HomeMy WebLinkAboutLogan Market Follow UpFrom:David Buchheit
To:Julia Medzegian
Subject:Logan Market Financials
Date:Wednesday, August 21, 2019 10:49:04 AM
Attachments:image001.png
Financial Pages from Logan Market Project - RFP-FINAL - reduced size.pdf
Julia,
At Monday’s COW meeting the Council asked for the financials provided by the Logan Market.
I have attached them to this email can you distribute these to the Council?
Thank You,
David Buchheit
Downtown Manager
City of Renton
Dept. of Community and Economic Development
1055 S Grady Wy 6th Fl
Renton, WA 98057
425-430-7270
Per the RFP, the City has requested proposals for leasing the
building and operating the Pavilion as a year-round market. We
strongly believe that our proposal meets the spirit and intent of
the RFP, is in alignment with the Downtown Civic Core Vision and
Action Plan, and best represents the interests of community
stakeholders. The sizable investment and time to repurpose the
building will necessitate an extended period of low lease rates.
However, the long-term revenue generated will far outpace the
current revenue generated from event sales and serve the greater
public. We hope our proposal is selected and that we can enter
into good faith negotiation on mutually beneficial lease terms.
Basic proposed terms are shown to the right followed by a
financial pro forma on the following page.
In addition to the proposed lease terms, we are also open to
other means of structuring a business relationship such as a
Public-Private-Partnership (PPP) or outright purchase of the
property. Each of these approaches has their own pros and cons
and can be discussed at a future date.
In addition to the efforts directly related to the Pavilion, we are
highly interested in securing first-right-of-refusal for future
development of the Transit Street and adjacent gravel lot on South
3rd Street. These development projects would only increase
momentum for the new Logan Market and downtown revitalization.
Lastly, a notional schedule is provided with the intent to
complete the project along with the redevelopment of the
downtown streets, intersections, and addition of the Festival Street.
We believe this to be a realistic schedule and one that will
maximize the public impact. A ribbon cutting ceremony that could
be timed with a large public event such as Renton River Days or
the Classic Car Show, would provide maximum visibility and help
get the new Logan Market off to a tremendous start.
§25-year lease with options to renew in 5-year
increments
§5-years of $1 annual lease terms followed by rate
of $10 per square foot per year
§Master Lease Authority to enter into and negotiate
sub-leases
§City’s continued maintenance of the exterior (less
tenant seating areas) and piazza
§Our commitment to coordinate and host public city
sponsored events
§Free event rentals for internal city needs such as
seminars or committee meetings and/or
community events
§First-right-of-refusal on purchase of the building
and/or land including the Transit Street and vacant
gravel lot
20
Revenue Year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Anchor Tenant A (Annual Lease Rate)$0 $0 $72,000 $74,160 $0 $0 $0 $0 $0 $0
Anchor Tenant B (Annual Lease Rate)$0 $0 $0 $49,000 $36,050 $0 $0 $0 $0 $0
Anchor Tenant A (% of Food/Alcohol Sales)$0 $0 $0 $0 $114,000 $124,800 $136,680 $149,748 $164,123 $179,935
Anchor Tenant B (% of Food/Alcohol Sales)$0 $0 $0 $0 $103,500 $187,200 $205,020 $224,622 $246,184 $269,903
Fixed Vendors C-H (Annual Lease Rate)$0 $0 $8,800 $17,600 $35,200 $52,800 $52,800 $52,800 $52,800 $52,800
Kiosk Annual Lease 3 Units (Monthly Rate)$0 $0 $6,750 $22,500 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000
Kiosk Seasonal Renters 3 Units (3 Month Paid in
Full)$0 $0 $12,000 $21,000 $21,000 $21,000 $21,000 $18,000 $21,000 $21,000
Kiosk Month-to-Month Renters 3 Units $0 $0 $17,500 $42,500 $45,000 $45,000 $45,000 $45,000 $45,000 $45,000
Kiosk Daily Event Rental 3 Units (Daily Rate)$0 $0 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200
Public Events ($6 Per Attendee)$21,600 $0 $12,978 $22,915 $23,603 $24,311 $25,040 $25,792 $26,565 $27,362
Private Events (Event Fees)$20,700 $0 $21,321 $32,941 $45,239 $46,596 $47,994 $49,434 $50,917 $52,444
Education (Facility Hourly Rental)$0 $0 $16,800 $35,200 $48,000 $57,600 $67,200 $72,000 $72,000 $72,000
Grants (Annual Estimate)$0 $0 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
NNN Invoiced to Tenants $0 $0 $158,958 $251,714 $256,626 $261,684 $266,895 $272,262 $277,790 $283,483
Total Revenue $42,300 $0 $393,307 $635,731 $821,417 $914,192 $960,829 $1,002,857 $1,049,579 $1,097,128
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The following models a diverse revenue stream from the three different tenants types discussed herein as well as events, education and grants. The major anchor tenants will be given
favorable lease terms for the first two-years to ensure we can successfully attract them and they can sustain operation while the market ramps up in activity. We assume modest event revenue
in the first year of operations, similar to the current level of activity. Once the planning and permitting phase is completed and construction begins in year two, all revenue will cease until
year three. The next two years of operation will be needed to break-even and get cashflow positive. As major tenant revenue grows, we will switch to a percentage of sales model.
Expenses Year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Start-up Expenses:
Architectural Drawings $75,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Legal Fees $45,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Permitting $60,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Branding and Marketing $10,000 $0 $0 $0 $0 $0 $0 $0 $0 $0
Start-Up Marketing, Events, and Promotion $1,500 $3,000 $0 $0 $0 $0 $0 $0 $0 $0
Tenant Engagement $0 $18,000 $0 $0 $0 $0 $0 $0 $0 $0
Total Start-up Expenses $191,500 $21,000 $0 $0 $0 $0 $0 $0 $0 $0
Financing Expenses
Interest Only $36,000 $72,000 $0 $0 $0 $0 $0 $0 $0 $0
Principal + Interest Payment $0 $0 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870
Total Financing Expenses $36,000 $72,000 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870
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The table below captures the major start-up and financing expenses. The loan will also cover the first two years of operating working capital, a third year may be required. The numbers
below assume an interest only payment period followed by a 7 year principal and interest conventional loan. The principal loan is assumed for $1.2M at an interest rate of 6%. Our Team will
also explore economic development grants or incentives to lessen this loan and/or augment available funds.
Expenses Year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating Expenses -Staff Subject to NNN
Security Officer $0 $18,720 $38,563 $39,720 $40,912 $42,139 $43,403 $44,705 $46,046 $47,428
Maintenance Staff $0 $16,932 $69,761 $71,853 $74,009 $76,229 $78,516 $80,872 $83,298 $85,797
Payroll Taxes $0 $3,922 $11,916 $12,273 $12,641 $13,021 $13,411 $13,813 $14,228 $14,655
Benefits (PTO, Health Insurance)$0 $10,696 $33,472 $34,476 $35,511 $36,576 $37,673 $38,803 $39,967 $41,166
Total Admin Subject to NNN $0 $50,270 $153,711 $158,323 $163,073 $167,965 $173,004 $178,194 $183,540 $189,046
Operating Expenses -Administration
Administrative Assistant $0 $11,350 $46,762 $48,165 $49,610 $51,098 $52,631 $54,210 $55,836 $57,511
Property Manager and Event Director $0 $2,600 $32,136 $33,100 $34,093 $35,116 $36,169 $37,254 $38,372 $39,523
Payroll Taxes $0 $1,535 $8,679 $8,939 $9,207 $9,484 $9,768 $10,061 $10,363 $10,674
Benefits (PTO, Health Insurance)$0 $4,185 $24,379 $25,111 $25,864 $26,640 $27,439 $28,263 $29,110 $29,984
Total Administrative Expenses $0 $19,670 $111,956 $115,315 $118,774 $122,338 $126,008 $129,788 $133,682 $137,692
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Due to the hands-on nature of our operational plan and extensive and ambitious event and education goals, the labor overhead associated with running the new Logan Market will be
higher for traditional landlord-tenant properties. We will have full-time cleaning, maintenance and security staff. These labor categories will be loaded into the NNN rate as they will benefit
all tenants. In addition to our own staff, our tenants will bring quality full-time jobs to the downtown area in addition to direct, supplier and induced jobs and economic benefit.
Expenses
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating Expenses -Lease
Lease Payments to City of Renton $1 $1 $1 $88,000 $88,000 $88,000 $88,000 $88,000 $88,000 $88,000
Total Lease Expenses $1 $1 $1 $88,000 $88,000 $88,000 $88,000 $88,000 $88,000 $88,000
Operating Expenses -General
Accounting Services $3,000 $3,090 $3,183 $3,278 $3,377 $3,478 $3,582 $3,690 $3,800 $3,914
Advertising and Promotion $6,000 $6,180 $6,365 $6,556 $6,753 $6,956 $7,164 $7,379 $7,601 $7,829
Bank Service Charges $600 $618 $637 $656 $675 $696 $716 $738 $760 $783
Business Licenses and Permits $900 $900 $900 $900 $900 $900 $900 $900 $900 $900
Cable/TV/Internet Service $1,800 $1,854 $1,910 $1,967 $2,026 $2,087 $2,149 $2,214 $2,280 $2,349
Charitable Contributions $2,500 $2,575 $2,652 $2,732 $2,814 $2,898 $2,985 $3,075 $3,167 $3,262
Computer and Internet Expenses $1,800 $1,854 $1,910 $1,967 $2,026 $2,087 $2,149 $2,214 $2,280 $2,349
Dues and Subscriptions $4,788 $4,932 $5,080 $5,232 $5,389 $5,551 $5,717 $5,889 $6,065 $6,247
Payroll Subscription Services $600 $618 $637 $656 $675 $696 $716 $738 $760 $783
Equipment Leases (Printer)$6,000 $6,180 $6,365 $6,556 $6,753 $6,956 $7,164 $7,379 $7,601 $7,829
Insurance $1,080 $1,112 $1,146 $1,180 $1,216 $1,252 $1,290 $1,328 $1,368 $1,409
Legal Fees $3,000 $3,090 $3,183 $3,278 $3,377 $3,478 $3,582 $3,690 $3,800 $3,914
Meals and Entertainment $2,700 $2,781 $2,864 $2,950 $3,039 $3,130 $3,224 $3,321 $3,420 $3,523
Office Supplies $1,500 $1,545 $1,591 $1,639 $1,688 $1,739 $1,791 $1,845 $1,900 $1,957
Postage and Delivery $300 $309 $318 $328 $338 $348 $358 $369 $380 $391
Telephone Expense $1,800 $1,854 $1,910 $1,967 $2,026 $2,087 $2,149 $2,214 $2,280 $2,349
Travel Expense $1,800 $1,854 $1,910 $1,967 $2,026 $2,087 $2,149 $2,214 $2,280 $2,349
Major Renovations (Every 5 Years)$0 $0 $0 $0 $0 $0 $0 $250,000 $0 $0
Total General Expenses $40,169 $41,347 $42,560 $43,810 $45,097 $46,423 $47,789 $299,195 $50,644 $52,136
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The expenses below are largely bases on the actual costs of operating similar sized properties and assumes acceptable lease terms with the City of Renton. We have also assumed that
every 5 years we will need to invest in major renovations or new tenant improvements and budget for those large expenditures in order to ensure the property is well maintained and
provides a fresh retail experience. Lastly expenses are calculated using a 3% annual escalation of costs to account for inflation.
Expenses Year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating Expenses -Subject to NNN
Public Internet Expenses $4,200 $4,326 $4,456 $4,589 $4,727 $4,869 $5,015 $5,165 $5,320 $5,480
Common Area Electric $9,000 $9,270 $9,548 $9,835 $10,130 $10,433 $10,746 $11,069 $11,401 $11,743
Public Area Entertainment/Music Service $600 $618 $637 $656 $675 $696 $716 $738 $760 $783
Common Area Liability Insurance $3,600 $3,708 $3,819 $3,934 $4,052 $4,173 $4,299 $4,428 $4,560 $4,697
Signage and Banners, Common Event
Promotion $12,000 $12,360 $12,731 $13,113 $13,506 $13,911 $14,329 $14,758 $15,201 $15,657
Building Repairs and Maintenance $6,600 $6,798 $7,002 $7,212 $7,428 $7,651 $7,881 $8,117 $8,361 $8,612
Emergency Phone Telephone Expense $5,400 $5,562 $5,729 $5,901 $6,078 $6,260 $6,448 $6,641 $6,841 $7,046
Staff Uniforms $3,000 $3,090 $3,183 $3,278 $3,377 $3,478 $3,582 $3,690 $3,800 $3,914
Total Expenses Subject to NNN $44,400 $45,732 $47,104 $48,517 $49,973 $51,472 $53,016 $54,606 $56,245 $57,932
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The table below summarizes the expenses that will be attributed to operating and maintaining the common areas and mechanical systems. In a traditional ownership model, property
taxes would also be included in the NNN charges. We will be transparent with tenants and the City about calculations and allocation of NNN charges to the tenants. It is our goal to ensure
the tenants are provided an opportunity to be successful and we will view them as partners in the new Logan Market.
Expenses Year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Profit and Loss Summary
Total Revenue $42,300 $0 $393,307 $635,731 $821,417 $914,192 $960,829 $1,002,857 $1,049,579 $1,097,128
Total Start-up Expense $141,500 $21,000 $0 $0 $0 $0 $0 $0 $0 $0
Total Finance Expense $36,000 $72,000 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870 $159,870
Total Administrative Expenses $0 $50,270 $153,711 $158,323 $163,073 $167,965 $173,004 $178,194 $183,540 $189,046
Total Labor Subject to NNN $0 $19,670 $111,956 $115,315 $118,774 $122,338 $126,008 $129,788 $133,682 $137,692
Total Lease Expense $12 $12 $12 $88,000 $88,000 $88,000 $88,000 $88,000 $88,000 $88,000
Total Operating Expense $40,169 $41,347 $42,560 $43,810 $45,097 $46,423 $47,789 $299,195 $50,644 $52,136
Total Operation Expenses Subject to NNN $44,400 $45,732 $47,104 $48,517 $49,973 $51,472 $53,016 $54,606 $56,245 $57,932
Total Expense $262,081 $250,030 $515,213 $613,834 $624,786 $636,067 $647,685 $909,653 $671,979 $684,676
EBITA ($219,781)($250,030)($121,906)$21,896 $196,631 $278,125 $313,144 $93,204 $377,599 $412,452
Economic Impacts
Total Direct Jobs at Logan Market 2 2 4 4 4 4 4 4 4 4
Total Direct Jobs from Tenants 0 0 64 76 90 96 96 96 96 96
Supplier Jobs (ratio of 0.46 per 100 jobs)1 1 66 78 92 98 98 98 98 98
Induced Jobs (ratio of 0.75 per 100 jobs)2 2 51 60 71 75 75 75 75 75
Total New Jobs 4 4 185 218 256 273 273 273 273 273
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The following table provides a summary of the profit and loss discussed in the previous tables. As show, the first three years will incur significant losses. The model indicates the
potential to break-even in year 4. Given that significant capital investment will be required, but no ownership will be provided, a low cost lease is essential to justify the private investment
required. The bottom of the table shows the potential economic impact in terms of job creation using 2019 model published by the Economic Policy Institute.