Gary Video Notes

Speaker is a managing partner at Capital Management.
Experience includes prior roles at FB Capital Partners and Lincoln Property Company.
Graduated from Penn State in 1980 with an accounting degree.
Will discuss the Frazier Center project located in downtown State College, Pennsylvania.

Nearly 28 years in the real estate business.
Has earned a CPA and possesses extensive experience in real estate development and investment.
The company is a boutique firm that raises private equity to invest in commercial real estate, particularly in office leases and hotel franchise agreements.
Experienced both economic highs and lows; has insights into how economic cycles affect real estate.

The presentation will cover:
- The design and architectural features of the project.
- Financial strategies employed in its development.
- Community impact and objectives of the project.
Building Design:
- Constructed with three different exterior materials: Ephes (stucco-like), brick, and metal panels.
- Designed to be visually interesting, contrasting with most existing downtown buildings that predominantly utilize Ephes.
Project Components:
- A 165-room Hyatt Place Hotel with a restaurant and 5,000 square feet of meeting space.
- 26 high-end residential condominiums for sale (not student housing).

Identified a need for large-format retail space in downtown State College, where the largest current space is about 6,000 square feet (McClanahan's grocery).
Attracted Target and H&M to occupy two large-format retail spaces designed for high visibility and accessibility.

Noting the last hotel built in the area was the Atherton in 1987.
Recognized the lack of modern hotel facilities; assessed demand positively, especially for academic-related events.
The hotel has already begun accepting reservations even before opening.

The last condominium development occurred over 30 years ago (Towers on South Allen Street).
The area saw a need for upscale condominiums to accommodate affluent buyers, evident in quick sales of most units.

Determining Use Mix:
- The hotel market has been stagnant in downtown since 1987; thus, new hotel space was needed.
- A mixed-use development was considered optimal based on local market demands.

The development was built within a signature zoning district, allowing for more flexibility in planning (higher density without student housing).
Faced challenges in obtaining curb cuts for access on Beaver Avenue, requiring negotiations with the borough and state government.
Received additional Floor Area Ratio (FAR), allowing for denser development, significantly reducing parking space requirements.

Showcased schematics highlighting the extensive planning; the building now features impressive views due to its height (currently the tallest in State College).
Discussed design aspects accommodating noise reduction for residential units above commercial spaces.
Images and visuals from the construction phase were shared to illustrate different architectural elements.

Total project cost estimated at $55 million, broken down as:
- $10 million cash equity from owners.
- $4 million R-CAP grant (state funding, non-repayable).
- $15.5 million EB-5 financing from foreign investors seeking U.S. residency.
- $23.5 million construction loan.

The EB-5 program enables foreign nationals to invest in U.S. projects in exchange for a green card.
The $15.5 million was raised from 31 investors at $500,000 each.
Benefits include non-recourse nature of the financing, which sheltered personal assets, and its subordinate status benefiting senior lenders.

The project aims to revitalize downtown State College, presenting an opportunity against the competitive landscape.
The community displayed support for the project due to its vision of enhancing local infrastructure, retail options, and tourism.
Emphasized the project's role in meeting the demands of modern-day college town living, shopping, and hospitality.

The high visibility and central location drive positive forecasts for occupancy rates and sales.
Expected to be profitable given the consistent demand and relatively low market supply.
The overall sentiment remains optimistic about transformation within downtown State College, predicting more mixed-use projects in subsequent years as the town evolves.

Acknowledged the intricacies associated with zoning laws and community interactions in development.
Lessons learned from navigating political implications and engaging with regulatory bodies throughout the project lifecycle.
Expressed a commitment to maintaining strong community relations by employing local contractors, suppliers, and supporting local businesses.