PUBLIC PRIVATE PARTNERSHIP | REALTORS® | DEVELOPERS | BUILD TO SUIT
The city of West Memphis, AR entered into a development agreement with The P3 Group Inc.. to design , build, finance (2) new fire stations, (1) police substation, and (1) new municipal courthouse. The city of West Memphis had not constructed any new municipal facilities since 1974. The city had just procured a general contractor for a new library under a design, bid, build methodology. The project came in $2,000,000 above budget. Also, in the state of Arkansas municipalities that finance projects backed by the full faith and credit of the city was limited to a maximum five year term on the indebtedness. At the time that The P3 Group was engaged by the city it was considering borrowing $12,000,000 secured by its own cash on hand at a local bank. The note was going to be for a term of 5 years at an interest rate of 3.5%. The city was interested in securing financing with a longer amortization period, lower interest rate, and wanted to design a project that would be constructed in budget.
The city of West Memphis entered into a development agreement with The P3 Group, Inc. to design, build, finance the new municipal facilities via a public private partnership. The P3 Group executed the project using an alternative delivery method consisting of a design-build project delivery system and an integrated project delivery method. The integrated project delivery method allowed The P3 Group’s team of project managers, architects, and engineers to engage in programming sessions with all of the city‘s stakeholders. The programming sessions allowed The P3 Group to work collaboratively with the design-build team and city stakeholders to establish firm program and budget for the projects. The design-build team then worked collaboratively to design the project to the approved budget. Also, since The P3 Group sell its leases in the capital markets as municipal bonds, we were able to create a structure that did not require a pledge of the full faith and credit of the city.
The P3 Group’s design-build team was able to design the facilities to the programming standards set during the various programming sessions. Our general contractor was able to provide a Gross Maximum Price (GMP), guaranteed by a payment and performance bond, that was within the budget established. The P3 Group was able to deliver $12 Million of capital, a GMP, and started construction of the projects within 117 days from the date that the development agreement was executed. The lease purchase agreement is for 20 years at 3.35% interest with zero closing costs paid by the city with a $1 buyout at the end of the lease. This project is a great example of what can be accomplished when the public sector leverages private resources.
This project is a great example of what can be accomplished when the public sector leverages private resources.
Dee Brown, MBA, LEED GA
President & CEO
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