BCEC Context, Convention Center Financing and BCEC Westin Hotel Presentation to The Convention Partnership

1. BCEC Context, Convention Center Financing andBCEC Westin HotelPresentation toThe Convention Partnership Presented by Kairos Shen, BRA Frederick Peterson, MCCA Johanna Storella, MCCA James Sult, Piper Jaffray & Co. Howard Davis, MCCA May 24, 2010

2. Agenda • Community Context • BRA’s Vision for the South Boston Seaport District, • Existing/Proposed Development Plans and Land Ownership • Transportation Plans/Future Considerations • South Boston and Fort Point Neighborhoods • BCEC Financing: Case Study • Overview: Financing for Other Convention Center Expansions • BCEC Westin Hotel: Case Study 2

3. Community Context Kairos Shen, Chief Planner, BRA Fred Peterson, Director of Facilities Operations, MCCA 3

4. MCCA and Community Dialogue • Objectives • Begin the process of jointly identifying neighborhood & community concerns • Work together to explore potential solutions • Respect existing uses in the area and how any expansion weaves into the fabric of the community • Planning Documents • Seaport Public Realm Plan • BRA 100 Acre Plan • City of Boston/ BRA Crossroads Initiative • Current zoning in and around BCEC • BRA East/West First Street planning – rezoning efforts 4

5. Community Concerns – What We’ve Heard Design • Campus-style • Appropriate aesthetic • Height; scale; massing & finishes • Open Space • Types of uses • Onsite location(s) • Connectivity to surrounding areas (e.g. 100 acres) Pedestrian Impact • Access • Connections to neighborhoods and waterfront • Streetscape improvements • Traffic calming elements 5

6. Community Concerns – What We’ve Heard Transportation • MBTA • D Street/Summer Street or on-site service • Silver Line • CSX Track 61 uses • Cypher St connection from A St to Pappas Way • Pedestrian connections & vehicular uses • “Blue Highway” – water ferries & shuttles • Parking & Marshalling • Locations, structures and loading docks • Shuttles & trucks servicing each building • South Boston Bypass Road • Spanning over the roadway • Current & future uses (Hazmat truck route) 6

7. BCEC Financing: Case Study Johanna Storella Chief Financial Officer, MCCA 7

8. BCEC Construction and Financing • Project Funded at State and Local Level: • Commonwealth Responsibilities • Chapter 152 authorized the Commonwealth to issue $694.4 million in special obligation bonds to cover Boston, Springfield and Worcester projects • Convention Center Fund established to secure and provide payment of State bonds • City of Boston Responsibilities • Under Chapter 152, City required to provide not less than $157.8 million for BCEC site acquisition and preparation • Chapter 152 also authorized the City to issue bonds to fund this obligation, and to increase the room occupancy tax to pay bond debt service • Funding plan designed to place the tax burden on the visitors rather than the citizens of the Commonwealth 8

9. Site Acquisition & Site Preparation Funding 9

10. BCEC Project Funding 10

11. Chapter 152 – Convention Center Fund Revenue Sources • Convention Center Fund • Convention Center Financing Fee, 2.75% of the total room rent • Commonwealth’s existing 5.7% hotel room occupancy tax • Current hotel rooms located in BCCFD • New hotel rooms located in Boston or Cambridge • New hotel rooms located in the SCCFD • Springfield’s 4% local hotel room occupancy tax for new rooms in the SCCFD • Commonwealth’s existing 5% tax upon sales at new retail shops in BCCFD and SCCFD • 5% surcharge on the ticket price for any land or water based tour in Boston • State’s share of the vehicular rental surcharge, $9 • $2 per day surcharge on parking at any facility constructed as part of the Boston, Springfield or Worcester projects 11

12. Chapter 152 – City of Boston New Revenue Sources • Anticipated 4% local option room occupancy excise tax on new hotel rooms • Sale of 260 hackney licenses • City’s share of the vehicular rental surcharge, $1 12

13. Flow of Funds:Convention Center Fund – FY 2009 13

14. Distribution of Funds:Convention Center Fund – FY 2009 8.9% 43.7% 16.3% 12.3% 11.3% 5.2% 62.5% 16.6% 23.2% 14 Example: Fiscal Year 2009

15. Overview: Financing for Other Convention Center Expansions James Sult, Piper Jaffray & Company 15

16. CAPITAL FUNDING SOURCES Hotel and F&B Related Taxes • Broad Base Occupancy Tax • Occupancy Tax on New Hotels • Flat Fee per Occupied Room • Broad Base F&B Tax • Target District F&B Tax Other Tourism Related Taxes • Rental Car Surcharge • Taxicab Fees • Tourist Activity Surcharge Direct Government Support • Broad Base Sales Tax Pledge • State Debt Obligation (GO) • City Debt Obligation 16

17. PHOENIX CONVENTION CENTER Ownership / Operations Owned and operated by City Operating Funding Sources Operating revenues Operating deficit funded from City Excise Tax Fund Capital Financing Structure (Expansion) $300,000,000 State contribution Issuance of State backed bonds $300,000,000 City issued bonds Backed by pledge of Citywide excise taxes Facility (expanded) • Original facility opened in 1969 • Expansion completed in December 2008 • 502,500 SF of exhibition space • 150,000 SF of flexible meeting space • Three ballrooms totaling 119,000 SF 17

18. SAN DIEGO CONVENTION CENTER Ownership / Operations Owned by City Operated by San Diego Convention Center Corporation (City controlled) Land owned by San Diego Unified Port Authority (ground lease to City) Operating Funding Sources Operating revenues Operating deficit funded from City General Fund Capital Financing Structure (Expansion) $205,000,000 Lease Revenue Bonds issued by Convention Center Expansion Authority Backed by annual City lease payments $4,500,000 annual debt service support payment from Port to City for 20 years Facility (expanded) • Original facility opened in 1989 • Expansion completed in 1998 • 615,701 SF of exhibition space • 204,114 SF of flexible meeting space • Further expansion and new hotel under consideration 18

19. PENNSYLVANIA CONVENTION CENTER Ownership / Operations Owned and operated by the Pennsylvania Convention Center Authority Authority is a component unit of the City of Philadelphia Land owned by City (ground lease to Authority) Operating Funding Sources Operating revenues Authority receives approximately 70% of a 6% City-wide hotel occupancy tax Capital Financing Structure (Original) $277,195,000 Lease Revenue Bonds issued by the Authority Backed by annual City lease payments equal to debt service City and State grants State - $185 million City - $42 million Expansion primarily funded by the State Facility (expanded) • Original facility broke ground in 1993 • Expansion expected completion • March 2011 • 700,001 SF of exhibition space • 246,000 SF of meeting space • 60,000 SF ballroom (92,000 SF total) 19

20. WASHINGTON DC CONVENTION CENTER Ownership / Operations Owned and operated by the Washington Convention Center Authority Independent authority of the District government Operating Funding Sources Operating revenues 4.45% district-wide hotel occupancy tax 1% district-wide F&B tax 1% tax on vehicle rentals Capital Financing Structure $524,460,000 Dedicated Tax Revenue Bonds issued by the Authority in 1998 Backed by revenues described above Facility • Opened March 2003 • 725,000 SF of exhibition space • 250,000 SF of meeting space • 52,000 SF ballroom 20

21. Capital Funding Sources by City 21

22. OWNERSHIP AND OPERATIONS Ownership Operations Funding Independent Authority (State) • Boston • Atlanta • Chicago • New Orleans Independent Authority (City) • Philadelphia • Washington DC • Las Vegas (Clark County) City Controlled • San Diego • San Francisco • Phoenix • Dallas • Denver • Orlando (Orange County) Dedicated Tax Revenues (operations) • Boston • Philadelphia • Washington DC • New Orleans • Dallas Direct City Funding (operations) • Phoenix • San Diego • San Francisco • Dallas (shortfalls) • Las Vegas (room tax revenues) • Denver 22

23. BCEC Westin Hotel: Case Study Howard Davis Director of Capital Projects, MCCA 23

24. RFP to Groundbreaking – 5 years • 1999: • RFP Issued • 2000 – 2002: • Development Agreement and Lease Signed • Starwood/Carpenter & Company • Design and Permitting • 2003: • New Developers • New Design – Two Phases • 2004: • Groundbreaking 24

25. Since 2004 Groundbreaking • 2006: • Westin Opens for Business • 2007: • Hotel Sold - $302 Million • Present • Operations Successful • No Firm Expansion Plans 25

26. Hotel Rent • Base Rent • Fixed Schedule • Commences 2013 • Percentage Rent • % of Gross Revenue • Transaction Rent • % of Sales/Refinancing Proceeds • Approximately $1 Million to MCCA from 2007 Sale 26

27. Room Block Agreement • Blocks of Rooms Available to MCCA • At Not-to-Exceed Rates • # of Available Rooms • Function of How Far in Advance Rooms are Booked • 48 Months and Beyond: 75% Rooms • Less than 12 Months: 0% Rooms 27

28. MCCA/Westin Relationship 28

29. Original Capital Structure $121,000,000 Private -1st Mortgage Debt $ 49,000,000Private - Developer/Tenant Equity $170,000,000 Total – Private Sources $ 18,000,000 MCCA – Infrastructure, Etc. $ 15,000,000Public HUD Loan – City of Boston $ 33,000,000 Total – Public Sources $ 203,000,000 Total – All Sources 29

30. Enhanced Investor Returns • Favorable Ground Lease from MCCA • No Annual Rent Payments for 7 years • Structured Property Taxes – City of Boston 30

31. Conclusions: BCEC Westin Hotel • Hotel Was Needed and Successfully Developed • 7 Year Process • Not Feasible Without Public Contributions • Approximately $33 million – 16% of Total • Today, Required Public Contribution Much Higher • In Washington, D.C., Approximately 50% • Hotel Sold Within Year of Opening • Very Significant Profit for Developer 31