Download - 2010 Vancouver Real Estate Forum
2010 Vancouver Real Estate Forum2010 Vancouver Real Estate Forum
May 13, 2010
1
Larry Blain, Chief Executive Officer
Is the PPP Market Worth Playing In?
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PPPs Around the World
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The Challenge in B.C.
1990’s: Significant Infrastructure GAP• Governments of the day fell behind on investments • Most dramatic needs in health, education and transportation
• High profile traditional procurement problems (scope, schedule, deferred maintenance)
2000’s: Commitment To Address GAP• $6-8 billion in capital spending
• Introduction of PPP approach
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PPPs in B.C.• Almost $10 billion invested in 30+ projects• $4 billion in private capital
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PPP is Performance-Based InfrastructureLong term, performance-based contract • Combines design, build, operate and often finance • Government retains ownership and control • Risk transfer and innovation • Life cycle planning
Objectives• Fair, open and transparent competitive process• Delivers value for taxpayers’ dollars• Public interest served
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Province
Concessionaire
OMR
Lenders
Private Finance
Sponsors (Equity)
Investment
Net Operating Cashflows
Concession Agreement
AvailabilityPayments
DB
Subcontractors
Typical PPP Structure – Availability
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PPP Benefit: Transferred Risks
Abbotsford Regional Hospital and Cancer Centre
Surrey Outpatient Care and Surgery Centre
Schedule and Cost
Cost and Availability of Financing
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Traditional Challenge: Retained Risks
Tunnels – Seymour Capuano Filtration Plant
Olympic Athletes’ Village
Schedule and Cost
Cost and Availability of Financing
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• Unique to PPPs
• Designer, builder and FM plan together, take long- term responsibility for facility
Cove flooring done at construction reduces problems over life (e.g., flooding)
PPP Benefit: Integration Benefits
Abbotsford Regional Hospital and Cancer Centre
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PPP Benefit: Innovation - Port Mann Bridge
• Partner proposed single bridge design
• Eliminates need for bridge replacement at end of original bridge’s life
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Current Major Partners To-Date• Acciona S.A.• Acciona Infrastructure
Canada• ACML (Western)• Bank of Ireland• B.C. Investment
Management Corp.• Bilfinger Berger (BOT)• BioTeQ Environmental• Bird Construction• Black & MacDonald• BLJC/Johnson Controls• Bouygues Batiment
International• Buckland & Taylor • Cannon Design
Architecture Inc.• Capilano Highway
Services
• Caisse de depot et placement du Québec
• CEI Architecture Planning Interiors
• CEMI• CH2M Hill Canada Ltd.• Chernoff Thompson
Architects• DEPFA Bank plc.• Dexia Credit Local S.A.• Ecovert FM Ltd.• EPCOR• Flatiron Constructors• Giffels Design Build• Graham Construction and
Engineering Inc.• Hatch Mott MacDonald
• Health Care Projects Canada Ltd.
• Helios Group, Utilities and Facilities Management Inc.
• HMC Services Inc.• HSBC Infrastructure
Fund Management Ltd.• IBI/HPA• Innisfree Ltd.• JJM Construction Ltd.• John Laing Infrastructure• Johnson Controls LP
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• Plenary Group (Canada) Ltd.• Serco Ltd.• Silver Thomas Hanley• Stantec Consulting Ltd.• SNC-Lavalin Inc.• Sodexho• Stuart Olson Constructors Inc.• Sun Life Assurance Company of Canada• Triton Environmental Consultants• Trow Associates• Vancouver Pile Driving• Western Industrial Contractors of Prince
George
• Kasian Architecture Interior Design and Planning Ltd.
• Lark Group• Ledcor• Lockerbie Stanley• Macquarie North America Ltd.• McElhanney Consulting• Miller Paving• Musson Cattell Mackey• ND Lea Inc. (MMM Group)• NORR Ltd.• Ontario Teachers’ Pension Plan• Parsons Overseas Co. • Peter Kiewit Sons Co.• PCL Constructors Westcoast Inc.
Current Major Partners To-Date (Cont’d)
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Gordon and Leslie Diamond Health Care Centre Gordon and Leslie Diamond Health Care Centre
•
First health PPP in BC•
Completed on time,
on budget
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Fort St John Hospital and Residential Care Fort St John Hospital and Residential Care •
LEED Gold, wood•
Affordability line•
No bank debt
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Sign up for Partnerships BC newswww.partnershipsbc.ca
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Public-Private Partnerships
Greg Lewis
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Outline
• Competitive Procurement Process
• Legal and Contracting Structure
• Risk Transfer
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RFQ Stage
RFP Stage
•
Submission of Responses•
Selection of Short-List
•
Initial Draft PA•
Bilateral In-confidence Meetings•
Revised Draft PA•
Submission of Proposals•
Evaluation and Selection of Preferred Proponent
Preferred Proponent Stage
•
Negotiation •
Finalization of PA and closing documents
Closing
About the Competitive Procurement
Process
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Risk TransferPrinciple Risks Transferred from Public to Private Partner
• Design and Construction• Schedule• Cost• Life Cycle Requirements• Performance of Services (i.e., hard and soft FM)
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Risk Transfer (Cont’d)
Risk Transfer Mechanisms• Private capital (debt and equity) fully at risk• No Service Payments (which include debt repayment / equity return
component) until Service Commencement• Deductions during Operating Period
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How Does PPP Finance Differ From
Traditional Real Estate Finance?
Duncan Ball,Senior Vice President
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Asset Class
Real EstateOffice
Industrial
Commercial
Retail
Hospitality
Residential
PPPsSocial:• Hospitals• Schools• Detention Centres• Court Houses• Water / Waste Water• Recreational Facilities• Housing• Etc.Transportation:• Roads• Transit• Bridges / Tunnels• Etc.
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Selection of Transactions
Social
Alberta Schools ($634M)
Kelowna Vernon Hospital ($435M)
Women’s College Hospital ($300M)
Gordon & Leslie Diamond Ambulatory Care ($95M)
Abbotsford Hospital ($355M)
Durham Court House ($334M)
Transportation
Sea to Sky Highway ($600M)
Kicking Horse Canyon ($130M)
Golden Ears Bridge ($808M)
Edmonton Ring Road I ($492M)
Edmonton Ring Road II ($1.42B)
Calgary Ring Road ($420M)
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ComparisonReal Estate
• 50-70% Debt / 50-30%Equity
• 1.35x +
• Usually in 5yr increments
• Usually 5 to 10 yrs
• Banks, lifecos, pension funds
• Goc + 150 bps (5- 10 yrs)
• Cap rates of 7%-8.5%• 9%-10.5% IRRs
• Rents adjust overtime• Residual value
PPP
• 90% Debt / 10% Equity
• 1.20x
• Usually 25 to 35 yrs
• 25 to 35 yrs
• Project Finance banks, Lifecos, Capital markets
• Goc + 250 bps (25+ yrs)
• 12%- 14% IRRs
• Typically involves construction risk
• Return on capital and return of capital
Metric
Debt to Equity
Coverage ratio
Lease term
Financing term
Debt Providers
Debt Pricing
Equity IRR
Key differences
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Real Estate
Freehold interest
Direct mortgage charge on asset
Right to foreclose
Triple net rent
Residual Value Risk
Cash flows adjust over time
PPP
License
Rights and entitlements are contained in the Project Agreement
Essential Assets. No rights to foreclose
Availability payments
No Residual value risk
Cash flows are generally fixed for the life of the concession
Comparison (Cont‘d)
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Preferred Bidder Construction Ramp-up Yield Maturity
Cash Flows
Present Value
Time
CurrentStatus
Value
Valuation Profile
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Duncan Ball, CFASenior Vice President
Bilfinger Berger Projects InvestmentsSuite #2680, Park Place
666 Burrard StreetVancouver V6C 2X8
Phone: +1 604 678 6540Mobile: +1 604 351 0165
Email: [email protected]
Contact
2929
QUESTIONS?