Continuum_hirez

PREMIER ISSUE 2013

AN EDGEMOOR INFRASTRUCTURE & REAL ESTATE PUBLICATION

NEW PERSPECTIVES ON REAL ESTATE, INFRASTRUCTURE & TURNKEY DELIVERY

Assessing Risk:

Selecting an Appropriate Procurement Platform TURNKEY DELIVERY TODAY: Redefining Strategies to Consider for the Realization of Important Facilities.

LONG BEACH COURT BUILDING: The First Performance Based Social Infrastructure Project in the U.S.

With an outstanding team of

INNOVATIVE

LE ADERS in the structuring and delivery of new facilities under a

TURNKEY

METHOD

Edgemoor Infrastructure & Real Estate creates value for its clients and partners by providing meaningful

RISK

TR ANSFERENCE with certainty of performance.

An affiliate of the Clark Construction Group, LLC, one of the largest privately held construction firms in the nation with more than $4 billion in annual revenues, Edgemoor leverages the financial and Design-Build strength of the Clark organization to exceed client expectations. www.edgemoordevelopment.com C

continuum

PREMIER ISSUE 2013

SPOTLIGHT

18 GOVERNOR GEORGE DEUKMEJIAN COURTHOUSE, LONG BEACH, CA

18

Simplifying Public Agency cost of occupancy via Performance Based Infrastructure

+ Interview with Clifford Ham, California’s lead coordinator for the Long Beach Court Building

MOTIVATORS

2

TURNKEY DELIVERY TODAY

6

REASONS FOR TURNKEY DELIVERY

trategies that provide risk transference and S certainty of delivery

34 VALUE FOR MONEY

6

new approach for comparing delivery methods A to ensure best value for public dollars

METHODS

12 DESIGN AND CONSTRUCTION WITHIN TURNKEY DELIVERY

Contractually aligning development, design and construction team members and enabling activities to overlap, allowing for fast-track delivery of facilities and early risk transference

28 APPROACHES TO FINANCING

Reviewing the most common financing approaches that are used within a turnkey delivery

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M OT I VATOR S

Turnkey Delivery Today Exploring Evolving Trends in Alternative Delivery Strategies for Public and Social Infrastructure Projects

BY NEAL FLEMING

The traditional Design-Bid-Build (DBB) method of project delivery has a long history of success and remains an appropriate method for the delivery of many public and social infrastructure projects, namely roads, bridges, schools, universities, healthcare facilities, airports, institutions, local governments and federal government facilities. The DBB approach is highly sequential, moving from programming through design to construction, and requires a government or institution (“Agency”) to manage many individual contracts. Under a traditional

Turnkey Delivery A delivery method that includes development and construction activities performed at-risk by a private contractor under a single contract.

GOAL SETTING

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DBB, the institution is responsible for land acquisition, entitlement, utility availability, design and construction management, tenant/client relationships, interior furniture, fixtures and equipment, financing, and operations and maintenance (O&M). To effectively accomplish a DBB delivery, an Agency needs an experienced staff, an adequate timeline that allows each discipline to work in a linear sequence, and the ability to manage budget and schedule risks associated with delivery and operation of a new facility.

Currently, government and institutional leaders are faced with an urgent need to replace our Nation’s deteriorating infrastructure and to deliver new modernized facilities to serve their constituencies. The pressure to perform is set against a backdrop of economic uncertainty and steady-todeclining government and institutional budgets which are resulting in staff reductions

PROCUREMENT STRUCTURE

TEAMING

with no corresponding reduction in assets or projects to manage. Because of these competing forces, now, more than ever, decision makers need to carefully assess the risk they are taking on in the delivery and long term O&M of a new facility.

Our new publication, Continuum, seeks to illuminate evolving trends in turnkey delivery strategies, clarify the industry’s

OUTCOME

understanding of the term “turnkey� and highlight how a wide range of public and institutional owners can benefit from these alternative delivery methods. These optional turnkey strategies for delivering public and social infrastructure projects eliminate many of the risks to the public sector that remain inherent under the DBB method of delivery and under standard models of facility operations after delivery. These articles provide thoughtful analyses as to when and why these optional strategies should be employed, arming decision makers with the proper tools to assess their project needs and organizational objectives.

Once alternatives have been evaluated, the client can confidently determine which method is most appropriate for their project.

No matter the method of delivery, the first step to any successful project is the clear determination of the primary goals for the facility. After the goals have been properly vetted by all stakeholders, the various methods of procurement can be properly evaluated and determined. The primary goals should include: Provide an efficient, productive, safe, and stimulating working environment Incorporate safety and technology requirements into design from day one.

Allocate individual and collaboration space efficiently and effectively, and create a work environment that is conducive to promoting positive morale and productivity.

Select a cost effective solution that considers the life of the facility, not just initial cost Evaluate initial, financial and long-term costs to understand true cost of occupancy.

Establish building operating standards and budgets prior to design. Design to these criterion and incorporate a capital maintenance program into operating budgets to avoid future problems created by deferred maintenance and unfunded capital replacements.

A New Vernacular for Defining Turnkey Delivery Strategies A Glossary What makes a project delivery approach turnkey? When referring to delivery of a new infrastructure or institutional real estate project, turnkey is a phrase that is often misused. We define a delivery approach as turnkey if it includes typically defined development activities, such as site acquisition, entitlements, utility availability, permitting, and 3rd party leasing management, with the private sector at-risk for their performance, under a single contract. Recognizing this distinction is important because these development activities are not typically performed by general contractors/design-build firms and require the specialized expertise of facility developers.

DBB

Design-Bid-Build is the traditional method of project delivery where there are separate contracts with separate entities for design and construction.

This method is sequential in nature, beginning with design, moving

through bidding, and ending with construction. The Agency is also responsible for land acquisition, entitlements, utility availability, permitting, financing and operations & maintenance (O&M)/lifecycle costs.

TDB

At the most basic level, a Turnkey-Design-Build approach contractually aligns the project design team with the construction team under one entity that is responsible for delivering the facility for a fixed cost and set

schedule. Unlike a conventional Design-Build, under a Turnkey-Design-Build model the private sector takes on all or some of the responsibility for land acquisition, entitlements, utility availability and permitting. Financing and O&M/lifecycle costs remain the responsibility of the Agency.

TDBF

With Turnkey-Design-Build-Finance, the private sector also steps in to provide project financing. This approach has all the attributes of the Turnkey-Design-Build method previously described; however, in this

scenario, the Agency remains responsible for O&M/lifecycle costs. Financing under TDBF is generally shorter-term in nature and used to fund delivery for assets that will be Agency owned over the long-term.

TDBFOM

The Turnkey-Design-Build-Finance-Operate-Maintain approach represents the fullest transfer of project delivery and longterm operations and maintenance risks available outside of

privatization. This comprehensive approach expands upon the risk transfer provided by TDBF by including comprehensive O&M/lifecycle cost risks in the turnkey agreement.

Also referred to as Performance Based Infrastructure (PBI), the TDBFOM approach provides certainty of development, Design-Build, financing and O&M/lifecycle costs, resulting in a facility solution that produces the lowest total cost of ownership, or occupancy, over the life of the facility. This approach also includes project financing, which is typically long-term and tailored to meet specific Agency needs. premier issue

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The Components of Facility Delivery and Long-Term Operations Activities in a Typical Turnkey-Design-Build-Finance-Operate-Maintain Delivery Approach

T

DEVELOPMENT ACTIVITIES

DB

DESIGN & CONSTRUCTION

F

FINANCING

OM

OPERATIONS & MAINTENANCE/ LIFECYCLE COSTS

Owner-Rep Delivery

Builder

Capitalization Plan

Owner Rep-Operations

End User Coordination

Designer

Life Cycle Cost Analysis

Site Entitlement

Engineers

Investors Debt (Banks/Bonds)

Permits

Lump Sum Fixed Price

Legal Structuring

Operating Cost Management

Utilities

Code Compliance

Legal Agreements

Licensing/Permits

Inspections

Tenant Work/Finishes

- Owner

Lease Management

Quality Control

Guaranteed Schedule

- Development

Tenant Service

FF&E

LEED Requirements

- Design-Build

LEED Requirements

Leasing

Insurance

- Facility Management

Risk Management

Accounting

Geotechnical/Environmental

Collateral Agreements

Insurance

Risk Management

Move-in Coordination

Builder/Lender

Move-in Coordination

Life Cycle Cost Studies

Facility Manager/Lender

Repairs & Maintenance

Community Relations

Commissioning

Building Management

Equipment and Component Replacements

Protect against cost overruns associated with design, construction, and O&M costs Establish realistic budget numbers for design, construction and operations and manage to the budget. Obtain buy-in from all stakeholders to fix scope of work and budget early in the process. Only allow changes with detailed evaluation and approval. Allocate risk of cost, schedule and operating cost overruns to the party best positioned to manage those risks.

Consider all financial alternatives to provide the best value option for financing the project Evaluate all options, including possible grants, government loans, tax-exempt bonds, and private sector financing.

Evaluate any opportunities to generate

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income in the completed facility including credits for energy savings and leasing of future expansion space.

This list of objectives would be tailored to the needs of a specific facility; however, it is important to reiterate the key to a project’s success: remaining focused on project goals leads to a clear choice in selecting a procurement method which best meets all of the objectives. This, in turn, enables selection of an appropriate delivery partner that can produce the desired outcome for the project.

In these challenging times of budget shortfalls and resource cutbacks, it is imperative for every organization to more effectively manage its resources and exposure to cost uncertainty. Turnkey delivery offers a range of strategies that

can advance important facility projects with cost and schedule certainty. These strategies ensure the procuring Agency maintains control and is able to oversee all key components of project delivery.

We hope you find these articles infor­ mative and useful as you evaluate your objectives for risk transference and cost control on your next major facility project. n

Infrastructure Sectors Supported by Turnkey Delivery AIRPORTS

HIGHWAYS

WATER TREATMENT

SOCIAL/EDUCATIONAL

GOVERNMENT/CIVIC

STADIUMS/ARENAS

HEALTHCARE

CONVENTION CENTERS

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M OT I VATOR S

Reasons for Turnkey Delivery Risk Transference and Other Drivers

BY DONALD GIBSON

The use of a turnkey delivery process, or the transfer of a facility ready for use by the occupants, is a well established practice throughout the United States. While this method of delivery has been around for decades, it is generating a renewed focus for being a cost effective and strategic means of managing complex facility needs for varying institutions.

Turnkey delivery strategies are alternatives to traditional Design-Bid-Build (DBB) delivery; they provide risk transference and certainty of delivery to both the public and

throughout its useful life; (1) Development, (2) Design & Construction, (3) Financing, and (4) Operations & Maintenance/Lifecycle Costs. Under the traditional DBB approach, an institution carries the risk and cost uncertainties affiliated with each of these activities. Because the DBB delivery process is linear and generally not integrated, construction cost is not always certain until the design is completed and the drawings are bid. Likewise, operating and lifecycle costs are not truly known until the facility is online and operating. Often times, an

Other institutions that have struggled to deliver facilities on time and on budget, or are stretched thin with limited resources, may find turnkey strategies to be a useful method of project delivery. institutional sectors. Turnkey delivery is flexible and comes in a variety of methods to meet the owner’s procurement requirements. Unlike a traditional DBB approach, turnkey delivery consolidates multiple aspects of development, building design, financing, construction and O&M into a comprehensive facility solution with financial and organizational flexibility and a single point of accountability.

There are four main activities associated with the delivery and operation of a facility 6

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institution’s operations group is a separate entity from the real estate and construction department. Effectively managing these risks requires an institution to commit significant resources from various groups to the delivery and operations process.

Turnkey delivery strategies mitigate these risks by contractually transferring them to the private sector. This allows the government or institution (“Agency”) to conserve resources, and enables people and financial assets to focus on their core

Presented on the facing page is a graphic representation of risk transference during a turnkey delivery approach.

Risks and their impacts are categorized in terms of the four main activities associated with delivery and operation of a facility. Risks retained by the institution are highlighted in red with those transferred highlighted in orange.

Agency Risk Transference

Agency Risk Risk Transferred to Private Sector

DBB AGENCY RISK

Development & Design O&M/Life Cycle Costs

Construction

DESIGN-BID-BUILD

Financing

Traditional DBB Risks In traditional DBB, the Agency retains all risk of development, design and construction, financing and operations & maintenance/life cycle costs

TDB

TURNKEY-DESIGN-BUILD

RIS K CONTINUU M

Development

O&M/Life Cycle Costs

Design & Construction

Financing

Development, Design and Construction Risks Transferred Under Turnkey Approach (Cost & Schedule) • Entitlement Delays • Change Orders • Permit Delays • Schedule Delays • Utilities (Cost & Schedule) • Scope Creep • Site Issues • Code Compliance • Attracting Third Party Tenants

TDBF Development

O&M/Life Cycle Costs

Design & Construction

Financing

TURNKEY-DESIGN-BUILD-FINANCE Financing Risks • Alternative Private Financing • Limited Debt Capacity

TURNKEY-DESIGN-BUILD-FINANCE-OPERATE-MAINTAIN Development

PRIVATE RISK

O&M/Life Cycle Costs

Design & Construction

Financing

TDBFOM

O&M/Lifecycle Risks •B aseline Operating Costs •U ncontrolled Operating Cost Escalations • Energy/Performance • Deferred Maintenance •D eferral of Major Equipment and Component Replacements

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‘

The [Turnkey] Design-Build process was critical to the success of the new middle school project. It allowed the Owner many more options throughout the project that would not have been available through a traditional Design-Bid-Build. — Lois

F. Berlin, Ed.D. Superintendent (retired) Falls Church City Public Schools

organizational mission. Risk transfer can be comprehensive or selective, depending on the project and Agency goals. A turnkey delivery contract combines some Development activities with any or all of the other four main activities described above. With a comprehensive Turnkey-Design-BuildFinance-Operate-Maintain (TDBFOM) structure, an institution can transfer all the risk to the private sector in exchange for a guaranteed fixed monthly payment over a defined term.

Agencies that have a good track record in managing project risks and have both adequate, experienced staff and the necessary financial resources, may find that the traditional DBB approach remains their best option for delivering new facilities. Other Agencies that have struggled to deliver facilities on time and on budget, or are stretched thin with limited resources, may

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find turnkey strategies to be a useful method of project delivery.

While risk transference is a major factor for the implementation of a turnkey delivery strategy, other reasons, such as speed of delivery, access to new sources of capital and managing building complexity, have been cited by some institutions as their primary motivator in implementing a turnkey approach.

Presented on the following pages are three examples from the Edgemoor port­ folio where additional considerations were motivators for the implementation of a turnkey delivery strategy. n

BEYOND RISK: Motivators for Turnkey Delivery

MOTIVATOR

SPEED

Facility needs to be brought on-line quickly n

n

n

Funding pre-development with project financing to start projects earlier Development activities such as site acquisition, utility availability and entitlements are integrated into turnkey solution to accelerate pre-construction Design-Build to reduce cost and accelerate delivery

Turnkey solution: Contractually integrated delivery approach is more efficient and productive

Mary Ellen Henderson Middle School Mary Ellen Henderson Middle School, a 131,000 SF school featuring technologically advanced, flexible learning environments, was the first project awarded in Virginia to build an educational facility under the “Public Private Educational Facility and Infrastructure Act of 2002.” In desperate need of a new school and unable to identify a viable site, Falls Church City Public Schools entered into an agreement with Edgemoor to provide turnkey services, including site selection, program development, zoning, design and construction of a new facility that houses grades five through seven. Edgemoor worked with Falls Church to determine the most feasible site and proposed alternative financing structures to reduce project costs and the City’s debt burden. In addition to classrooms, the school features a cafeteria/auditorium, gymnasium, art lab, library, science and computer rooms, and a media production area.

The ultimate delivery of the school saved the school system two years and close to $10 million against their original expectations.

TDB premier issue

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MOTIVATOR

FINANCING

Capital constraints require new project finance strategies n O ff

balance sheet or 3rd-party financing sources needed

n n

n

Lease / leaseback project financing

South County Secondary School South County Secondary School, a $64 million Turnkey-Design-Build-Finance project, was delivered through an innovative financial and development structure developed by principals of Edgemoor. Edgemoor’s plan called for the monetization of unused Fairfax County land assets, thereby lowering the overall net cost of the project to the County and accelerating the delivery of the school without taking any funds out of the school system’s capital improvement plan until they were originally programmed. In addition, through the land sale, value engineering, and other creative tools, the County was able

Use of availability payments and service agreements to underwrite project financing

to save over $25 million against the project budget. This created enough

No upfront or progress payments; payments begin with occupancy

County. Edgemoor provided day-to-day management and a single point of

Turnkey solution: Custom tailored project financing frees capital for other institutional needs

TDBF

funds to accelerate the renovation of 11 other school facilities in Fairfax responsibility from the private sector for the entire development process, including financing, which reduced the burden on Fairfax County Public Schools staff. The school opened three years ahead of the County’s original schedule.

This project was awarded the National Council for Public-Private Partnerships 2006 Innovation Award.

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MOTIVATOR

COMPLEXITY

Managing project complexity n

n n

n

Sandler Neurosciences Center, University of California, San Francisco (UCSF) Edgemoor/McCarthy Cook Partners LLC entered into a public-private partnership agreement with the University of California, San Francisco (UCSF) to turnkey develop, design, construct, operate and maintain (TDBOM) the Sandler Neuro­ sciences Center on UCSF’s Mission Bay Campus. Edgemoor was responsible for

Interconnected and interdependent mechanical and electrical systems

coordinating all of the development activities, including entitlements, permitting,

Complex program and code requirements

McCarthy Cook is providing property management services to the building for the

New computer modeling tools enabling enhanced design coordination

schedule management, as well as cost and schedule guarantees.

Pursuit of energy and resource efficiency through the green building movement

n

Adaptability of space for future needs

n

Employee attraction/retention

Turnkey solution: Integrated Turnkey Design-Build team contractually aligned and accountable for delivering the facility on schedule and budget.

design management, asset management and oversight of final delivery and occupancy. term of the lease. Clark was responsible for all design and construction activities,

Designed to house the UCSF Department of Neurology, the Institute for Neuro­ degenerative Diseases, and the Center for Integrative Neuroscience, the UCSF Sandler Neurosciences Center is one of the largest neuroscience complexes in the world. Enveloped in curtain wall, metal panels, and precast concrete, the five-story building houses approximately 100 principal investigators, including a Nobel Prize winner, and more than 500 additional researchers and staff.

Edgemoor arranged pre-development financing with a commercial bank based in California to cover initial costs of architecture and engineering. Permanent funding was provided through a lease-leaseback structure involving UCSF,

TDBOM

Edgemoor/McCarthy Cook, and a newly formed 501(c)(3) corporation. Edgemoor/ McCarthy Cook will own the building for the 38-year term of the lease. The project costs were funded by Build America Bonds issued by the non-profit. The

This project was recently awarded the San Francisco Business Times 2012 Real Estate Deal of the Year - New R&D

credit for the bond repayment is a lease between UCSF and Edgemoor/McCarthy Cook. The lease payments cover capital (building delivery costs) repayment along with guaranteed operations and routine maintenance throughout the lease term. premier issue

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M ET HODS

DESIGN & CONSTRUCTION WITHIN

Turnkey Delivery

BY BILL CALHOUN

Turnkey delivery offers a more effective process for designing and constructing new

mance of development activities, such as site acquisition, entitlements, utilities, permitting,

facilities than a traditional Design-Bid-Build (DBB) procurement. Turnkey delivery consolidates multiple contracts into a single point of accountability, provides early risk transference with certainty of schedule and cost, and results in accelerated delivery, while integrating the Agency as an active participant in the design process.

public relations and end-user coordination, and a Design-Builder that is responsible for the design and construction activities employing a Design-Build method.

Understanding the Design-Build method within the turnkey delivery process begins with the role of the Agency. As represented in the graphic on the facing page, with a traditional DBB, the Agency is central in orchestrating and managing the process. The Agency holds multiple contracts and is responsible for managing the contractual process between all the various parties involved. With this, the Agency assumes the delivery risk, and is ultimately responsible for cost and schedule overruns.

Once the building is complete, the Agency

Greater Accountability and Risk Transference Through Contractual Alignment The turnkey delivery process contractually aligns real estate (development), design (architect), and build (contractor) team members through a single source contract, creating greater accountability to the

Turnkey-Design-Build commonly results in schedule reduction of 20% or more, which equates to 10 months or more on most projects.

Agency by the private sector (see facing page). Delivery risk is assigned by the Agency to a turnkey delivery team that is positioned to effectively manage the risks inherent to building new facilities. A typical turnkey delivery team is comprised of a developer that manages the team’s perfor12

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is responsible for building operations & maintenance (O&M).

A turnkey delivery approach offers the Agency a single source, fully integrated and effective way to manage the development, design and construction process. The turnkey delivery team is responsible for overseeing

the facility’s development at a fixed cost and schedule, eliminating Agency risks of schedule delays and cost overruns (see page 14 for a cost and performance analysis produced by Caltrans). This approach enables Agencies to do more with less staff and to tailor their level of involvement on a specific project to meet their broader organizational needs.

Schedule Savings via TurnkeyDesign-Build Delivery With a turnkey delivery approach, development, design and construction activities overlap, allowing for fast-track delivery of facilities with no additional risk to the Agency. Turnkey-Design-Build commonly results in schedule reduction of 20% or more when compared to traditional Design-BidBuild delivery. This equates to 10 months or

Traditional Design-Bid-Build (DBB) Structure LEGAL

REAL ESTATE

DESIGN

End-User Coordination Site Entitlement Permits Utilities Inspections Quality Control FF&E Risk Management Community Relations Leasing Accounting

Designer Engineers Code Compliance Tenant Work Schedule LEED Requirements Geotech/Environmental

RISK TRANSFERENCE WITH SINGLE POINT OF ACCOUNTABILITY

(A & E)

BUILD

(GENERAL CONTRACTOR)

END USERS

O&M (FACILITY

FINANCE

MANAGER)

Builder/General Contractor Tenant Work Schedule Insurance Commissioning Build per Plans & Specifications

Agency Risk Risk Transferred to Private Sector

Turnkey-Design-Build (TDB) Structure LEGAL

TURNKEY DESIGNBUILDER Real Estate Activities Owner-Rep Delivery End-User Coordination Site Entitlement Permits Utilities Inspections Quality Control FF&E Risk Management Community Relations Leasing Accounting

AGENCY/ INSTITUTION

Design-Build Activities Builder Designer Engineers Lump Sum Fixed Price Code Compliance Tenant Work Guaranteed Schedule LEED Requirements Insurance Geotech/Environmental Move-in Coordination Commissioning

AGENCY/ INSTITUTION

FINANCE

END USERS

O&M (FACILITY

MANAGER)

Through TDB, an Agency’s time is leveraged by the expertise of the development team for greater efficiency, allowing the Agency to avoid the minutia of the process while maintaining focus on their end-product goals. premier issue

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Cost Certainty: Knowing Your Agency’s Strengths Caltrans Analysis of the Presidio Parkway Project

Caltrans Historical Performance 70% On projects over $300M (like Presidio Parkway), Caltrans has historically had cost overuns in excess of 50%

60% 50% COST OVERUNS

Prior to undertaking the Presidio Parkway project, Caltrans evaluated their historical performance in delivering transportation infrastructure projects. This analysis clearly identified which projects they delivered on budget and where they had consistently experienced major cost overruns.

Based on this analysis, Caltrans was able to measure the value of the cost and schedule guarantees that they would receive through turnkey delivery, which made a DBFOM delivery the best option for the $500M Presidio Parkway project.

40% 30% 20% 10% 0% -10% Up to $50M

$50M to $100M

$100M to $300M

over $300M

PROJECT COST Source: Caltrans

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Average Cost Savings

Average Cost Overuns

more on most projects. Integrated design and construction teams are better equipped to realize solutions to complex building problems by promoting close collaboration through a contractually defined process.

This consolidation of expertise allows for tasks such as permitting, submittals, inspections, and quality control processes to occur simultaneously with construction.

Public Sector Design Input: Long Beach Court Building

Leveraging Private Sector Expertise Frees Agency to Focus on End-Product Goals

Prior to constructing the life-size mock-up, the Design-Build team developed a fully

Turnkey delivery does not remove the Agency from the equation; they are present throughout the Design-Build process, attend all design and construction meetings, and exercise a large degree of control over the direction of the project. While profoundly involved throughout the entire process, the Agency’s time is leveraged by the expertise of the development team for greater efficiency.

With the aid of the development team, the Agency avoids the minutia of the process while maintaining focus on their end-product goals. Design approval is verified through a design review process, where the Agency has the opportunity to review and approve the design packages created by the Design-Build team. During construction, the Agency can retain 3rd party inspectors and commissioning agents to independently verify that the Design-Build team is meeting all the requirements of the agreement. In this way, the Agency can maintain laser focus on meeting all of the objectives of the project end-users.

Keys to a Successful Design-Build Process Design Process Organization Critical to the success of the design and construction component of turnkey delivery is organization and management of the design process. Creating a framework for collaboration between the various team members is key. Under a turnkey delivery, the Design-Build executive manager

The new 545,000 square foot Long Beach Court Building is being developed by Edgemoor Infrastructure, with Clark Construction leading the Design-Build team.

With 31 courtrooms planned for the new building, the Design-Build team utilized a mock-up of typical courtrooms to ensure that each courtroom addressed the needs of the Judiciary and users of the building.

detailed 3-D virtual model for the court users to review and provide feedback. A life size mock-up was then constructed to ensure that the design of each courtroom met the client’s technical and aesthetic requirements. This mock-up also allowed the contractor and sub-contractors to refine the construction approach and establish a visible quality standard.

The project team constructed the courtroom mock-up and adjacent detention areas in a rented warehouse building close to the construction site. Honorable James D. Otto, Supervising Judge of the South District, presided over the mock-up evaluation where members of the

Through a mock-up process, participants were able to provide feedback on the functionality of the space. These modifications were incorporated into the final design, ensuring the completed facility met the court’s needs.

development team, acting as jurors, defendants and in-custody defendants, assisted the AOC and judiciary representatives during their tests of the court design. Judges, court reporters, Los Angeles County Sheriffs’ deputies and other court personnel acted out courtroom procedures and scenarios. A typical courtroom consists of the judge’s bench, witness box, courtroom clerk’s station, court reporter’s station, attorneys’ tables, spectator seating, and one or two jury boxes. All of these functions were mocked-up by the Design-Build team. Also included were ramps to confirm proper accessibility and projection screens for evidence presentations.

In order to customize the mock-up, various height options were provided at the judge’s bench, in the jury box and at the courtroom rails through the use of styrofoam panels which could be added or removed by mock-up participants to achieve the ideal heights and sightlines. Utilizing a mock-up enabled courtroom staff to verify user positions and workstation adequacy prior to the commencement of construction.

Detailed elements such as workstation size and the height of the judge’s bench were all accounted for during this process, resulting in a design that had been sufficiently tested and met the court’s needs. premier issue

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assumes responsibility for leading the design effort and coordinating the design with the Agency. Establishing a regular place to host design meetings is a crucial feature of the Design-Build process because it promotes teamwork and improves efficiency. Also important is creating a central repository of critical information that is online and accessible to key project stakeholders.

addition, at key stages in the design process, packages are created for review and approval to ensure the design solutions created by the project team meet the requirements of the Agency. A formal process for recording feedback and resolving design matters is essential for validating the design and moving forward with construction.

Because design and construction

Active Agency Involvement – No Loss of Control A typical concern raised by Agencies when contemplating turnkey delivery and the Design-Build process is loss of control over design. Our experience suggests that this concern is overstated. Active involvement from the Agency throughout the design process is integral to achieving success. In

Turnkey-Design-Build vs. Traditional DBB Delivery Schedule Comparison TURNKEY-DESIGN-BUILD (Hypothetical 200,000 SF Institutional Building) Agency Driven Program Procurement TDB Team Legislative/Board Approval Award TDB Contract Cost and Schedule Risk Transfer Design-Build (Design Documents)

In TDB, schedule and cost risk is transferred to the turnkey design-builder upon contract execution, establishing cost far earlier (after 45 weeks) than in DBB.

Permitting: Sitework Permitting: Foundation Permitting: Structure & Skin

In TDB, turnkey design-builder is willing to take risk of early start with limited permits, accelerating commencement of construction by 42 weeks.

Permitting: Total Building Construction

TRADITIONAL DESIGN-BID-BUILD (Hypothetical 200,000 SF Institutional Building) Agency Driven Program

Traditional DBB requires owner and architect to take adequate time to ensure design meets all code requirements prior to taking out to bid resulting in 16 week longer design period.

Procurement Architect Legislative/Board Approval Design to Construct Documents Permitting Bid Construction Legislative/Board Approval

Cost for plans and specs, as designed, under DBB, established over one year later than TDB.

Award Construction Contract Construction

Weeks 1-20

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Weeks 21-40

Weeks 41-60

Weeks 61-80

Weeks 81-100

Weeks 101-120

activities overlap, early construction phases involving sitework, foundations, super足 structure and the exterior enclosure can be built while the remaining building interiors and mechanical system designs are being finalized. At this stage of the project, the Agency is in the field and is actively engaged in the building process while the design is being completed. Onsite construction

Contract Awarded

continues like a traditional construction process; architects and engineers provide construction administration services and operate under the same professional standard of care. Third party inspectors and jurisdictional code review agencies are also involved, providing independent reporting and quality control services.

Throughout the design and construction

Risk Transferred

Project Delivered

process, it is essential for the Agency to establish its level of involvement. One Agency may want to actively supervise the DesignBuild process, while another may only want to be involved during key design phases.

Turnkey delivery offers varying degrees of project involvement and consistently delivers on cost and schedule guarantees.

Refining Design to Improve End-User Experience/Maintaining Budget and Schedule Another exciting feature of turnkey delivery is that it offers the Agency more opportunity to provide input into design refinements focused on the experience of the facility end-users. The integrated Design-Build approach of turnkey delivery allows design refinements to be incorporated more quickly, reducing any cost or schedule impacts to the project. As detailed in the case study on page 15, the use of mock ups enable design refinements to be made in real time with input from actual users of the planned space. If decisions cannot be made regarding future refinements, the project team can make provisions to accommodate the refinements at a later date. The use of a collaborative team approach can extend to senior level leadership when a special executive leadership team is established.

This partnering approach ensures all members of the project team are aligned and able to determine the course of action when the unexpected occurs.

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TDB PRICE AND SCHEDULE RISK TRANSFER AT WEEKS

DBB PRICE AND SCHEDULE RISK RETAINED UNTIL PROJECT COMPLETION TDB DELIVERS OVER

10 MONTHS EARLIER THAN DBB

Effective Risk Management Throughout the Turnkey Design and Construction Process

Weeks 121-140

Weeks 141-160

Weeks 161-180

Weeks 181-200

Weeks 201-220

Turnkey development promotes active Agency involvement and aligns the incentives of the designers and builders, enabling them to work towards their shared performance goals. The resulting process is streamlined, productive and offers great value to institutions and the public sector that are pursuing major facility projects. n premier issue

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SP O T LI GH T O N P E R F O R MAN CE BASE D I N F R ASTRUCTURE

Governor George Deukmejian

COURTHOUSE A Turnkey-Design-Build-Finance-Operate-Maintain Project

E

BY JAMIE MARTIN

xperience has taught us that no two organizations are identical and neither are any two infrastructure or real estate projects. What may be an attractive transaction structure for one organization might be too big of a leap for another. The flexibility of the turnkey delivery approach, with regards to the bundling of services and transference of risks, allows for tailored solutions that can meet the needs of any organization and any project, no matter the size or the complexity.

Integrated lighting and audio/visual controls at Judge’s bench Displacement Air HVAC System at floor level

Carpet for sound attenuation but easily changeable at high traffic areas

Innovative use of finish materials in the courtroom design give the appearance of a room centered on the judicial bench, a typical design standard, while in reality the bench is offset slightly from center for highly efficient use of the floor area.

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continuum

The Governor George Deukmejian Courthouse (aka, the Long Beach Court Building) is a unique project because it represents one transaction in which the private sector tackles all four primary risks associated with facility delivery and long term operations, including: (1) Development,

(2) Design and Construction (Schedule and Cost), (3) Financing, and (4) Operations and Maintenance/Life Cycle Costs (Replacements).

Edgemoor Infrastructure & Real Estate is part of the Long Beach Judicial Partners LLC, (LBJP) team that is under contract to

Major Project Benefits

Durable, cleanable surfaces.

Hard wood veneer and back painted glass to reduce maintenance costs

Delivering the Long Beach Court Building with a full turnkey solution (TDBFOM) allowed the transfer of significant project risks to the party best able to manage them; provided access to new, competitive sources of capital; and focused on lowest cost of occupancy over a 35 year period, rather than lowest first cost.

Court Building Details PROJECT DESCRIPTION 440,000 SF of courthouse space

Chairs in lieu of benches leads to less vandalism and reduces maintenance costs

100,000 SF of commercial office space leased to LA County 5,000 SF of retail and food service space DEVELOPMENT PROGRAM 31 court rooms, courts administration and County lease space PROJECT TEAM Concessionaire: Meridiam Infrastructure Development Management: Edgemoor Infrastructure & Real Estate Design-Builder: Clark Construction Group

turnkey develop, design, construct, finance, operate, and maintain (TDBFOM) the new 545,000 square foot Governor George Deukmejian Courthouse in Long Beach, California. The project is being delivered under a unique Public-Private Partnership agreement, which has a total development

Architect: AECOM Facility Manager: Johnson Controls, Inc. COMPLETION DATE September 2013

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‘

Having the firm responsible for the long term operation of the building...at the table [during design & construction] is a quality control mechanism of sorts that helps ensure that the product being built using fast track construction will be an enduring asset.

—C lifford Ham Principal Architect at the Administrative Office of the Courts (AOC) of California

cost of approximately $490 million and a Design-Build cost of $343 million.

This court building is the first social infrastructure project in the United States procured under the principles of Performance Based Infrastructure (PBI) contracting.

Under the PBI agreement, the California Administrative Office of the Courts (AOC) will own the building and the Superior Court of Los Angeles County will occupy the space. The AOC will pay LBJP an annual, performance based service fee, or Availability Payment, for 35 years. The PBI delivery method will leverage the private sector’s access to financing, technological expertise,

and management efficiency to quickly provide a high quality facility that will serve the Superior Court of Los Angeles County.

Edgemoor is providing real estate development services for the project. The scope of work includes significant utility relocations, permitting, and implementation of the California Environmental Quality Act (CEQA). CEQA requirements include preser­vation of historical artifacts, hiring of an independent building expert with the state building permit authority, and inter­facing with local city government for work outside the property line. The development team has also assisted LBJP with

The Long Beach Court Building, which was procured using a PBI turnkey approach, provides value for money through trans­ference of all project delivery and operating risks under a 35 year TDBFOM concession agreement.

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continuum

Maximize glazing on northern faรงade for light management

Vandal resistant interior surfaces, including glazing

Terrazzo is more durable in high traffic areas and has a lower total cost over 35 years than carpet

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PBI: Availability Payments and Impact on Design Approach An Availability Payment is a means of compensating a private concessionaire for its responsibility to design, construct, operate and maintain a facility for a set period of time. These payments are made by the public Agency and based on particular project milestones, including a completion deadline and/or facility performance standards. Performance standards are measured opera足tionally and according to occupant satisfaction. Operational considerations can include room air temperature, cleanliness, and speed of light bulb replacement. Occupant satisfaction measures customer service, performance, the completion of preventative maintenance, testing of equipment, and inspection of space.

On the Long Beach Court Building there are no milestone payments associated with construction and the Availability Payments will not commence until occupancy of the space.

After occupancy, receipt of the Availability Payment is predicated upon the performance of the facility, which mandates the facility manager is performing all required tasks and the space

With the risk of long term operations and life cycle costs built

is in the specified condition. There are detailed key performance

in to the transaction structure, choices in mechanical systems

indicators by which the condition of the space and performance

and finish materials were driven not by initial cost but by total

of the facility manager are measured. Predetermined deductions

cost over the entire concession period. Examples of these

to the Availa足bility Payment are instituted if key performance

considerations are highlighted in the renderings on pages

indicators are not met or achieved.

20 and 23.

In contrast to traditional Design-Bid-Build delivery, the trans足

A good example of the types of choices made was the selection

actional requirements of the Performance Based Infrastructure

of Terrazzo flooring versus carpeting in heavily trafficked

(PBI) turnkey approach drive the need for a fully integrated

corridors. Although a much higher first cost, this material is

design process involving the architect, engineers, contractor

much more durable and enables the end user to avoid the

and facility manager. When working with public agencies under

higher cost of frequent carpet replacement. Another example

more traditional delivery approaches, the objective is almost

is the construction of enclosed penthouses on the roof that

always to lower first cost. In the case of lowest bid selection,

provide additional protection for the mechanical systems against

the long term operating and life cycle costs are often driven

the marine environment of Long Beach. With guidance from the

upward as a result of the selection of shorter lived equipment

facility manager, the design team selected hard, durable but

and less durable materials. Unfortunately, this rarely seems to

easily cleanable wall finishes to reduce potential for vandalism

get factored in by the public sector.

and for ease of daily servicing. As these examples illustrate, design and material choices can be heavily influenced by the life cycle cost considerations inherent to a PBI turnkey approach.

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continuum

Agency Risk

Long Beach Court Building PBI: (TDBFOM)

Risk Transferred to Private Sector

In this model, the concessionaire assumed all TDBFOM risk and has partnered with a turnkey developer and an O&M facility manager to guarantee performance.

LEGAL

AGENCY/ INSTITUTION

LEGAL

CONCESSIONAIRE

TURNKEY DESIGNBUILDER Real Estate Activities Owner-Rep Delivery End-User Coordination Site Entitlement Permits Utilities Inspections Quality Control FF&E Leasing Accounting Risk Management Community Relations

Design-Build Activities Builder Designer Engineers Lump Sum Fixed Price Code Compliance Tenant Work Guaranteed Schedule LEED Requirements Insurance Geotech/Environmental Move-in Coordination Life Cycle Cost Studies Commissioning

establishing commercial leases with Los Angeles County and retail tenants. Clark Construction is leading the design and construction of the new courthouse, including the tenant work.

When complete, the five story building will house 31 courtrooms, court administration offices, Los Angeles County lease space, and commercial and retail leasable space.

FINANCE

Feasibility Studies Capitalization Plan Debt (Banks/Bonds) Equity Investors Transaction Structuring Bond/Lender Counsel Loan Documentation Collateral Agreements - Builder/Lender - Facility Manager/Lender Financial Close Ongoing Financial Reporting

The building will include below-grade secure inmate transfer facilities, detention facilities, and separate secure parking areas for judges. A five level great room atrium enclosed on two ends by a cable supported glass wall system will serve as the single entry point for the public and provide access to a secured central courtyard. Clad in deeply articulated curtain wall and elements of

END USERS

O&M (FACILITY

MANAGER)

Owner Rep Operations Life Cycle Cost Analysis Building Management Operating Cost Mgmt Licensing/Permits Lease Management Tenant Service LEED Requirements Risk Management Insurance Move-in Coordination Repairs & Maintenance Equipment/Component Replacements

stone, the project spans two city blocks in downtown Long Beach and will replace the functionally obsolete courthouse building one block away. In addition to the new building, the project team will also renovate and expand an existing 399,000 square foot parking structure. n

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CONVERSATION

A Closer Look at the Courthouse PBI A conversation with Clifford Ham on the delivery of the Long Beach Court Building project for the Administrative Office of the Courts.

INTERVIEW BY JEFFREY FULLERTON

How did you first hear about PBI as a model?

Under Governor Schwarzenegger there was a desire to explore a new way of doing things [capital outlay building projects]. The AOC was chosen as a likely candidate, partly because we had a number of buildings that were in serious need of improvement and the depth and range of projects provided a good basis for testing the model.

Clifford Ham is the Principal Architect at the Administrative Office of the Courts (AOC) of California, where he is responsible for overseeing the delivery of large scale building projects.

Why was Long Beach a likely candidate for the first trial project?

There were a few things that made Long Beach a good candidate. First, there was some value in the existing property, or at least there was thought to be.

This provided some potential for development opportunities, or for a land swap opportunity, as was ultimately consummated with the City of Long Beach.

Second, the scale of the project was of a size that was interesting and attractive to sophisticated investors and project teams, so it attracted some very interesting proposals. Finally, being located in a major metropolitan area was a big plus, as it meant that there was top notch talent available to staff the project [development] team.

What intrigues you most about the PBI model?

We explored a lot of models with our advisors. What I really liked as an architect was this idea of linking the long term performance of the facility to the initial design. With PBI you build in a motivation for the developer to consider the total lifecycle costs, not just what might look good on day one.

26

continuum

What are the things you think that you got right in the procurement process?

One key thing was having our own land. There was some talk early on about having the developers bring land [as part of their proposal], but this way we got to pick the site we wanted and the project team [and design approach] that we wanted. One of the things we learned from the market early on was that the big infrastructure funds are not the same groups generally who are into flipping land and doing speculative development.

Also, I think we did a decent job of transferring the risks. One example is the permits risk, which I know you are personally familiar with. While we had the site entitled, any potential changes required by the approving authorities fall squarely in the hands of the builder and developer.

Finally, we had a decent set of facilities standards to work with up

As a test project, I imagine that the Long Beach Court Building gets a lot of attention. What is the number one question that you get asked about the project in Sacramento?

The big question I get is did we truly transfer risk or is this just some type of smoke and mirrors. The risks certainly did transfer.

I mentioned the permit risk earlier. Schedule risk was also transferred. Of course the project is on schedule.

front and a good “Client” in the Superior Court. The Superior Court had done a lot of Design-Build work, so they were used to laying out a good program and making decisions early in the process, then sticking to them. Where we didn’t have clarity in the program [for example, the low voltage equipment], we set up allowances so the court could have time to work through an appropriate standard that met today’s changing technology within a defined budget and without needing to decide every detail up front.

The project has garnished some media and industry attention outside of the state as well. What do you think people are looking to learn from Long Beach?

One is how we are doing it so quickly. The ability to overlap the construction and design schedule has certainly helped to accelerate the process. Having the firm responsible for the long term operation of the building, in this case Johnson Controls, at the table [during design and construction] is a quality control mechanism of sorts that helps ensure that the product being built using fast-track construction will be an enduring asset.

Of course I think in hindsight the big question will be “did the State get a good deal?” One of the things we did in this deal that I think may turn out well is that we have a formula that shares any savings from refinancing. With the recent drop in interest rates I think we may benefit if Meridiam refinances the project after it is open.

How has the project gone since financial close from your perspective?

It’s interesting. I often say that it took three years to get the procurement done but it will only take two to complete the building. Now that we have a template, future PBI procurements should not take as long. The design and construction is going amazingly fast though, which is a good thing. In addition to being on schedule, we are about $14 million under budget right now. Mostly that is because of how we managed the AOC allowances.

If you compare Long Beach to the other projects that the AOC has going on around the state, what would you say are the major differences you see?

One of the big differences is that the long term operations and main­tenance, including lifecycle replacements, is fully funded from day one. Long Beach was started about 6 months ahead of the San Bernardino courthouse, which is a similar size; the idea being we would have two very similar projects to compare against each other. It will take a few years to truly see the results of funding O&M through a service payment versus the traditional O&M funding model.

What do you think is the future of PBI in California?

The AOC has no current plans for other PBI projects. With that said, it is hard to say what the future of PBI in California is going to be.

There is certainly no shortage of projects and there is value in the idea that with a limited [state general fund] budget we accomplish more [projects] using private sector capital in addition to state funds.

What advice would you give to another public agency looking to pursue a Public-Private Partnership project?

You need to build in a little flexibility for yourself. Technology is an area, for example, that changes so quickly that if you determine the type of equipment that needs to be in the building, you don’t have to spec every single piece. For Long Beach we established an allowance that allowed us some flexibility to determine what worked for the more current systems in the building during the final stages of design.

Another thing I would highly recommend is that you have agreement ahead of time with the approving agencies, mapping out the evaluation and approvals process, and who is going to do what, and then build commitment to the schedule on the public side. n

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M ET HODS

APPROACHES TO

Financing

BY GREG DERBY

A turnkey delivery approach allows for tailored financing solutions that meet the

investment, or if the project is viewed as a significant long-term income generator and

specific needs of the building owners and occupants. Financing structures can accommodate the needs of project owners/ occupants, whether they seek off balance sheet treatment, bridge financing or long-­term facility ownership. This article includes descriptions of the most common financing approaches that are used within a turnkey delivery approach.

the public sector wants to capture future revenues. An Availability Payment is used to transfer the project risks of delivery, O&M and lifecycle costs to the private sector while leveraging the credit strength of the public agency to create efficient project financing. As long as the private sector fulfills its obligations and makes the facility available for its intended use as defined in the performance

‘

Debt providers require the private sector to inject more equity for an At-Risk transaction than an Availability Payment transaction for greater cushion in case the projected revenue levels do not materialize.

— Zoe Markwick, Societe Generale

Approach 1: Concession/PBI Transaction (Availability Payment) Concession/Performance Based Infrastructure (PBI) with an Availability Payment is often used when a new asset cannot generate revenues that are sufficient to cover the cost of delivering the asset as reflected in debt service payments and return on equity 28

continuum

specifications for the project, the public sector is obligated to make the Availability Payment. Failure by the private sector to meet prescribed standards can result in reductions to the Availability Payment.

This structure generally allows for high loan-to-cost ratios in the 80% to 90% range and flexibility to use bank or bond financing.

Concession terms typically last anywhere from 25 to 50 years, with the private sector responsible for life cycle costs, including maintenance and capital expenditures, such that at the end of the concession term they hand back to the public sector an asset in good working order.

Bank Debt Bank financing in the current market will typically have a term of 5 to 7 years covering construction and the initial years of operation. Depending on the size of the transaction, bank debt may require the participation of multiple banks, as any single financial institution currently limits its funding to no more than $75 million per transaction.

As many as seven banks have participated in recent Availability Payment financings,

Bank Debt vs. Bonds TYPICAL TERM

BANK DEBT

5-7 years

BONDS

As long as 35 years

REFINANCE RISK

including the Long Beach Court Building and Presidio Parkway in California. Bank debt is typically most attractive to those sponsors/investors who, in the short term, plan to transfer their interest in the concession or believe they will be able to return their investment through a recapitalization of the project. Bank financing does carry refinancing risk and the possibility of higher or lower interest rates at the time of refinancing. While underlying rates can move, the risk premium (margin) charged by banks typically decreases once construction is complete and the project has completed a few years of operations.

Bonds Taxable bonds represent a long-term financing option for both Availability Payment and At-Risk transactions (See Approach 2). Terms on bonds can go as long as 35 years, depending on the term of the concession. Based on market conditions,

Availability Payment A service fee paid to a concessionaire for making services and/or assets available at established standards.

MOST APPROPRIATE FOR USE

High

Investors with short-term plan to transfer interest or if financing is placed during a period with abnormally high interest rates and a high likelihood of a decrease in interest rates in the 5-7 year horizon

Low

Long Term Investors; transactions with investment grade ratings through Availability Payments by entity of good credit or on at-risk deals with limited perceived revenue risk or low leverage

bonds can represent a higher or lower cost of capital than bank debt, but serve to reduce refinancing risk. Bonds are most attractive to sponsors/investors who intend to main足足 tain their interest in the concession for the long term. Bonds typically are non-callable for at least 10 years, so while interest rates are fixed for the term of the bonds, they provide less refinancing flexibility to take advantage of reductions in interest rates during the first 10 years.

Equity The level of equity investment in Availability Payment transactions is typically 10% to 15% of the total project capitalization.

Investor equity targets receipt of an internal rate of return (IRR) of 10% to 12% over the investment period.

Approach 2: Concession/At-Risk Operations (Toll Road/Tunnel/Bridge) There are some variations in the financing options available for projects, such as toll roads and bridges, which have the private sector taking real risk on the revenue generation of the project as a means to pay back the project financing. Generally, these projects bring more significant risk to sponsorship and require a much higher

level of equity investment when compared to Availability Payment deals. Equity investment of 30% to 50% of total project capitalization is required for At-Risk deals.

The debt making up 50% to 70% of the capital structure is typically in the form of Bank Debt, Private Activity Bonds and TIFIA (a form of low cost subordinated Federal funds).

Bank Debt Bank debt for revenue risk projects has similar characteristics to bank debt on Availability Payment transactions except that loan-to-cost ratios will be much lower, in the 50% to 60% range.

Private Activity Bonds (PABs) PABs are a form of tax-exempt municipal bond available for both At-Risk and Availability Payment transactions in which a local government entity raises money for a private company. The municipality issuing the bond must be able to prove that a public benefit derives from the private activity bond in order to qualify for tax-exempt status. Private activity bonds generally are not guaranteed by the revenue of the municipality and they are used for projects such as housing, water and sewer, airports, premier issue

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The Role of TIFIA TIFIA is a program of flexible, low cost, subordinated Federal credit assistance to surface transportation (highway, transit, rail and port) projects of national or regional significance, in the form of: • Direct loans (up to 35-year term, fixed rate) • Loan guarantees (same terms as direct loans) • Lines of credit (available for 10 years after completion) – Either public or private borrowers are eligible to apply – TIFIA contribution is capped at 49% of total project cost or the amount of senior debt (for any single project) – Senior debt must be rated investment grade TIFIA has the following specific objectives: • Facilitate projects with significant public benefits • Encourage new revenue streams and private participation • Fill capital market gaps for secondary/subordinate capital • Be a “patient” investor regarding time horizon, liquidity, predictability and risk • Limit Federal exposure by relying on market discipline

TIFIA is available for both At-Risk and Availability Payment transactions and has been critical to the successful capitalization of many recent projects including: At-Risk Projects; Capital Beltway Express Lanes, LBJ, North Tarrant Expressway, Midtown Tunnel and I-95 Express Lanes and Availability Projects; I-595, Port of Miami Tunnel, Denver FasTracks and Presidio Parkway.

road and rail. PABs, like other bond debt, have a long tenure but have limitations on repayment. The loan-to-cost ratio for PABs on revenue risk projects is similar to Bank Debt and is in the 50% to 60% range. PABs have been employed on many recent notable turnkey transactions, including I-95 Express, Capital Beltway Express Lanes, Midtown Tunnel, LBJ Freeway, North Tarrant Expressway, which were all At-Risk transactions, and the Denver FasTracks Eagle project, which was an Availability Payment transaction.

Equity At-Risk Concessions, unlike Availability Payment transactions which have credit worthy governmental counterparties obligated to pay, rely solely on outside, third-party sources of revenues such as tolls or user fees to repay the cost of and return on investment. Due to the greater risk of revenue generation from these sources, At-Risk Concessions require equity to fund a higher proportion of the capital structure.

Equity is typically provided by the sponsor entity with some participation from contractors and other investors. Equity IRR requirements for full revenue risk projects are in the range of 15% to 20%.

Approach 3: Build-to-Suit Operating Lease The build-to-suit operating lease structure is common to standard commercial real estate with a major distinction from a concession being that at the end of the lease term, ownership of the asset remains with the private sector. The public sector either needs to renew its lease or vacate the facility.

Financing options on build-to-suit operating lease transactions are quite flexible with the main drivers impacting the loan-to-cost ratio and interest rates being the credit quality of the public agency tenant and the financial strength and experience of the private sponsor.

30

continuum

Bank/Institutional Debt Bank/Institutional debt is available to finance the construction and early operations of new development under build-to-suit operating lease scenarios. This is the tra足di足 tional method of finance for commercial real estate development. Whether construction financing or construction/mini-perm financing, banks, insurance companies and other lenders will provide financing for the construction period and up to 5 years of operations. The amount of debt that will be provided is dependent upon the credit quality of the public tenant and the financing strength of the borrower. If the borrower is willing to guarantee (recourse) a portion of the loan amount, they can typically borrow

more than is available on a non-recourse basis. Generally, loan-to-cost ratios for build-to-suit operating leases are in the 50% to 70% range with equity IRR requirements in the range of 7% to 15%, depending on the credit quality of the public tenant.

The U.S. Department of Transportation used a build-tosuit lease structure for their 1.5 million square foot Washington, DC Headquarters, built in 2008.

Credit Tenant Lease (CTL) Bond Financing CTL financing is taxable bond financing which is typically structured in a private placement transaction to institutional lenders such as insurance companies or pension funds who like the long term nature of the debt instrument. CTL is attractive to developers. It offers construction and permanent financing with a term equal to premier issue

31

‘

When short term bank financing is used, the private sector assumes the risk of whether the debt will be able to be refinanced. — Zoe Markwick, Societe Generale

the length of the lease term, and can cover as much as 100% of project cost on a non-recourse basis to the borrower. Also, because the CTL structure provides a fixed interest rate for the term of the loan, it offers the added protection of guarding against

not accept construction/delivery risk without some form of mitigation. Lenders would fund 100% of the loan amount to a bank which would issue a Letter of Credit, effectively guaranteeing construction completion. Today, CTL loans will treat

institutional facilities; and federal, state or local governmental Design-BuildLeaseback projects.

refinancing risks present with shorter-term obligations. Depending on the market location and the product type, CTL financing may have an amortization period that exceeds the term of the lease. A longer amortization period is acceptable to lenders when they believe the tenant will renew its lease due to limited alternative options or when a market study shows that there is a strong possibility for a replacement tenant at lease expiration. Historically, lenders would

draws during construction like a traditional bank construction loan while other lenders fund all cost upfront like a traditional bond financing, creating differences in the amount of capitalized interest required for interest payments prior to the commencement of rent. The CTL structure works best when the underlying tenant is an investment grade credit. Typically transactions have included single tenant retail outlets; corporate sale-leaseback arrangements;

the build-to-suit operating lease market depending on the specific terms of the lease, the debt financing options available and the philosophy of the developer/sponsor. Equity investment can be as high as 100% cash (for certain pension fund investors) to no equity under CTL financing structures. Equity IRR requirements are dependent on the capital structure and credit quality of the public tenant, with a minimum IRR requirement in an all equity deal of 7%.

Equity Equity investment can vary significantly in

Summary of Financial Model Traits LOAN TO COST RATIO

LOAN TERM

EQUITY AS % OF COST

EQUITY INTERNAL RATE OF RETURN

END OF TERM OWNER

1. Concession/ Availability Payment

80-90%

25-50 years

10-20%

10-12%

Public

2. Concession/ At-Risk

50-70%

7-35 years

30-50%

15-20%

Public

3. Built-to-Suit Operating Lease

0-100%

5-25 years

0-100%

7-15%

Private

100%

15-30 years

0%

N/A

Public

4. Capital Lease

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Approach 4: Capital Lease for Vertical Social Infrastructure Capital lease financing is a method which is used to finance a number of Non-Federal public facility-types including schools, healthcare facilities, jails, municipal centers and stadiums. Capital lease financing can be utilized with a turnkey delivery approach to provide risk transference to the private sector for the delivery and operation of the project. Capital lease financing is typically in the form of either tax-exempt Lease Revenue Bonds or Certificates of Participation that are subject to annual appropriation. The term of these tax-exempt bonds are generally anywhere from 15 to 30 years depending

on the asset type and the appetite of the government entity. Capital leases generally do not require a referendum for approval and can be entered into by State and local governments without voter approval.

There are numerous ways to finance infrastructure projects that employ a turnkey delivery approach. This financial flexibility makes turnkey delivery available to any project where there is value in the risk transference. If desired by the public, financing risk can also be transferred to the private sector, placing all the risk of delivering, operating and maintaining new infrastructure with the private sector. n

The Sandler Neurosciences Center at UCSF is a 38 year capital lease financed with Build America Bonds.

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M OT I VATOR S

Value for Money A Method for Comparing PBI with Traditional Delivery and Operating Models

BY GEOFF STRICKER

In these challenging times of significant infrastructure needs and declining government budgets, government leaders are charged with finding the best value for their money. When searching for best value, it is imperative to consider turnkey project delivery methods. Analysis shows that a successful Performance Based Infrastructure (PBI) approach, on average, saves nearly 7% to 10% in lifecycle costs, when compared to

‘

We believe that a robust VfM analysis allows public owners to make informed decisions on the delivery option that meets their objective.

— Iain Tester, KPMG

traditional procurement and facility operation methods. (Testing Tradition – Assessing the Added Value of PPPs; The National Council for Public Private Partnerships – 2012). In a case where an infrastructure project costs hundreds of millions of dollars, the savings are quite substantial and can directly affect the go or no go decision.

Countries worldwide find this cost reduction difficult to ignore, which is why they are now incorporating alternative delivery assessment into the planning phase of most infrastructure projects. How are these governments evaluating these 34

alternative methods? Most typically they are employing Value for Money (VfM) analysis, which compares the net present value (NPV) of the expected life-time cost of a project using a traditional Design-Bid-Build delivery method (the Public Sector Comparator or PSC) to the NPV of the expected life-time cost of the project using a private PBI delivery. A lower NPV cost for PBI delivery reflects the added value, or Value

continuum

for Money, to the public when utilizing an alternative delivery method.

This VfM analysis is unique because typically, in a traditional procurement, only

Value For Money (VfM) Turnkey Delivery must be able to demonstrate, when measured against the Public Sector Comparator (PSC), that it represents a lower net present value lifetime cost than a Traditional Procurement method.

the initial cost of design and construction are estimated in the bid; whereas, in VfM analysis, the expected costs for both delivery and operating phases are projected and incorporated into the analysis, capturing the full lifecycle cost of the facility.

Undertaking VfM Analysis Public agencies that have used VfM analysis suggest undertaking it a minimum of two times during the process of planning for and procuring a project. An initial VfM analysis should be completed during the project planning phase. This enables the public agency to determine if a specific candidate project is likely to produce VfM under a PBI delivery as compared to a traditional procurement. VfM analysis should be under­-­­­­­ t­­a ken again at the end of the competitive procurement process, after selecting a best

Finding Value for Money: Long Beach Court Building Lowest Present Value Cost Represents Best Value

$450

P PBI RE

$400

NET PRESENT VALUE

$350

$25 MILLION $157 MILLION

$300

$

RESEN

TS

49M

E FOR VALU NEY MO

$250 $200 $150

$247 MILLION

$334 MILLION

Base Project Cost

$100

Risk Retained

$50

Ancillary Costs

$0 TRADITIONAL PROCUREMENT (PSC)

value proposal to confirm the PBI approach is providing the anticipated value for money.

VfM analysis has two components: the quantitative assessment and the qualitative assessment. In the initial VfM analysis, the public agency creates a risk-adjusted PSC and a Shadow Bid. A Shadow Bid is an estimation of costs the private sector would be expected to propose based on the anti­cipated transaction terms for concession length, risk sharing, delivery costs, potential revenue generation (if a revenue generating asset), operating and life cycle costs, and the expected costs of sources of funds to be used in private financing. The process for estimating the Shadow Bid is similar to the process described here for the PSC.

PERFORMANCE BASED INFRASTRUCTURE (PBI) AND PROCUREMENT

Quantitative Assessment: Creating the Public Sector Comparator Critical to the VfM quantitative assessment is the fair and honest determination of the PSC based on a public agency’s historic spending and a realistic approach to future funding, especially with regard to operations and maintenance, lifecycle costs and the impact of deferred maintenance. The quantitative components of a PSC include: Capital Costs This category includes items such as procurement, oversight and administration costs, site/right-of-way acquisition costs, design-engineering costs, construction, and contingency funding costs.

Source: Ernst & Young

Operations & Maintenance/Lifecycle Costs Based on a specified performance standard or service level and building condition requirements at hand back, these costs include: direct operating costs and long term replacement costs (including routine, cyclical and preventative repairs and maintenance), capital maintenance and replacements, staffing, equipment and general facility administration and overhead costs, utilities, management fees, transaction costs, and costs of unavailability of parts or all of a facility.

Finance Costs Based on the likely method of financing as a public project, the analysis needs to take into account reserve requirements, required debt premier issue

35

coverage, cash flow waterfall arrangements, regulatory requirements, the Agency’s ability to fund annual operating deficits over the project life (if applicable), and the Agency’s treatment of residual cash flows.

Risks One of the more complicated areas of VfM quantitative assessment is the calculation of transferable or retained risks. The steps typically involved in valuation of risks include: 1. Identification: creation of a risk matrix that identifies all risks including general, construction, permitting, environmental, technical, financing, operational

categorize risks as transferred or retained.

The value of transferable risks in PSC measures the cost the public agency could expect to pay for that risk over the term of the project in a public procurement scenario.

Retained risks are those risks or responsibilities that remain with the public agency and are typically the same for the Shadow Bid and the PSC. Once all the risks have been categorized, the size and timing of the expected cash flows associated with each risk is aggregated to determine their NPV.

Example of Timing of VfM Assessment

and reputational risks that can occur on the project; 2. Consequence Assessment: after identifying all risks, the consequences or impacts of each risk are assessed; 3. Risk Probability Calculation: after assessing impact, the probability of the occurrence of each risk is estimated based on historical data, best practices, and industry data; 4. Value Calculation: the value of the risk can be calculated by multiplying the consequence and the probability of occurrence.

After risk valuation, the public agency must find the optimal risk allocation between the public and private sectors to

A Note on PBI Under a PBI concession agreement, the private sector is granted the right to design, build operate, and maintain a facility for a certain period of time, after which the facility is to be returned to the public sector in like new condition.

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continuum

Competitive Neutrality PSC calculations typically include a Competitive Neutrality value to remove the inherent competitive advantages, or disadvantages, available to the Agency as a public sector body that would be unavailable to the private sector and vice versa. The Competitive Neutrality value allows the PSC and Shadow Bid to be compared on an equivalent basis. Generally, the Competitive Neutrality value takes into account differences in tax obligations, regulatory costs,

Initial VfM Assessment QUALITATIVE ISSUES

QUANTITATIVE ISSUES Risk-adjusted PSC

Shadow Bid

+

Issues that can’t be expressed in monetary terms

VfM

Final VfM Assessment AVAILABILITY PAYMENT STRUCTURE Updated Riskadjusted PSC

Apparent Best Value Proposal

+

Viability, performance and achievability issues

VfM

+

Viability, performance and achievability issues

VfM

Or COMPETITIVELY PROCURED TOLLED CONCESSION AGREEMENT Updated Shadow Bid

Apparent Best Value Proposal

Source: Virginia Office of Transportation Public Private Partnerships (OTP3)

The Virginia OTP3 department undertakes an initial VfM assessment to determine the suitability of candidate projects for PBI and then performs a final assessment at the end of procurement prior to executing final contracts.

and/or tort liability limitations. Examples of public sector advantages include exemption from land taxes, local government rates, and other taxes and fees. Public sector disadvantages include additional costs associated with accountability, public scrutiny and reporting requirements.

impact the VfM assessment and cannot be expressed in monetary terms. Qualitative assessment is not prescriptive and the issues to be considered vary by project. Generally, the qualitative analysis will seek to identify factors which will influence the project in terms of: n

Revenues For projects that have potential to generate revenues from tolls or user fees, these revenues need to be included in the financial models for both the PSC and Shadow Bid.

n

n

Qualitative Assessment: Evaluating Factors That Cannot be Quantified While the Quantitative Assessment constitutes a significant portion of VfM analysis, it is not the sole factor used in deriving VfM. The Qualitative Assessment is used to identify those factors that might

Viability – ability to form a sound contract; Performance – the opportunity to encourage risk sharing and innovation; chievability – the capability of the A public agency and private sector to complete the project.

Examples of qualitative factors to be considered include: project strategic fit; differences in specifications and service expectations between the PSC and Shadow

Representative Risk Allocation Matrix RISK CATEGORY Political

PUBLIC AGENCY

PRIVATE PARTY

SHARED

n

Financial

n

Right-of-Way

n

Permits/Gov’t Approvals

n

Utilities

n

Procurement

n

Contamination (Environmental)

n

Geotechnical

n

Design & Construction

n

Operations & Maintenance

n

Hand-Back

n

Force Majeure Change in Law

n n

Bid; whether there are equity, efficiency or accountability issues; whether there are any regulatory or legal restrictions; whether there are affordability issues; whether there are sufficient opportunities for the private sector to deliver high service quality through innovation; whether there are sufficient resources within the agency to manage the procurement process and administer the contract; the likely strength of competition in the market to bid on the project; and the robustness of the information used in developing the PSC.

Drawing a Conclusion from VfM Analysis Whether the VfM assessment is the initial or final assessment, the outcome needs to consider both the results of the quantitative and the qualitative assessments. A decision to proceed with a PBI delivery should be supported by both assessments. The quantitative assessment should result in meaningful savings as reflected in the NPV of the Shadow Bid or actual final private proposal as compared to the NPV of the PSC. In addition, the qualitative assessment should demonstrate that the alternative delivery method is contractually viable, encourages risk sharing and innovation and can be achieved by both the public and private parties. With alignment in these assessments, the public agency can move forward with confidence that the alternative approach provides Value for Money.

It is important to note that not all projects are good candidates for PBI or other forms of alternative delivery. By understanding and implementing VfM analysis, the public sector can produce the information critical to guiding decisions in the procurement of major infrastructure facility projects. In these times where leaders are faced with difficult choices, VfM analysis is an important tool to assist governments to achieve best value for their money. n

premier issue

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CONTRIBUTOR PROFILES

Neal Fleming

Bill Calhoun

Principal Edgemoor Infrastructure & Real Estate

Vice Chairman Clark Construction Group, LLC

neal.fleming@edgemoordevelopment.com

bill.calhoun@clarkconstruction.com

Mr. Fleming provides executive leader-

Mr. Calhoun has been with Clark since

ship for all of Edgemoor’s pursuits.

1983 and currently works closely

Mr. Fleming has over 35 years of

with the leaders of each of Clark

experience in construction and real estate development. He began

Construction’s business units and regions, helping with business

his career at The George Hyman Construction Company and was a

development efforts and driving the company’s strategic focus on

founding member of OMNI Construction, which later merged to

new and emerging markets.

form The Clark Construction Group, Inc. In 1985, Mr. Fleming left

Mr. Calhoun holds a bachelor’s degree in civil engineering from

the construction industry to serve as President of Development

the Georgia Institute of Technology and completed the Advanced

Resources Inc. (DRI). While at DRI, he was responsible for the

Management Program at Harvard Business School. He is a

development of over fifty (50) build-to-suit facilities for end users

member of the Corporate Advisory Board of So Others Might Eat,

and provided ongoing property management for most of the facilities

the External Advisory Board of Georgia Institute of Technology’s

they developed. In 2000, he returned to Clark to become the

School of Civil Engineering, the Board of Visitors for the School of

President of Clark Global Technologies and later Clark Residential.

Engineering at the University of Maryland, and a National Peer in

Mr. Fleming received a Bachelor of Arts and Sciences from

GSA’s Construction Excellence Program.

Tulane University and a Masters of Real Estate from The American University. He has served on a number of non-profit boards for real estate, education, and healthcare groups.

Donald Gibson

Jamie Martin Vice President Edgemoor Infrastructure & Real Estate james.martin@edgemoordevelopment.com

Director Edgemoor Infrastructure & Real Estate

Mr. Martin provides executive oversight

donald.gibson@edgemoordevelopment.com

asset management activities. With

for all of Edgemoor’s development and

Mr. Gibson is responsible for project

over 25 years of development and construction management

development activities including the

experience, Mr. Martin has been the Development Executive on

oversight of design, estimating,

a number of projects from concept to close-out. Mr. Martin has

permitting and construction activities through owner occupancy.

experience in land acquisition and disposition, land use entitle-

He also assists with contract negotiation, transaction structuring

ments, development budget management, design and construction

and financing management and is involved in development of new

management, marketing and leasing, and performing asset

opportunities for Edgemoor. Prior to joining Edgemoor, Mr. Gibson

management for company owned assets.

was a Senior Project Manager with Clark Construction overseeing

Mr. Martin holds a Masters of Business Administration from

design and planning activities on two large design-build projects,

George Mason University and a Bachelor of Science in Civil

the U.S. Coast Guard Headquarters in Washington, D.C. and the

Engineering from the Virginia Polytechnic and State University.

DoD BRAC 133 Headquarters in Alexandria, VA.

He is also a Registered Professional Engineer in the Common-

Mr. Gibson has a Masters of Architecture from the Harvard

wealth of Virginia and is active with the Urban Land Institute,

University Graduate School of Design, and a Bachelor of Science

National Association of Industrial and Office Properties, and the

in Engineering from the Ohio State University. He is a member of

American Society of Civil Engineers.

the Urban Land Institute and The Real Estate Group.

38

continuum

Jeffrey Fullerton

Geoffrey Stricker

Director Edgemoor Infrastructure & Real Estate

Managing Director Edgemoor Infrastructure & Real Estate

jeffrey.fullerton@edgemoordevelopment.com

geoffrey.stricker@edgemoordevelopment.com

Mr. Fullerton plays an integral role in

Mr. Stricker provides executive level

managing on-going developments on

oversight for the planning and execution

the west coast including the Governor

of a portfolio of real estate deals,

George Deukmejian Courthouse in Long Beach, California. He is

including public-private partnerships. Since joining Edgemoor Real

also responsible for identifying, planning and structuring new

Estate Services in 2001, he has played an instrumental role in

infrastructure and real estate developments, including public-­

developing public-private opportunities for the company in the

private partnerships and alternative delivery projects.

fields of higher education, K-12 education, and transportation.

Mr. Fullerton has over 15 years of experience in the real estate

Prior to joining Edgemoor, he was a Vice President at Lehman

and financial services industries. Prior to joining Edgemoor, he

Brothers, where he was responsible for research and analysis for

ran his own consulting firm advising pension funds, international

the telecommunications industry, and supported the investment

banks and high net worth individuals on over $2.5 billion of

banking division on multiple transactions, including initial public

opportunistic real estate acquisitions. Mr. Fullerton holds a

offerings, private placements, and mergers and acquisitions. Mr.

Masters of Business Administration from Stanford University and

Stricker also spent three years at MCI Communications.

a Bachelor of Arts in Accounting from the University of Montana.

He is actively involved with the Urban Land Institute, the National

Mr. Stricker holds a Bachelor of Arts from Clark University and a Masters of Business Administration from Georgetown University.

Council of Public Private Partnerships and the Western Council of Construction Consumers.

Greg Derby Managing Director Edgemoor Infrastructure & Real Estate greg.derby@edgemoordevelopment.com

Mr. Derby provides executive level oversight for the planning and execution of a portfolio of real estate deals and develops creative solutions to projects using his extensive understanding of real estate finance, investment, and development.

Prior to joining Edgemoor in 2006, Mr. Derby was Senior Vice President for Concord Eastridge, Inc. and its predecessor, The Eastridge Companies, LLC. Earlier in his career, Mr. Derby served as a Director with Arthur Andersen’s Real Estate Capital Markets Group where he was responsible for the execution of private placement debt and equity transactions exceeding $500 million in gross capitalization.

Mr. Derby holds a Master of Science in Real Estate Development from the Massachusetts Institute of Technology and a Bachelor of Science in Marketing from the University of Maryland. premier issue

39

www.edgemoordevelopment.com

Guaranteed Turnkey Delivery

Transaction Structuring

Asset Management

Edgemoor’s proven turnkey approach

Edgemoor prides itself on offering compre-

Edgemoor brings additional value to its

accelerates delivery of needed infrastructure

hensive financial solutions for the most

clients, even after delivery and occupancy,

and real estate while maximizing risk

complex projects. With an understanding

through its asset management capabilities.

transference through early guarantees on

of a wide range of project financing options

By maintaining an oversight role from

cost and schedule. Edgemoor personnel are

– including taxable and tax-exempt bonds,

the conceptual design stage through

experts at steering the delivery process for

bank financing, Transportation Infrastructure

entitlements, permits and construction, and

complex facilities; listening to and under-

Finance and Innovation Act (TIFIA), Private

continuing with operations and maintenance

standing the needs of end-users and other

Activity Bonds (PABs), Tax Increment

(O&M) of a facility, Edgemoor is able to

project stake­holders; integrating facility

Financing (TIF), Payment in Lieu of Taxes

address cost of occupancy issues more

management and life cycle cost consider-

(PILOT), conventional commercial real

effectively than traditional fee based third-­

ations into the design-build process;

estate bank and institutional debt, and

party operators. Edgemoor’s continuum of

managing budget, schedule and challenging

various tax credit programs – Edgemoor

service ensures that lifecycle and operating

design; engineering; and construction, all

has the ability to tailor financing solutions

costs are not an afterthought left for the

of which help to create cost effective

that meet the needs of its clients. With

building occupant or owner to “deal with.”

facility solutions that excel in function.

extensive relationships with financial

There are important “first thought”

Edgemoor’s skill set includes managing

advisors, investment banks, commercial

considerations that must be addressed

entitlement and zoning processes, securing

banks, insurance companies, investment

throughout the design phases and during

permits, managing design and construction,

funds, rating agencies, technical advisers,

construction; these will provide the client

and coordinating user occupancy and

accountants, and tax and legal counsel,

with complete assurance that facility

commissioning. This frees Edgemoor’s

Edgemoor provides its clients and partners

operations will be as efficient and cost

clients to focus their resources on

with valuable insight to develop an

effective as possible, from day-one through

managing their core business.

appropriate transaction solution and the

the last day of the transaction term. By

horsepower to execute its implementation.

utilizing Edgemoor to provide facilities management oversight, a client is able to provide greater focus on their core business with confidence that their facilities will be well managed. Edgemoor’s experience includes operations, maintenance and asset management of many institutional, commercial and government facilities in the U.S., including providing services on long-term performance-based contracts.

PHOTOGRAPHY CREDITS

CONTRIBUTORS

Page 1, from top to bottom

Edgemoor Infrastructure & Real Estate, LLC

AECOM, Governor George Deukmejian Courthouse Sisson Studios, Mary Ellen Henderson Middle School SOM/Cesar Rubio Photography, UCSF Sandler Neurosciences Center Page 5, clockwise from top left Uncredited, LAX Central Utility Plant Replacement Peter Crane Photography, Intercounty Connector Sisson Studios, Potomac Water Filtration Plant Improvements Ken Wyner, Nationals Park, Washington, DC Sisson Studios, The Johns Hopkins Hospital – Sheikh Zayed Tower and The Charlotte R. Bloomberg Children’s Center Uncredited, McCormick Place West Expansion Abby Sadin/SOM, San Francisco Civic Center Complex Sisson Studios, George Mason University Long and Kimmy Nguyen Engineering Building Pages 9 Sisson Studios, Mary Ellen Henderson Middle School

Neal Fleming Donald Gibson Jamie Martin Jeffrey Fullerton Greg Derby Geoffrey Stricker Clark Construction Group, LLC Bill Calhoun Interface Multimedia, Inc. www.ifmm.com Jeff Pulford Viviane Moritz Alexandra Fleming EDGEMOOR HEADQUARTERS 7500 Old Georgetown Road 7th Floor Bethesda, Maryland 20814

Page 10

FEEDBACK

Sisson Studios, South County Secondary School

Let us know what you think, we are happy to hear your questions and comments.

Pages 11, 35 Cesar Rubio Photography/SOM, UCSF Sandler Neurosciences Center Page 14 Caltrans Pages 18-24 AECOM, Governor George Deukmejian Courthouse

For more information, or to provide feedback, please e-mail Brigid Myler at continuum@edgemoordevelopment.com SUBSCRIPTIONS If you would like to receive issues of CONTINUUM by mail, please sign up at edgemoordevelopment.com/continuum.

Page 30 Maryland State Highway Administration ICC Team, Intercounty Connector Page 31 Jim Tetro, U.S. Department of Transportation Headquarters

© Edgemoor Infrastructure & Real Estate, LLC

Continuum Magazine 7500 Old Georgetown Road 7th Floor Bethesda, Maryland 20814

NEW PERSPECTIVES ON REAL ESTATE, INFRASTRUCTURE & TURNKEY DELIVERY