Andres Sanchez Thesis Presentation


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Andres Sanchez Thesis Presentation

  1. 1. By Andres Sanchez<br />August 21, 2009<br />
  2. 2. Goals & Objectives<br />GOAL: To identify and illustrate the advanced funding strategies of a real-world, $900 million riverfront development project.<br />Additionally, the following fiscal instruments will be explained in depth, including charts, graphs, and tables and how they pertain to the development of Manhattan Harbour:<br />Public Financing Instruments <br />Tax Increment Financing<br />Sales Tax<br />Income Tax<br />Private Financing Instruments<br />Equity Fund<br />Debt Fund<br />EB5 Regional Employment Zone<br />Quasi Public Financing Instruments<br />Municipal Bonds<br />
  3. 3. What is Manhattan Harbour<br />142 acre riverfront site in Dayton Kentucky<br />$872 million project<br />Future site of North Americas first fully ubiquitous city.<br />Mixed use development <br />1,600 residential units<br />1.2 million square feet of commercial<br />
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  7. 7. Dayton, Kentucky<br />5,966 residents in 2000<br />5,477 estimated in 2009 <br />-8.1% change in population<br />98.3% white<br />$32,008 median H.H. income<br />$59,100 median home value<br />15.2% below poverty line<br />46.1% with high school education / GED<br />30.7% with no high school education<br />8.9% have attended any form of post secondary<br />
  8. 8. Infrastructure<br />While water, sewer, and electric are nearby, the site has no utilities.<br />Site access is an issue since route 8 cannot accommodate any additional traffic.<br />The site is located on a flood levee and must be raised between 10-15’ <br />
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  19. 19. Ubiquitous Community<br />Video produced by LG CNS<br />
  20. 20. Finance Strategies<br />
  21. 21. My Experience<br />Troika Entertainment & Development – assisted principal investor in securing private funds for redevelopment of vacant property, as well as created revenue models for 3 entertainment venues<br />The Boss Group – worked with partners during the build out phase of the Rookwood. Assisted in accounting duties, as well marketing materials.<br />Rapid Mortgage – created financial database to show a wide array of options for Loan Officers to pick the best product for their customer. <br />
  22. 22. My Experience<br />I truly enjoy investing my money and am facinated by economics, primarily investments. I also enjoy writing essays that share my hypothesis on changes in large corporations and the potential impacts in terms of profitability.<br />
  23. 23. Tax Increment Financing <br />Tax Increment Financing (TIF), also known as value capturing, is a public financing tool that encourages development in underdeveloped areas. TIFs measure the baseline tax levels before the development, and then pledge a percentage of taxes generated by the new development in the TIF district. The funds are used to finance public infrastructure. Assuming that baseline tax level for a district is $5 million, and the post development tax level is $11 million, the difference of $6 million is the eligible “pool” of funding. Given the $6 million difference, let’s assume the local government pledges 75% of the new taxes generated -- $4.5 million(75% of $6 million) is the increment that can be used to finance the project. Generally, that $4.5 million is used to cover the principal and interest of a municipally issued TIF bond. Assuming the interest rate on the bond is 4.5%, that $4.5 million can effectively be used to issue $100 million in bonds. The obligation then shifts to the developer to pay the principal and <br />
  24. 24. Tax Increment Financing<br />TIF funds will be used for reimbursement of Infrastructure costs<br />State of Kentucky, City of Dayton, & Campbell County have pledged 80% of all taxes generated<br />A special TIF district has pledged 50% of all activity in the district towards Manhattan Harbour<br />TIF value totals $493 MM<br />
  25. 25. Debt Fund – Private Financing<br /><ul><li>Debt Fund is used to preserve capital & generate income
  26. 26. Objective is to get taxes to a level that funds additional phases of development
  27. 27. Debt Service Cover Ratio (DSCR) is 1.8 initially, 5.4 for all phases.
  28. 28. Exit Strategy is to get taxes to recurring level that permits issuance of municipal bonds</li></ul>Investment strategy is targeted towards pension funds, endowments, and wealth management firms. <br />
  29. 29. Equity Fund – Private Financing<br />The Manhattan Harbour equity fund is a $90 million fund to be used in the building and operation of the Manhattan Harbour entertainment district. <br />8 year investment<br />
  30. 30. EB5 Regional Employment Zone<br />EB5 program is a Federal immigration investment program through agency of U.S. Citizenship & Immigration Service (USCIS).<br />Immigrant investors can obtain a conditional “Green Card” for themselves and their immediate family (including any children under the age of 21) residing into the United States if they invest $1 million of at risk equity into the U.S. and create 10 jobs (direct or indirect).<br />Jobs must be sustained for at least 2 years.<br />If the area is designated as a “Targeted Employment Zone” from the governor’s office, the amount of investment required drops from $1,000,000 to $500,000.<br />In application phase - not included in financial projections<br />
  31. 31. New Market Tax Credit<br />The City of Dayton of Kentucky is qualified for New Market Tax Credits, a Federal program under Community Renewal Tax Relief Act.<br />Specific elements of the project can be financed utilizing these tax credits. <br />Qualification is done per building and per sub project. <br />Typically, NMTCs are used in underserved areas in conjunction with a lending institution to provide loans to developers at highly subsidized rates.<br />
  32. 32. Contribution Breakdown<br />
  33. 33. Source vs. Use of Funds<br />