BCEC Context, Convention Center Financing and BCEC Westin Hotel Presentation to The Convention Partnership Presented by Kairos Shen, BRA Frederick Peterson, MCCA Johanna Storella, MCCA James Sult, Piper Jaffray & Co. Howard Davis, MCCA May 24, 2010

Agenda Community Context BCEC Financing: Case Study 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

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

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

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

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

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

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

Site Acquisition & Site Preparation Funding 9

BCEC Project Funding 10

Chapter 152 – Convention Center Fund Revenue Sources 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

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

Flow of Funds: Convention Center Fund – FY 2009 13

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

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

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

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

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

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

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

Capital Funding Sources by City 21

OWNERSHIP AND OPERATIONS 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

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

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

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

Hotel Rent Base Rent Percentage Rent Transaction 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

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

MCCA/Westin Relationship 28

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

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

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