Frequently Asked Questions - Financing and Feasibility

COST

How is the process of closing the project cost gap going?

Pretty well!  Since the proposal was submitted, we have been analyzing the relationship between development size (starting with number of acres and linear feet of road) and properties (lot size and price points).  We condensed the total development area from 19 acres to 10 acres and found there is a point where property values suffer.  We then expanded the development area until we could break even.

If we are selected, we will work with prospective residents and members of the public to determine the best quality space (both private and community space) to land on the very best value for all this investment. 

How would a Community Housing Infrastructure Program (CHIP) bond work for this project?

This is an awesome program to help Vermont build housing.  For more information, visit https://accd.vermont.gov/economic-development/vepc/chip 

When a new development generates new tax revenue for a municipality and for the state, part of that new revenue can used to pay for the project’s infrastructure. A bond is created to pay for the infrastructure up front – guaranteed either by the municipality or by the developer – and the diverted (or “retained”) tax revenue pays down the bond over time (typically 20 years).  

Say the Country Club project generates $70,000,000 new tax revenue per year when it’s fully occupied. That would roughly leverage a $16,000,000 bond. Assuming the cost of infrastructure (including design and other related costs) is less than $16,000,000, then Montpelier could create this bond and the developer could use the proceeds to pay for infrastructure. That in turn brings down the cost of the new homes to affordable prices.

What happens if construction costs suddenly skyrocket or interest rates rise?

This is a scary question for everyone. Our concept is incredibly flexible, such that a house can be “locked in” (deposit paid, in queue for construction) for as little as 3 months before it’s ready to be occupied. To do this, we plan to build out block by block. As soon as a block is sold, it’s built and occupied. That keeps as little construction in progress as possible.

If the economy slows down, we have several options: we can revise our product list, build and rent units, or adjust sales prices. 

And how do you plan to ensure the project remains financially viable and deliverable given its ambition — particularly if funding or permitting challenges arise mid-project?

Most of this question is answered above, but regarding unforeseen permitting challenges:  our practice is to meet early with permitting groups such as the City and ANR and resolve all issues up front. 

Are your construction cost estimates based on Vermont-specific comparables, or on broader regional or national data?  

They are based on central VT data including recent projects by our suppliers and partners.

Does your financial plan rely at all on tax stabilization? 

One of our partners is Downstreet, and by statute their taxes are reduced. At this time, no other part of our project requires tax stabilization to be feasible, and we have no plans to ask for stabilization.

How will you pay for the community spaces?  How will the community buildings, health center etc. be paid for both up front and over time?

Both indoors and outdoors:  they are listed as project costs that are not offset by revenue.  Lot sales cover these costs.

We have not finalized the ownership model for the community buildings yet. They could be sold, they could be retained by Execusuite and rented, and/or they can become community assets owned by an association. Each building could have a different solution. 

Sounds like there are concerns, eg. geothermal - what of the proposal is pie in the sky vs. viable?

District geothermal is almost certainly feasible. A project in Hinesburg is under construction.  The elements of the proposal that seem least solid to us are the community farm – that will take a concerted effort of many individuals to bring to fruition – and heating the pedestrian lanes. Both are worthwhile goals, and we will give both topics full effort.

Please spell out exactly how your proposal will benefit not only potential homeowners and those needing living spaces, but the rest of the citizens of Montpelier; and how will it alleviate the enormous property tax burden of living in Montpelier?

New housing can be a net burden on a city, especially if it triggers new schools, water-treatment plants, emergency services, etc.  Perhaps this is the question: Which proposal for developing Country Club will burden the rest of Montpelier the least?  We hypothesize that a project that increases Montpelier’s tax base is good, and a project that attracts young families is good for our schools.  There is a shortage of workers in Montpelier, so providing homes for workers should also help our businesses and that part of our tax base. 

TIME

Execusuite doesn’t feel nearly as "shovel-ready" as the other proposals.  

We expect that all four developers will need 5-6 months to get to a final financing plan with schematic sets ready for preliminary permit reviews.  Because our project does not rely on LIHTC financing, we may actually be ready to start earlier than others. 

Do you really think you will have funding in place for the entire project by June 24th if you are selected on April 22? This seems very unrealistic.  In fact, the whole pre-construction and permitting timeline is incredibly optimistic given the complexity of this project.

Agreed, June 24th is unrealistic.  Our finance expert is suggesting 6 months to get to a development agreement which would include a schematic design, preliminary permitting, funding, and a much clearer plan for all the apartments, community, and mixed-use buildings. Once funding is finalized, it will take 4-5 months to complete permitting assuming there are no appeals. We would like to break ground May 2028, but that assumes that the access road will be complete.

Has Downstreet confirmed that they have capacity to manage this project without slowing or impacting their other projects?

YES.  They would apply for LIHTC credits by January 2028 and start construction late 2028 or early 2029.  This works well with their workload and also with LIHTC fund availability.

Development schedule: Execusuite was more aggressive on the timeline, but do they have the capacity to deliver the more aggressive schedule? 

Our current timeline shows construction starting May 2028.  This is not a question of capacity but rather of contingencies: Act 250 permitting, City construction of the access road, CHIP bond, etc.  

The site GC and the pre-fab suppliers we are partnering with are not concerned at all about a four-year build out schedule. We are being more conservative for funding calculations which focus on absorption rates (how quickly homes sell or rent). 

What is your worst-case scenario for a build-out schedule?

Following from the previous question:  We are working with conservative worst-case scenario of 25 purchased homes and 25 rented homes per year, 50 total per year, so 6 years.  We have switched to that scenario for developing our CHIP TIF model. 

What safeguards can you provide the city for completing the project in-spite of your lack of experience and incomplete funding plans?  Who will ultimately be responsible for getting it all done?  

We disagree with your assumption about inexperience, and all teams’ funding plans are currently incomplete. Execusuite will ultimately be responsible for completing the project within agreed-upon timeframes.

TEAM

The proposal is heavily reliant on companies and entities (modular housing manufacturers, Downstreet) who haven't weighed in or been identified as "team" members.  

That is not correct: Downstreet, Huntington Homes, Brushwood, Foam Laminates of Vermont, New Frameworks, Sweet Dreams Microhomes, Timberhomes, and UpEndThis are all on our team since the beginning of the project.  This has been verified for the City.

I am skeptical that this plan would actually come to fruition.  There's a lot of "maybes" and "would like tos" in this proposal, and they admit themselves that the budget doesn't work. I am worried we'd waste a lot of time trying to nail down all the details, and it would eventually fall apart without building anything, or half done, and have to find a new developer to take over.  They don't have experience doing projects like this, and it just feels like a huge risk for a dreamy but unpractical proposal.  There are also a ton of different players who haven't worked together before, and I think wrangling them all could be problematic and could lead to project failure due to disagreements.   

These are valid concerns. We are working on a structure for decisions so that there is overall progress built on a solid foundation within a fixed timeline. Our team works together really well, and we have indeed worked together before, in pairs and threes if not as one assembled team.  Moreover, we are used to working with new partners. Probably the best strategy is to keep things transparent and understood by all, with lots of little deadlines (milestones) to be clear about progress. 

Regarding budget: please see above… we do have a budget that works.

The Execusuite bid felt chaotic, unorganized, and in-experienced...or ungrounded.

We agree our proposal was not as polished as the other three; all three are solid companies, mostly in-house teams, with long experience building their product.  It was pretty crazy cramming a huge amount of conceptual design, feasibility, and related details into six weeks!  While we agree with chaotic and disorganized, we are proud of our team’s experience and the solid foundation this proposal is based on. 

Can you speak to your team's specific experience delivering mixed-use, mixed-income residential neighborhoods at a comparable scale? 

How does Execusuite intend to translate its relative inexperience in developing a project of this size into a success here?

Execusuite's principal and senior leadership have a combined 85 years of experience in all aspects of real estate, locally, nationally and internationally. We own, redevelop, maintain, and manage a variety of real estate, and we have a 42 year history as a successful contractor. Our success has been based on the ability to scale projects and maximize efficiency, contributing to and even creating vibrant, diverse communities for folks to live, work and play. Just now, we are bringing 160,000 square feet of real estate back online in nearby Plainfield. This is in addition to numerous other projects including the redevelopment of old schools, dry cleaning buildings, warehouses, gas stations, railroad freight houses, and farms. Redeveloping existing buildings is significantly more challenging, it requires understanding and managing the complex vagaries and asymmetric risk of older real estate; new construction requires carefully managing a linear process and avoiding overextension. 

Regarding residential neighborhoods specifically, what we (Execusuite) have not done yet is dozens of single family homes and duplexes. There is nothing especially challenging from the construction perspective. We have sales and financing covered with our team, and frankly we like the flexibility of this model.

Speak to why the relationship in Montpelier has already been difficult (sounds like it's already been difficult to deal with this group - if true this should be a red flag)  

It has not been difficult for us; we have enjoyed the process to date and appreciate the care and thoughtfulness of both White + Burke and the City Council’s Sub-Committee.  We may be more hands-on than some of the other teams because we have been actively improving our development model since February. If that has caused any frustration, we apologize.  We invite anyone who finds communication difficult to please let us know so we can improve.

Concerned that Execusuite (and associated companies, Recreo, Ledgeworks) does not have a good track record and reputation - a quick Google search turns up concerning results - bold vision but contentious interactions with city councils, tenants, etc. 

We've been at this for 42 years and our work speaks for itself: we have a reputation for professional management and services, and a track record for reviving historic New England downtowns… which is extremely complex work.  We generally have very positive working relationships with municipal officials and boards, even if we disagree. The few contentious moments we've had with our local governments occurred when our rights were being violated. We are not a large corporation and are personally invested. We do not back down when faced with corruption.

Regarding Valley News articles, I (Mike Davidson) must say I love our local paper. While they do their best, like most media they are increasingly understaffed. This makes it hard to fact-check information. Recently an historic gas station we saved and renovated for a coffee shop in Lebanon made the front page. The tenant's claims were untrue despite our good relationship, with no rent increase in four or five years. Whenever possible, we do not respond in order to maintain courtesy and good relations.

Speak to tenant relations and property management.

We pride ourselves on fostering and maintaining a professional, but friendly, relationship with our tenants. I (Tim, Execusuite’s Chief of Operations) hold multiple real estate licenses, as well as the National Apartment Association's Certified Apartment Manager (CAM) and National Association of Leasing Professionals (NALP) designations. We respect our tenants and their spaces, and seek to provide quick, efficient service when called upon. Many of us live in buildings we own and manage, including Mike and me. Our office door is open and we encourage residents to visit us. We offer 24/7/365 emergency maintenance, and full-service maintenance during business hours. 

Speak to your capacity to handle a project of this size.

Again, not a big deal.  Key elements are (1) having an excellent realtor – we do! – with a solid plan for marketing and interacting with prospective buyers;  (2) having excellent administration for any grants/bonds – we do!  (3) having an excellent and adequately sized GC – we do unless we need to bid that; (4) having excellent building suppliers – we do! (5) having an excellent design team – we do! – that can translate a wide range of public input into a tight design, then get it permitted.  As Mike Davidson says, this is more of a series of $10M projects than one large $130M project.