ARIZONA BOARD OF REGENTS BUSINESS AND FINANCE … Documents/2016...Feb 03, 2016 · McAllister Academic Village (now known as Hassayampa) housing facility, and the issuance by McAllister

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ARIZONA BOARD OF REGENTS BUSINESS AND FINANCE COMMITTEE

ARIZONA STATE UNIVERSITY Student Memorial Union – Turquoise Room

Wednesday, February 3, 2016 12:00 p.m. to 1:00 p.m.

Committee Members:

Regent Rick Myers, Chair Regent Greg Patterson, Vice Chair

Regent Mark Naufel Regent Larry Penley

Regent Bill Ridenour Regent Ron Shoopman

Regent Jay Heiler (ex-officio)

12:00 p.m. CALL TO ORDER, GREETINGS, AND ANNOUNCEMENT FROM THE CHAIR Approval of Committee Meeting minutes from November 18, 2015.

1. Acknowledgement and Approval for Component Units to Issue Refunding Bonds (ASU)

The committee is asked to review and recommend board approval of acknowledgement and authorization: (1) for McAllister Academic Village LLC, a wholly-owned subsidiary of Arizona Capital Facilities Finance Corporation (ACFFC), to refund up to $139.6 million of its 2008 Revenue Refunding Bonds (Arizona State University Hassayampa Academic Village Project) and (2) to pay associated issuance and transaction costs.

12:15 p.m. EXECUTIVE SESSION

Pursuant to A.R.S. § 38-431.03, the committee will convene in executive session to discuss items identified on the executive session agenda.

12:45 p.m. RESUME PUBLIC SESSION

2. Approval of Ground Leases and Related Agreements for the Development of the ASU Athletics Facilities District (ASU)

Arizona State University requests that the committee review and recommend board approval for Arizona State University to enter into ground leases and related agreements for the development, occupancy, and operation of parcels of land within the ASU Athletic Facilities District.

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3. Acquisition of Property Adjacent to the ASU Downtown Phoenix Campus (ASU)

The committee is asked to review and recommend board approval of the

purchase of the real property located at 372 N. 1st Avenue, Phoenix, Arizona from Pterodactyl Holdings (Phoenix) LLC, a Delaware limited liability company, Thomas E. Bishop, and Thomas E. Bishop, trustee of related family trusts.

1:00 p.m. Meeting Adjourned

PLEASE NOTE: This agenda may be amended at any time prior to 24 hours before the Committee

meeting. Estimated starting times for the agenda items are indicated; however, discussions may commence, or

action may be taken, before or after the suggested times. Any item on the agenda may be considered at any

time out of order at the discretion of the Committee Chair. The Committee may discuss, consider, or take action

regarding any item on the agenda. Pursuant to A.R.S. §38-431.03 (A)(3) the Committee may convene in

Executive Session at any time during the meeting to receive legal advice regarding any item on the agenda.

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BUSINESS AND FINANCE COMMITTEE EXECUTIVE SESSION AGENDA

February 3, 2016

NOTE: The executive session is scheduled for approximately 12:15 p.m. on Wednesday, February 3, 2016. The executive session may be recessed and continued as necessary.

Statutory Authorization A.R.S. § 38-431.03 Items to be Discussed (A.7) 1. Discussion or consultation to consider the committee’s position and instruct its

representatives regarding negotiations for the purchase, sale or lease of real property related to the following items:

Approval of Ground Leases and Related Agreements for the Development of the ASU Athletics Facilities District (ASU); and

Acquisition of Property Adjacent to the ASU Downtown Phoenix Campus (ASU)

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Business and Finance Committee Meeting February 3, 2016

Item #1 EXECUTIVE SUMMARY Page 1 of 2

Contact: Morgan R. Olsen, Executive Vice President, Treasurer and CFO • (480) 727-9920 • [email protected]

Item Name: Acknowledgement and Approval for Component Units to Issue Refunding Bonds (ASU)

Action Item Committee Recommendation to Full Board First Read of Proposed Policy Change Information or Discussion Item

Enterprise or University Strategic Plan (Check the element(s) of the strategic plan that this item supports or advances)

Education excellence, access and degree production Research excellence Workforce and community Productivity Compliance Real property purchase/sale/lease Other:

Background

In January 2005, the Board approved the formation of McAllister Academic Village LLC, the execution and delivery of a ground lease for the construction of the McAllister Academic Village (now known as Hassayampa) housing facility, and the issuance by McAllister Academic Village, LLC of $145.0 million of its Variable Rate Demand Revenue Bonds which were issued in July 2005. In September 2008, the 2005 Bonds were refunded with $145.2 million of fixed-rate 2008 Revenue Refunding Bonds of which $139.6 million remains outstanding.

Issue: Arizona State University (ASU) asks for committee review and recommendation

to the full board for approval of acknowledgement and authorization: (1) for McAllister Academic Village LLC, a wholly-owned subsidiary of Arizona Capital Facilities Finance Corporation (ACFFC), to refund up to $139.6 million of its 2008 Revenue Refunding Bonds (Arizona State University Hassayampa Academic Village Project) and (2) to pay associated issuance and transaction costs.



Discussion

McAllister Academic Village, LLC will refinance the 2008 Refunding Bonds by selling one or more series of refunding bonds in amounts sufficient to defease and redeem the outstanding 2008 Refunding Bonds and pay costs of issuance. The refunding bonds will be issued as fixed rate bonds and mature over the same time period as the 2008 Refunding Bonds, with a final maturity of 2039.

The estimated net present value savings from refunding the 2008 Refunding Bonds as of mid-December 2015 is $10.6 million, or 8.4 percent of the principal amount of the bonds being refunded, based on an assumed interest rate of 3.7 percent. Actual net present value savings may be higher or lower, depending on the interest rate environment at the time of the sale of the Refunding Bonds, but the refinancing will proceed only if savings are at least 3.0 percent of the principal amount of the 2008 Refunding Bonds being refunded.

ASU will evaluate bond insurers available in the market at the time of sale. The decision as to whether bond insurance will be used will be a function of market conditions and the bond insurer’s ratings at the time of pricing. Bond insurance will be used only if the insurance provides a demonstrated economic benefit to ASU, as required by federal tax law.

Committee Review and Recommendation ASU asks the committee for review and recommendation to the full board for approval of acknowledgement and authorization for the issuance of Revenue Refunding Bonds by McAllister Academic Village, LLC, as presented in this executive summary.

Business and Finance Committee February 3, 2016



Item Name: Approval of Ground Leases and Related Agreements for Development of the ASU Athletic Facilities District (ASU)


Enterprise or University Strategic Plan

Empower Student Success and Learning Advance Educational Attainment within Arizona Create New Knowledge Impact Arizona Compliance Real property purchase/sale/lease Other:

Statutory/Policy Requirements ABOR Policy 7-207.A.1.a requires Board approval for any lease with a term that exceeds 120 months. Background

In 2010, the Arizona Legislature passed HB 2676, which enabled the establishment of a single university athletic facilities district in each county that is home to a state university.

The purpose of the legislation is to permit state universities to generate revenue to construct and improve intercollegiate athletic facilities through the assessment of an in-lieu payment in conjunction with commercial development of University-owned property.

The District is a 330-acre property located at the northeast end of the Tempe campus, generally bounded by Sun Devil Stadium, Veterans Way, University Drive, McClintock Road and Tempe Town Lake. In addition to proximity to the Tempe campus and the

Issue: Arizona State University asks the committee for review and recommendation to the full board for approval of authorization for Arizona State University to enter into ground leases and related agreements for the development, occupancy, and operation of parcels of land within the ASU Athletic Facilities District (the

“District”).

mailto:[email protected]



research, instruction, and collaboration opportunities this provides, the District is close to light rail, major freeways, Sky Harbor Airport, Tempe Town Lake and vibrant downtown Tempe.

Intergovernmental agreements among ASU, Maricopa County and the District's legal entity define management and operations of the District, which through its seven-member Board is responsible for assessing and collecting District in-lieu payments. District assessments cannot exceed applicable property tax rates set by Maricopa County.

In addition to financial support for intercollegiate athletics, the District will provide significant, tangible economic, social and cultural benefits to the University and the community.

While the District Board is responsible for managing in-lieu payment revenue within the District, ASU retains ownership of the property within the District and is responsible for planning and development within the District.

To assist with development within the District, ASU issued a Request for Qualifications seeking a developer with “best in class” experience and a proven record of success in the development of mixed-use, master-planned communities in the public/private environment.

After an extensive vetting process by the University and an advisory board, which included interviews, site visits and client references, ASU selected Catellus Development Corporation (Catellus) in October 2014, based on its experience and depth of expertise. ASU and Catellus entered into a twelve-month Exclusive Negotiating Agreement to support initial planning activities within the District, including terms of a master development agreement.

During the Exclusive Negotiating Agreement period, Catellus has developed a long-term development plan that includes a conceptual land use master plan, market study, infrastructure master plan, phasing schedule and marketing plan. Major components of the District will include commercial office, multi-family residential, hospitality and service retail development.

Catellus and ASU have completed an extensive community outreach effort that resulted in dozens of public presentations to various stakeholders to gather input and public comment on the master development plan. Catellus paid for the due diligence, master planning activities, marketing plan and community outreach.

A long-term development of this nature requires a significant investment in infrastructure, site work and marketing. ASU and Catellus will execute a long-term Development Agreement designating Catellus as the master developer for the District. This long-term agreement will require Catellus to invest in the infrastructure, site work and marketing to execute the master development plan successfully.



Discussion

The planning horizon for development of the District is anticipated to be twenty-plus years. ASU and Catellus will be actively engaged in creating interest in the District, soliciting appropriate District tenants, and negotiating long-term ground leases to realize the full potential of the District.

Lessees will be responsible for development costs, operating and maintenance costs, assessments, taxes, and other costs associated with development of vertical improvements within the District.

Development of the District will require negotiation of complex, market-driven transactions with speed and flexibility to be responsive to the marketplace of prospective tenants. To justify the investment from Catellus, provide confidence to the marketplace that Catellus has the authority and ability to deliver building sites and to provide the flexibility needed to respond to current market conditions and opportunities, ASU is requesting approval to execute ground leases within the District for the sole purpose of prime commercial development. Without this flexibility, ASU will be competitively disadvantaged relative to other commercial developments in the vicinity.

ASU and Catellus will negotiate ground lease terms for development within the District, subject to approval of the ASU President and Executive Vice President, Treasurer and Chief Financial Officer.

ASU will annually provide a report to ABOR of leasing activity within the District, similar to reporting currently provided for the ASU Research Park.

Fiscal Impact and Management Plan

ASU will use funds generated from leasing activity within the District to offset relocation costs of the existing athletics and other facilities within the designated area of the District, to construct required infrastructure within the District, and to construct and improve the University's intercollegiate athletics facilities.

Exhibit A – Location Map

Committee Review and Recommendation ASU asks the committee for review and recommendation to the full board for approval of authorization for Arizona State University to enter into ground leases and related agreements for the development, occupancy, and operation of parcels of land within the ASU Athletic Facilities District.



EXHIBIT A

LOCATION MAP

Boundary Map of ASU Athletic Facilities District (Maricopa County, Arizona)




Item Name: Acquisition of Property at 372 N. 1st Avenue Adjacent to Downtown Phoenix Campus (ASU)


Enterprise or University Strategic Plan

Empower Student Success and Learning Advance Educational Attainment within Arizona Create New Knowledge Impact Arizona Compliance Real property purchase/sale/lease Other:

Statutory/Policy Requirements

ABOR Policy 7-203 requires Board approval of purchases of real property over $500,000.

ABOR Policy 7-203 requires that a request for authorization to purchase real property include a legal description of the real property.

ABOR Policy 7-206 requires two appraisals for the purchase of real property with an anticipated sale price over $1,000,000. All appraisals shall be independent, unilaterally requested and paid for by the University.

Background

Arizona State University’s Downtown Phoenix campus is home to the Walter Cronkite School of Journalism and Mass Communication, the College of Health Solutions, the College of Nursing and Health Innovation, the College of Public Service and Community Solutions and the School of Letters and Sciences. The Mary Lou Fulton Teacher’s College and University College also have a presence

Issue: Arizona State University asks for committee review and recommendation to the full board for approval of the purchase of the real property located at 372 N. 1st Avenue, Phoenix, Arizona from Pterodactyl Holdings (Phoenix) LLC, a Delaware limited liability company, Thomas E. Bishop, and Thomas E. Bishop, trustee of related family trusts.

mailto:[email protected]



there. The Sandra Day O’Connor College of Law will relocate downtown in summer 2016. The Sun Devil Fitness Complex downtown is located on the same block as the property.

Approximately 11,500 students are enrolled on the Downtown Phoenix campus, experiencing the advantages of an integrated urban environment featuring business, technology, medicine law, arts, research, journalism and education.

The Downtown Phoenix campus will continue to expand to meet the demand and needs of this unique campus. Given the location of the property in relation to the downtown Phoenix campus and the anticipated growth of the campus, this parcel is considered to be a strategic acquisition.

Discussion

The purchase price for the property is $4,650,000, plus customary transaction costs. The property is 34,798 SF (approximately .8 acre).

The purchase price reflects the increasing demand for developable land in the heart of downtown Phoenix. The property has other offers pending. ASU is obtaining two appraisals in accordance with Board policy, which are expected to support the price and will be completed within 30 days.

The purchase of the property will be paid from available local funds. Exhibits

Exhibit A - Legal Description

Exhibit B - Location Map

Exhibit C – Site Map Committee Review and Recommendation Arizona State University asks for committee review and recommendation to the full board for approval of the purchase of the real property in Downtown Phoenix, as presented in this Executive Summary.



EXHIBIT "A" LEGAL DESCRIPTION Parcel 1, Tax Parcels 111-42-077A and 111-42-079A Lots 17 and 19, Block 2, SEGER’S ADDITION, a subdivision recorded in Book 2 of Maps, page 12, records of Maricopa County, Arizona; Except a part of Lots 17 and 19, Block 2 of SEGER’S ADDITION subdivision as recorded in Book 2 of Maps, Page 12 and located in the Southwest Quarter (SW1/4) of Section 5, Township 1 North, Range 3 East of the Gila and Salt River Base Meridian, Maricopa County, Arizona, more particularly described as follows: Commencing at the intersection of 1st Avenue and Fillmore Street; Thence South 00°11′54″ West, along the centerline of said 1st Avenue, a distance of 261.45 feet; Thence North 89°38′08″ West, a distance of 50.00 feet to the Point of Beginning; Thence South 00°11′54″ West, a distance of 99.97 feet; Thence North 89°38′08″ West, a distance of 1.42 feet; Thence North 00°09′54″ West, a distance of 99.98 feet; Thence South 89°38′08″ East, a distance of 2.06 feet to the Point of Beginning. Parcel 2, Tax Parcels 111-42-081A and 111-42-083 Lots 21 and 23, Block 2, SEGER’S ADDITION, according to the plat of record in the office of the County Recorder of Maricopa County, in Book 2 of Maps, page 12; Except that part conveyed to the City of Phoenix, as set forth in Deed recorded in Recording No. 2006-603102, described as follows: A part of Lot 21, Block 2 of SEGER’S ADDITION subdivision, as recorded in Book 2 of Maps, Page 12 and located in the Southwest Quarter (SW1/4) of Section 5, Township 1 North, Range 3 East of the Gila and Salt River Base Meridian, Maricopa County, Arizona, more particularly described as follows: Commencing at the intersection of 1st Avenue and Fillmore Street; Thence South 00°11′54″ West, along the centerline of said 1st Avenue, a distance of 261.45 feet;



Thence North 89°38′08″ West, a distance of 50.00 feet to the Point of Beginning; Thence, continuing North 89°38′08″ West, a distance of 2.06 feet; Thence North 00°09′54″ West, a distance of 13.66 feet; Thence North 89°50′06″ East, a distance of 2.14 feet; Thence South 00°11′54″ West, a distance of 13.68 feet to the Point of Beginning Parcel 3, Tax Parcel 111-42-085 Lot 25, Block 2, SEGER’S ADDITION, according to the plat of record in the office of the County Recorder of Maricopa County, in Book 2 of Maps, page 12.



EXHIBIT "B"

LOCATION MAP



EXHIBIT "C"

SITE MAP