Fengate Asset Management P3 K-12

K-12 PUBLIC PRIVATE PARTNERSHIPS ALTERNATIVE CONSTRUCTION FINANCING

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ABOUT US Fengate is a leading alternative investment manager focused on infrastructure, private equity

combined value of $15 billion.

and real estate strategies. With offices in Toronto,

Fengate’s infrastructure team is focused on

Houston, Vancouver, New York and Oakville,

public-private partnerships, contracted power and

Fengate is one of the most active real asset

contracted utilities. With a dedicated team of more

investors in North America.

than 140 professionals, Fengate leads carefully targeted investment pursuits from consortium

Fengate invests in long-life, high-quality assets

building, qualification and proposal phases to

and businesses on behalf of its clients and, with

commercial and financial close.

more than 45 years of experience, is proud of a proven track record and trusted reputation across

In 2011, Fengate made a strategic decision to build

targeted sectors.

a dedicated, in-house asset management team providing industry-leading facility management

With 140 professionals (600+ through its portfolio companies), Fengate manages $1.8 billion of total nonrecourse PPP equity commitments and has $12 billion of assets under management on behalf of institutional investors and pension funds.

Fengate has arranged project financing across 22 Public-Private Partnership projects with a

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services — a true differentiator within the industry. This value-add service enables proactive management of the infrastructure portfolio which protects our investors’ assets, and ensures each project reaches its full potential and maximum return.

It is not about smart children, it is about happy children who have the confidence and courage to learn and pursue things dear to their heart.

- Alexandria Eidens

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BENEFIT OF K-12 PUBLIC PRIVATE PARTNERSHIPS Many school districts across the US currently operate school

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facilities that are both out of date and inefficient. Many of these facilities have reached the end of their useful lives and tend to cost tax payers excessive maintenance costs. Public-

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private partnerships create an alternative financing solution

The Public-private partnership delivery method encourages private equity partners to put forth innovative designs for educational spaces to positively impact school environments,

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Summary of risk allocation and innovatie

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Allocate Risk to Maximize Project Stabilty

to facility occupancy.

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Develop a building maintenance management system in

Experienced approach to timeline for financial

monitored and diagnosed.

close

with cost overruns and schedule delays to the private equity

price innovative solutions that will address the spatial and

partner, creating a peace of mind for our public clients.

functional needs of students and staff, blend aesthetically

Financing

with the surrounding area, and increase the operational

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necessary to properly plan the sequence of events prior

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Public-private partnerships are structured to provide fixed-

Minimize Cost of Capital for Projects

Develop a transition plan in collaboration with all parties

which all building systems are linked and can be centrally

financing approach that transfers all project risk associated

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Well-established lender relationships

Design-Build

objectives outlined below:

decisions.

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both students and staff. The P3 delivery method also brings a

for each project focuses on optimizing the three core

Provide consultation during design and construction to ensure all FM requirements are considered in design

approaches to financing

academic performance, and the health and well-being of the

Our approach to structuring and implementing the financing

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Maximize Certainty of Achieving Financial Close

for the development of new state-of-the-art school facilities with considerable cost savings in deferred maintenance.

Financial innovations and detailed market knowledge

efficiency of the school facilities while controlling annual operating costs.

Facilities Management Public-private partntership Facilities Management (FM) approach combines the necessary tools, technology and

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Dual Track financing approach

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Efficiently priced equity

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Equity capital redundancy

necessary to flawlessly deliver services. FM teams employ the

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Tax-exempt debt financing option

following steps to ensure schools operates effectively for the

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Competitively sourced financing

long term:

people to ensure trouble free operation while carefully monitoring quality management in all aspects of operation

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Implement a standard reporting system that tracks all project agreement requirements, including the tracking of all work orders, response and rectifications times.

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TEAM STRUCTURE & ENGAGEMENT Our teams include strategically structured and integrated

project development and assure our public clients that each

infrastructure experts that meet specific challenges

organization is involved at the highest level of management.

associated with public-private prartnerships. Our team

We value continuity in our team personnel, ensuring the

provides our public clients with the necessary project

continuous transfer of project knowledge and reducing the

knowlege, local expertise, technical expertise and proven

likelihood of potential disagreements.

ability to deliver innovative and cost-effective solutions to public agencies.

The structure of our team is a well-defined contractual framework that is based on our team’s prior experience with the delivery of numerous P3 projects. This approach provides the following benefits: Single point of contact Fengate, as the Equity Member/Developer has overall responsibility of project delivery through project life cycle.

As Developer, an employee of Fengate serves as Project Executive and Principal in Charge, acting as the single point

Clear Reporting Lines and Definition of Responsibilities Our standard teaming arrangements clearly define the responsibilities for each of the key stakeholders in each project, including financing, design, construction and operations and maintenancee. The clear allocation of roles and responsibilities among team members creates a cohesive and aligned group that is dedicated to delivering the best value to each publc agency. These defined roles and responsibilities help us to facilitate a seamless integration of specialized disciplines to key personnel with the best knowledge, skills, and experience.

of contact for our public clients pertaining to stakeholder

Prior to the RFQ stage, our team is organized by each

engagement, project risk identification, and risk resolution.

discipline. Whether it is a lifecycle analysis or constructability

Consistent Executive Leadership Our public clients benefit from executive oversight that is stable and consistent throughout each phase. Regular Steering Committee meetings occur that involve senior executives from the Equity Membership, Design-Builder, and Service Provider to provide checks and balances for

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review, each decision is evaluated against its overall effect on the project, ensuring the development of an optimal solution that provides best value-for-money to each public client. This approach ensures the early integration of facilities maintenance professionals into the project design and construction decisions, taking long-term lifecycle cost consideration into account early in the process.

Stakeholder relations and community involvement Our leadership team understands the importance of community stakeholder involvement throughout each phase of the development. We work diligently to forge relationships with not only end-users, but community-based organizations that support the growth of small and local business.

Teaming Arrangements

Agreement with the Service Provider. The Facilities Maintenance Agreement transfers all risk associated with the performance-based facilities management obligations to the Service

The contractual relationship between our team members is typically a ‘chain of command’ structure that will provide best value to our public clients by allocating all risks and

Provider for typically 15 to 30 years.

Throughout the lifecycle of the project, our team is diligent about our relationship with

responsibilities to those team members who are most suited for particular roles.

our public clients, as well as with community stakeholders, scheduling recurring meetings

As the primary equity sponsor, Fengate forms a special purpose vehicle company, otherwise

throughout the operations period to maintain open lines of communication and mitigate risks.

known as an SPV. The SPV enters into the Project Agreement with our public clients, the Design-Build Agreement with the DesignBuild team, and the Facilities Maintenance Agreement with the Serivce Provider.

The equity team, otherwise known as the

LENDERS’ ADVISORS

SCHOOL DISTRICT

EQUITY ADVISORS

Developer, obtains financing, monitors the design-build phase of the project, as wells as monitors the operations and

PUBLIC-PRIVATE PARTNERSHIP PROJECT AGREEMENT

maintenance phase of the project. Table 1.0 outlines the project team and the roles each play throughout the life of the project.

The SPV enters into a fixed-price, Design-

BONDHOLDERS (LENDERS)

EQUITY SPONSORS

PROJECT COMPANY

Build Agreement with the Design-Builder.

The Design-Build Agreement transfers all

DESIGN-BUILD AGREEMENT

FACILITIES MAINTENANCE AGREEMENT

risk associated with the design-build scope to the Design-Build team. Our Design-Build team are ENR ranked contracting firms that work with dedicated and qualified subcontracting partners to deliver each

DESIGN BUILDER

INTERFACE AGREEMENT

SERVICE PROVIDER

project on budget and schedule. The Design-Builder enters into a Design Services Agreement with some of the top

DESIGN AGREEMENT

K-12 design firms in the country. These design firms assume all risks associated with the design of each project. Our DesignBuild teams leverage their collective skillset to accelerate the work.

DESIGN TEAM Table 1.0

The SPV enters into a Facilities Maintenance 7

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KEY PROJECT AGREEMENTS AGREEMENTS Public-Private Partnership Agreement (PPA)

Design-Build Agreement

PARTIES

Public Agency/Project Co

maintenance of the project, as well as the payment obligations of the public agency.

The agreement provides an efficient back-to-back contract on a fixed-price and fixed date basis, as well as the clear location of

Design-Builder

all design and construction related rights and performance obligations.

Project Co/

Agreement

Facilities Maintenance

Design Services Agreement

The agreement will clearly define roles and responsibilities relating to the design, construction, financing, operation and

Project Co/

Facilities Maintenance

Interface Agreement

DESCRIPTION

The agreement provides for an efficient back-to-back contract on a fixed price basis, as well as the clear allocation of all operations, maintenance, and life cycle related rights and performance obligations. These obligations also include handback provisions stipulated by the public agency.

Design-Builder/

The agreement provides a detailed allocation of scope and responsibilities between the Design-Builder and Facilities Manager

Facilities Maintenance

throughour project transition, particularly addressing all warranty and defects.

Design-Builder/

The agreement provides for an efficient back-to-back contract, on a fixed-price basis, as well as the clear allocation of all design

Designer

related rights and performance obligations.

The agreement provides clearly defined terms outlining how the Project Co can access debt capital from lenders, including Lender Agreement

Project Co/Lenders

interest rates and fees, conditions precedent to closing, debt draws, repayment provisions, etc. The agreement also contains provisions pertaining to default that permit lenders to step in and facilitate project completion.

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CASE STUDY

PRINCE GEORGE’S COUNTY PUBLIC SCHOOLS ALTERNATIVE CONSTRUCTION FINANCING I PROJECT

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PROJECT BACKGROUND The Prince George’s County Public Schools Alternative Construction Financing I Project is

Project Scope - Maintenance

being developed as an alternative financing solution for the accelerated delivery of state of the

The project includes facilities maintenance roles at six school facilities for 30 years to properly

art school facilities to create a positive educational environment for both students and staff.

maintain manufactured equipment, building systems, improvements, property and assets, as

Background and Project Description •

With growing student enrollment and 206 rapidly aging schools in the County, the Authority has identified capital needs of $8.5+ billion over 20 years to fully modernize building systems and components, repair or replace existing schools, or expand existing capacities.

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Deliver planned, scheduled, and on-demand maintenance

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Provide hard facilities management services including mechanical and electrical plant operations (i.e. heating, air conditioning, lighting, mechanical ventilation, and elevator systems)

PGCPS also needs to create thousands of middle and high school seats to avoid The project will provide 7,200 middle school seats and 800 elementary school seats ◊

Adelphi Area Middle School

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Drew-Freeman Middle School

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Hyattsbille Middle School

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Kenmoor Middle School

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Southern Area K-8 School

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Walker Mill Middle School

Project Scope - Design and Construction The project includes the design and construction of six new school facilities, including: Delivery of the architectural, mechanical, electrical and other systems (i.e. electrical system, heating and ventilation system, air conditioning, BMS, plumbing system, fire protection, fire alarm system, security system, master clock and building elevators) •

Delivery of the exterior hardscapes and landscaping, including playing fields

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Commissioning work

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Demolition and hazardous materials remediation of four existing schools

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facilities maintenance roles include the following:

the modernization or complet renovation of over 40% of its existing buildings.

across the following six schools:

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the six facilities’ appearance and ensuring the comfort and safety of all school users. The

PGCPS has the second oldest facilities program in the state of Maryland with a need for

forecasted county-wide overcrowding.

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well as ensure that PGCPS assets remain functionally and operationally sound while maintaining

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Provide limited soft facilities management services (i.e. pest control, roads, ground, and landscape maintenance)2

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Provide utilities management services, including the management, testing, and troubleshooting all utility systems and associated infrastructure

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Provide efficiency testing and maintenance of all energy-consuming building systems, including all boilers

CONSORTIUM ORGANIZATION LENDERS' ADVISORS LEGAL - WINSTON STRAWN TECHNICAL - ALTUS MODEL - OPERIS INSURANCE - INTECH

SCHOOL DISTRICT

EQUITY ADVSORS

PRINCE GEORGE'S COUNTY PUBIC SCHOOLS

LEGAL - TORY'S LLP INSURANCE - INTECH RISK MANAGEMENT

PUBLIC-PRIVATE PARTNERSHIP PROJECT AGREEMENT

LENDERS

PROJECT CO

EQUITY SPONSORS

MANULIFE, NUVEEN, METLFE, CANADA LIFE, AIG, BARINGS

PRINCE GEORGE'S COUNTY EDUCATION & COMMUNITY PARTNERS

FENGATE - 75% GILBANE DEVELOPMENT COMPANY - 25%

DESIGN-BUILD AGREEMENT

DESIGN-BUILDER GILBANE BUILDING COMPANY

FACILITIES MAINTENANCE AGREEMENT

INTERFACE AGREEMENT

SERVICE PROVIDER HONEYWELL

DESIGN AGREEMENT

DESIGN TEAM STANTEC

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KEY PROJECT TERMS General

DESCRIPTION •

PA is the contract between the school district and Project Co detailing the responsibilities of Project Co, Project schedules, payment mechanism, relief events, defaults, liability and termination events

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Since Consortium’s technical submission assumes a delivery date of July 15, 2023 for all six schools, PA would require Project Co to complete construction and achieve substantial completion (“Project Readiness”) by this date (“Project Readiness Date”)

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Project Readiness is achieved when all six schools achieve substantial completion (“School Occupancy Readiness”)

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For a given school, failure to achieve School Occupancy Readiness within 365 days of the scheduled date (“Scheduled School Occupancy Readiness Date”), constitutes a Project Co event of default

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If School Occupancy Readiness is not achieved by the Scheduled School Occupancy Readiness Date for a given school, late delivery damages of$ 5,000 per day will be charged to Project Co up to a cap of $1 million per school

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Availability payment will be pro rated if some but not all schools achieve School Occupancy Readiness by the Scheduled School Occupancy Readiness Date

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Operating term is from Project Readiness Date to June 30, 2053 (“Expiration Date”)

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Relief events include governmental delays, force majeure events, change in law events and PGCPS faults

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Relief events provide schedule relief during construction, performance relief during operations and full compensation on a “no better, no worse basis”

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Relief event regime generally affords more expansive protections than on typical social P3 projects in Canada

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On Expiration Date, schools must be in a condition consistent with the performance of the design, construction and services obligations

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required under the PA (“Handback Requirements”)

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Three years prior to Expiration Date, Project Co and PGCPS shall conduct a joint inspection and survey of each of the schools, with the support of a handback inspector

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Handback inspector will determine if any additional work is required to meet the Handback Requirements (“Handback Work”), and if so, what

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the expected costs of completing Handback Work would be (“Handback Retainage”)

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PGCPS shall retain an amount equivalent to the Handback Retainage from the availability payment and will hold this amount until Handback Work is satisfactorily performed

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MBE Penalty: Project Co is required to award at least 30% of construction and operation expenses to Minority Business Enterprises (MBEs) of which

Construction Period Obligations and Delay Regime

Relief Events

Handback Requirements

20% must be awarded to County Bases Businesses (CBBs) Unique Features

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Failure to achieve the MBE/ CBB Target results in the levying of the MBE Penalty

Unknown land conditions risk associated is capped at $400k

KEY PROJECT TERMS: PAYMENT SUMMARY CONSTRUCTION PERIOD (30 MONTHS)

2021

2023

OPERATIONS PERIOD (30 YEARS)

2023

2053

CONSTRUCTION PROGRESS PAYMENTS

FINAL COMPLETION PAYMENTS

AVAILABILITY PAYMENTS

PGCPS will make a payment in the amount of $15.0 million once 50% of the construction contract costs has been expended

PGCPS will make a payment in the amount of $5.0 million per school once School Occupancy Readiness Date has been reached

Following the School Occupancy Readiness Date, PGCPS will pay Availability Payments to Project Co: Capital Charge: Payments to compensate Project Co for its capital costs; annual escalation of 1.5% Services Charge: Payments to compensate Project Co for its FM, lifecycle and SPV costs; indexed to inflation 13

DBFM AGREEMENT: RISK TRANSFER SUMMARY RISK Project Ownership Project Delivery/Decision-Making Performance Specifications Environmental, Geotechnical, Other Site Conditions Utilities and Utility Adjustments Hazardous Materials Electricity Rates Permitting Force Majeure Change in Federal, State, & Local Laws Financing Design Construction Delivery Cost Overruns Site Safety Scheduling/Delays Traffic Management Commissioning Operations & Maintenance

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SPONSOR

SHARED

DEVELOPER

Mac Bell Managing Director, Infrastructure Investments O: +1(416)795-4468 mac.bell@fengate.com

Jensen Clark Director, Head of P3 Business Development O: +1(416)705-3969 jensen.clark@fengate.com

Brandey Rodgers McDonald Project Director, Infrastructure Asset Management O: (301)346-2551 brandey.mcdonald@fengate.com

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OUR TEAM With a dedicated Infrastructure team of more than 50 professionals, Fengate

Our experienced in-house asset and financial management capabilities enhance

employs a disciplined investment approach to deliver value to our investors by

value through active management to deliver results consistent with objectives.

playing a lead role in the bidding and development phases of infrastructure projects as well as the ongoing day-to-day management of each asset.

The combined commercial and technical strengths of our team are developing, building and operating today’s and tomorrow’s infrastructure projects.

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Toronto:

Oakville:

Texas:

77 King Street West, Suite 3410

2275 Upper Middle Road E, Suite 700

708 Main Street, Suite 08-103

Toronto, Ontario, M5K 1H1

Oakville, ON, L6H 0C3

Houston, TX, 77002

Canada

Canada

United States

+1 416 488 4184

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