P3 Case Study: Long Beach Courthouse

Location Long Beach, California

Project Owner Judicial Council of California’s Administrative Courts (AOC)

Private Partner/

Long Beach Judicial Partners (LBJP), which includes:

Meridiam Infrastructure North America

AECOM: Architect/Engineer

Clark Construction Group, LLC: Construction management

Edgemoor Real Estate Services: Commercial real estate svcs.

Johnson Controls Inc.: Facilities management, operation

maintenance.

Fiscal Year Approved

2010

Project Type Public Facility / Social Infrastructure

Project Delivery / Contract Method

DBFOM (design, build, finance, operate, and maintain)

Description The project is the building, operation and maintenance of a new 545,000-sq. ft

courthouse to replace its dilapidated courthouse, built in 1959. The new courthouse

will consist of a five-story main building containing 31 courtrooms, administrative

offices, below-grade inmate transfer and detention facilities and a 37 slot parking

facility for judges and sheriff’s personnel. It also includes a smaller building with space

leased to the county, a retail food court and a large jury assembly room. Additionally, a

399,000-sq. ft. 972 stall existing off-site parking facility will be renovated and expanded

as part of the project.

SAVE THE DATE

PUBLIC POLICY FORUM

Hanson Bridgett

Public Policy Forum

425 MARKET STREET, 26TH FLOOR | SAN FRANCISCO, CA 94105 | JANUARY 25, 2012

Cost / Payment

To finance the initial development costs, design and construction, at financial close

LBJP put in place a project-financing package consisting of long-term equity (10%) and

debt (90%), with a total investment of just under $500 million. Meridiam Infrastructure

paid $49 million in cash equity at the closing. Seven-year floating-rate mini perm loans

totaling $443 million were arranged with a bank consortium to cover the three-year

construction period and allow Meridiam four years to refinance.

In exchange for these services, LBJP will be paid an annual service fee by the AOC

with such payments starting only upon completion of construction. The service fee was

contractually fixed at the time of financial close and has a mortgage-like payment profile

over the 35-year operations period, plus an inflation indexation. At the end of the 35-

year period, the LBJP will hand back the facility to the AOC, as specified in the PPP

long-term contract.

The service fee payments are linked to specific availability and performance

milestones, which involve specified response times and potential payment deductions

if requirements are not met. The most important milestone is the availability of fully

functioning courtrooms for their intended use each day of the year. There also are a

range of other maintenance and operational performance indicators, which, if not met,

may trigger deductions in the service fee payments.

This arrangement gives the private sector a great incentive to design the project to

operate with optimal efficiency and reliability, complete the construction of the project

on time and on budget (so that the service fee payments start as scheduled) and then

to operate and maintain the project in such a condition to avoid potential deductions in

payment.

At the financial close, a blended LIBOR swap was used to set the all-in interest rate,

which determined the final cost of the service contract to the state. The payment for the

first full year of occupancy, 2014-2015, is set at $53.65 million, assuming no deductions

for poor performance.

Funding Sources

LBJP will raise 100 percent of the financing required to complete the project.

Lenders BBVA, RBC, Scotia Bank, BNP Paribas, Credit Agricole and Deutsche Bank

Duration / Status

Commercial close December 2010

Construction began April 2010; expected completion in Summer 2013

Financial Status / Performance

Financial close on December 20, 2010

Project still in construction

425 MARKET STREET, 26TH FLOOR | SAN FRANCISCO, CA 94105 | JANUARY 25, 2012

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Projected Benefits

Earlier completion—Completion is estimated at 30 months earlier than a traditional

segregated procurement.

Lower cost—as a direct benefit of earlier completion, the construction bid was more

than 15% below AOC’s estimates.

Integrated procurement—ensures that the design and maintenance proposals are

optimized with each other, reducing life-cycle costs.

Fully funded maintenance—all payments to JBJP are directly linked to potential

performance deductions, ensuring occupants and visitors will enjoy a well-

maintained building for the 35-year contract period.

Innovations • First project in California, and possibly in the U.S., for which a local court system will

use a long-term, project financed P3 delivery arrangement.

• First social infrastructure /non-transportation P3 in California.

• Employs an innovative delivery arrangement called Performance Based

Infrastructure.

• Innovative financing of a traditional public finance project that did not involve

municipal securities

425 MARKET STREET, 26TH FLOOR | SAN FRANCISCO, CA 94105 | JANUARY 25, 2012

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