY2022
FY2020
$0
FY2018
$10 FY2016
Projected annual revenue ($M nominal)
REVENUES UPDATE: Revised Recurring Revenue Projection
Current Projection
Growth driven by commencement of ground rent and by PILOT values increasing as buildings are constructed and occupied Assumes 3% inflation of PILOT, defined escalation terms on ground leases
10
CASHFLOW PROJECTION: Assuming no Pier 61 (reactive maritime approach) BBP projected to run out of money in FY2025…
Park Cash Reserves ($M nominal) )
$100 $0
FY2016 FY2020 FY2024 FY2028 FY2032 FY2036 FY2040 FY2044 FY2048 FY2052 FY2056 FY2060 FY2064
($100) ($200) ($300) ($400) ($500) Reserve balance 2
3
...and results in $450M of deferred maintenance
1. Cashflow projection assumes no revenues from Pier 6 development sites 2. Includes all projected expenses (opex, maritime, and capital maint.) and all projected revenues (one-time, recurring, and rev from abatement expirations) 3. “Reserve balance” is aggregate beginning balance of operating, capital maintenance, and maritime maintenance reserve funds in any given year NOTE: Cost of borrowing during negative “Reserve fund balance” years not included
11
CASHFLOW PROJECTION: Assuming no Pier 61 (preventative maritime approach)
Park Cash Reserves ($M nominal)
$400
Not Feasible due to lack of upfront funds to pay for initial costs of preventative maintenance
$300 $200 $100 $0
FY2016 FY2020 FY2024 FY2028 FY2032 FY2036 FY2040 FY2044 FY2048 FY2052 FY2056 FY2060 FY2064
($100) ($200) ($300) ($400) Reserve balance 2
3
1. Cashflow projection assumes no revenues from Pier 6 development sites 2. Includes all projected expenses (opex, maritime, and capital maint.) and all projected revenues (one-time, recurring, and rev from abatement expirations) 3. “Reserve balance” is aggregate beginning balance of operating, capital maintenance, and maritime maintenance reserve funds in any given year NOTE: Cost of borrowing during negative “Reserve fund balance” years not included
12
CASHFLOW PROJECTION: Pier 6 development site financial offer Subject to approval by BBP Board Recurring revenue
One-time revenue Upfront rent
$104M
Ground rent3
$0.6M/yr
PILOST1
$4M
PILOT1
$1.8M/yr
PILOMRT1
$7M
Park Transfer Fee4
$0.3M/yr
TOTAL
$2.7M/yr
TOTAL2
1. 2. 3. 4.
$115M
Projected values based on current DOF valuation of comparable buildings Although the proposal includes an offer of participation rent offer at 15% of all revenues over an average net per square foot sales price of $2,200, given current market conditions, BBP is not projecting any revenue from this offer Growth rate is 7.5% every 5 years Beginning ten years after Substantial Completion, BBP receives Park Transfer Fee of 0.75% of the sale price of each sold unit
13
CASHFLOW PROJECTION: With Pier 6 (preventative approach) $300 $200
FY2064
FY2062
FY2060
FY2058
FY2056
FY2054
FY2052
FY2050
FY2048
FY2046
FY2044
FY2042
FY2040
FY2038
FY2036
FY2034
FY2032
FY2030
FY2028
FY2026
FY2024
FY2022
($100)
FY2020
$0
FY2018
$100 FY2016
Park Cash Reserves ($M nominal)
$400
($200) ($300) ($400) Reserve balance1
Reserve Balance (with City Sweep)2
1. “Reserve balance” is aggregate beginning balance of operating, capital maintenance, and maritime maintenance reserve funds in any given year NOTE: Figures include annual 1% return on invested capital (i.e., the reserve balance) 2. Assumes City sweep of excess PILOT revenue starting in FY2047 equivalent to $3.5M in FY2016$
14
Conclusion • Model has long history and has been publicly vetted over 10+ years • Updates include FY2016 PILOT numbers, more accurate PILOST projections, and refined park construction schedule • Without revenues from Pier 6 development sites BBP cannot fulfil its mandate to be financially self-sufficient • The recommended Pier 6 RFP proposal provides an appropriate level of revenues to ensure the park remains financially solvent
15
FINANCIAL MODEL OVERVIEW:
2
OPERATING EXPENSES UPDATE:
Operating budget
Expenses
1.
• Updated Phase-in schedule • Update growth projection due to new park visitation
Capital Maint. Reserve
• No Change
Maritime Repair Reserve
• No Change1
Previously, reactive maritime maintenance estimates were based on a price of $1,100/LF. Recent proposals received by BBP have indicated that these prices have increased to $1400/LF. However for the purposes of this estimate, we are still assuming $1,100/LF.
3
OPERATING EXPENSES UPDATE: Revised M&O Expense Projection Projected ann. opex ($M, nominal5)
$60
Projected build-out2
$50 $40 $30 $20 $10 $0 FY2012 FY2016 FY2020 FY2024 FY2028 FY2032 FY2036 FY2040 FY2044 FY2048 FY2052 FY2056 FY2060 FY2064
FY15 Projection
Current Projection
NOTE: FY12 to FY16 derived from approved BBP budgets, FY17 from proposed budget, and FY18 to FY65 from projections 1. Expense growth prior to projected build out based on (i) addition of new parkland, (ii) increased visitation at existing parkland, and (iii) projected inflation 2. Park construction projected to be completed during FY20 3. Expense growth during after projected build out projected to be 3% annually, the historical average rate of inflation in the US 4. Nominal values include inflation
4
REVENUES UPDATE: Upfront Rent
• No Change
PILOMRT
• No Change
One-Time Expenses Revenue PILOST
Participation
1.
• Reduced from $12.1M to $9M1
• No Change
Based on actual construction costs at John St, Empire Stores and Pierhouse development near the end of construction.
5
REVENUES UPDATE: Ground Rent • No Change
PILOT Recurring Expenses Revenue
1. 2. 3.
Market Value/SF • Residential2 • Hotel3 • Commercial3
Transfer Fees
• No Change
Other Revenue1
• No Change
Prev FY16 Projection $127/SF $221,000/Room $197/SF
Current Projection $134/SF $243,000/Room $257/SF
Other Revenue includes Concessions, License Fees, Permit Fees, and Events Fees Residential Properties include 1 John St, Pierhouse and One Brooklyn Bridge Park. Impact of the change from One BBP is limited due to J-51 exemption and abatement Impact of changes to hotel and commercial PILOT levels is limited due to expected ICAP exemption on both properties
6
REVENUES UPDATE: Market Value/SF for Comparable Residential Properties Manhattan Condo Projects $350
FY16 Market Value/SF1
$300
Brooklyn Heights/ DUMBO Condo Projects
$250 $200 $150 $100 $50 $0 192 Water 166 84 Front St BBP 360 205 Water 20 Henry St Montague Projection Furman St St Street Street
1.
15 Union Rosin 106 15 Central Square Projection Central Park West West Park South (Trump Parc)
FY16 Market Value/SF from DOF Cooperative/Condominium Comparable Rental Income Archives http://www1.nyc.gov/site/finance/taxes/propertycooperative-and-condominium-comparables-archives.page
7
REVENUES UPDATE: Market Value/Room for Comparable Hotel Properties $300,000
FY16 Market Value/SF1
$250,000 $200,000 $150,000 $100,000 $50,000 $0 Aloft Brooklyn
1. 2.
Sheraton Brooklyn
Marriott Brooklyn Bridge
Rosin Projection 2
BBB Projection
FY16 Market Value/SF from January 15, 2016 DOF Notice of Property Value The Rosin report combines the residential and hotel components of Pier 1 into 1 market value. BBP has calculated Rosin’s hotel MV by assuming that Rosin was applying the John Street projections to the residential component of Pier 1 and then subtracting it from the total.
8
REVENUES UPDATE: Market Value/SF for Comparable Office Properties Manhattan Office Buildings $450 $400
FY16 Market Value/SF1
$350 $300
DUMBO Office Buildings
Downtown Brooklyn Office Buildings
$250 $200 $150 $100 $50 $0
1.
20 Jay St
55 Washington St
45 Main St
1 Metrotech
1 Pierrepont Plaza
16 Court St
BBP Projection Empire State Empire Stores Building
7 World Trade RosinProjection 4 Times Square Center Empire Stores
FY16 Market Value/SF from January 15, 2016 DOF Notice of Property Value
9
$100 $90 $80 $70 $60 $50 $40 $30 $20
FY 15 Projected Recurring Revenue 1. 2.
FY2064
FY2062
FY2060
FY2058
FY2056
FY2054
FY2052
FY2050
FY2048
FY2046
FY2044
FY2042
FY2040
FY2038
FY2036
FY2034
FY2032
FY2030
FY2028
FY2026
FY2024
FY2022
FY2020
$0
FY2018
$10 FY2016
Projected annual revenue ($M nominal)
REVENUES UPDATE: Revised Recurring Revenue Projection
Current Projection
Growth driven by commencement of ground rent and by PILOT values increasing as buildings are constructed and occupied Assumes 3% inflation of PILOT, defined escalation terms on ground leases
10
CASHFLOW PROJECTION: Assuming no Pier 61 (reactive maritime approach) BBP projected to run out of money in FY2025…
Park Cash Reserves ($M nominal) )
$100 $0
FY2016 FY2020 FY2024 FY2028 FY2032 FY2036 FY2040 FY2044 FY2048 FY2052 FY2056 FY2060 FY2064
($100) ($200) ($300) ($400) ($500) Reserve balance 2
3
...and results in $450M of deferred maintenance
1. Cashflow projection assumes no revenues from Pier 6 development sites 2. Includes all projected expenses (opex, maritime, and capital maint.) and all projected revenues (one-time, recurring, and rev from abatement expirations) 3. “Reserve balance” is aggregate beginning balance of operating, capital maintenance, and maritime maintenance reserve funds in any given year NOTE: Cost of borrowing during negative “Reserve fund balance” years not included
11
CASHFLOW PROJECTION: Assuming no Pier 61 (preventative maritime approach)
Park Cash Reserves ($M nominal)
$400
Not Feasible due to lack of upfront funds to pay for initial costs of preventative maintenance
$300 $200 $100 $0
FY2016 FY2020 FY2024 FY2028 FY2032 FY2036 FY2040 FY2044 FY2048 FY2052 FY2056 FY2060 FY2064
($100) ($200) ($300) ($400) Reserve balance 2
3
1. Cashflow projection assumes no revenues from Pier 6 development sites 2. Includes all projected expenses (opex, maritime, and capital maint.) and all projected revenues (one-time, recurring, and rev from abatement expirations) 3. “Reserve balance” is aggregate beginning balance of operating, capital maintenance, and maritime maintenance reserve funds in any given year NOTE: Cost of borrowing during negative “Reserve fund balance” years not included
12
CASHFLOW PROJECTION: Pier 6 development site financial offer Subject to approval by BBP Board Recurring revenue
One-time revenue Upfront rent
$104M
Ground rent3
$0.6M/yr
PILOST1
$4M
PILOT1
$1.8M/yr
PILOMRT1
$7M
Park Transfer Fee4
$0.3M/yr
TOTAL
$2.7M/yr
TOTAL2
1. 2. 3. 4.
$115M
Projected values based on current DOF valuation of comparable buildings Although the proposal includes an offer of participation rent offer at 15% of all revenues over an average net per square foot sales price of $2,200, given current market conditions, BBP is not projecting any revenue from this offer Growth rate is 7.5% every 5 years Beginning ten years after Substantial Completion, BBP receives Park Transfer Fee of 0.75% of the sale price of each sold unit
13
CASHFLOW PROJECTION: With Pier 6 (preventative approach) $300 $200
FY2064
FY2062
FY2060
FY2058
FY2056
FY2054
FY2052
FY2050
FY2048
FY2046
FY2044
FY2042
FY2040
FY2038
FY2036
FY2034
FY2032
FY2030
FY2028
FY2026
FY2024
FY2022
($100)
FY2020
$0
FY2018
$100 FY2016
Park Cash Reserves ($M nominal)
$400
($200) ($300) ($400) Reserve balance1
Reserve Balance (with City Sweep)2
1. “Reserve balance” is aggregate beginning balance of operating, capital maintenance, and maritime maintenance reserve funds in any given year NOTE: Figures include annual 1% return on invested capital (i.e., the reserve balance) 2. Assumes City sweep of excess PILOT revenue starting in FY2047 equivalent to $3.5M in FY2016$
14
Conclusion • Model has long history and has been publicly vetted over 10+ years • Updates include FY2016 PILOT numbers, more accurate PILOST projections, and refined park construction schedule • Without revenues from Pier 6 development sites BBP cannot fulfil its mandate to be financially self-sufficient • The recommended Pier 6 RFP proposal provides an appropriate level of revenues to ensure the park remains financially solvent
15
