The University of California, Merced, this week announced a $1.1-billion expansion program, confusing once again its edifice complex with an educational complex.
UC Merced appears to thrive despite its disreputable beginnings squatting on a three-legged stool. One leg was a land deal; another an outsized political boondoggle (a very thick leg indeed); and the third leg was composed of a pile of resource-agency officials that corrupted state and federal environmental law and regulation.
Now, the "San Joaquin Valley's only UC campus " (venerable since 2005), has chosen a global investment banking firm to fund and manage its build out: Plenary Group of Melbourne, Australia, locally dba "Plenary Properties Merced." It came all the way from Melbourne, capital of the Australian state of Victoria.
No much can be said with certainty at this point. But a responsible journalist must raise the issue of the Trans Pacific Partnership, which President Obama has said he plans to have completed and signed soon. In the event that the TPP and the UC Merced build out contract are signed about the same time, we must ask what kind of environmental protections we will lose in the new situation, called "investor-state dispute settlement." Under TPP rules, investors who find local, state or federal environmental laws an obstacle to their projects can sue the governmental jurisdiction before a panel of three private lawyers. (See the Public Citizen article at the bottom of this post). It is hard to imagine a more powerful deterrent to enforcement of environmental laws. And in the case of UC Merced, local, state and federal land-use and resource agencies have already rolled over like trained Chihuahuas on grandmother's rug.
The Plenary Group bills itself as a global developer of Public Private Partnerships. Like some earlier "win-win" local examples, a more accurate description would be a Predator Parasite Cartel.
UC Merced Office of Communications
Campus Announces Major Expansion
UC Merced selects developer for project that will nearly double size of campus
The University of California, Merced, today named Plenary Properties Merced (PPM) the winning bidder for its next major phase of campus development – an unprecedented four-year project that will nearly double the physical capacity of the campus by 2020, allowing it to grow to 10,000 students shortly thereafter.
“We are impressed by the creativity, efficiency and aesthetic qualities evident throughout the winning proposal,” UC Merced Chancellor Dorothy Leland said. “Plenary Properties Merced has produced a compact, environmentally sensitive design that blends beautifully with our existing campus, facilitates our multi-disciplinary teaching and research methods, and provides flexibility for future changes in building usage. Most important, it’s a cost-effective way of building out our campus.”
Leland said the UC Board of Regents will be asked in July to review and approve the project’s conceptual design and to approve the required external financing, clearing the way for completion and execution of the formal contract in August. The regents previously approved the $1.14 billion budget, commercial terms and all major elements of the delivery model last November.
The new facilities will be built within a 219-acre site that currently supports the existing campus and its 6,700 students. Groundbreaking could begin as early as September. The first phase of buildings is scheduled for delivery in 2018, with the remainder completed in 2020.
PPM is a consortium of design, engineering, construction, maintenance, operations and financial partners, anchored by lead developer, equity provider and financial arranger Plenary Group, an international infrastructure developer and investor in public-private partnership projects across North America. PPM’s lead contractor is Webcor Builders, a San Francisco-based firm whose previous projects include California Memorial Stadium at UC Berkeley, Zuckerberg San Francisco General Hospital and the California Academy of Sciences. Johnson Controls is providing the operations, maintenance and renewal services to the project throughout the 39-year contract term. The team’s selection is the culmination of a rigorous process of identifying, pre-qualifying and thoroughly vetting developers capable of taking on a project of this size.
The project will be the first in the UC system to use a single private development team for a multi-year, multi-building project of this scope. PPM will not only design and build all of the new facilities as a single, fast-track project but will also ensure major building systems operate effectively over the 39-year term of the contract. In addition, the developer will be responsible for raising all required private financing as part of the public-private partnership.
“UC Merced, the youngest campus in our system, is poised to become a model for our other campuses as we look for the most efficient ways to construct, operate and maintain facilities that enable us to pursue our teaching, research and public service missions,” UC President Janet Napolitano said. “As the first public research university to be created in the 21st century, UC Merced is prepared to build on its remarkable academic achievements as the campus itself is built out to accommodate future growth.”
In keeping with UC Merced’s strong emphasis on interdisciplinary learning and research, PPM’s design themes make creative use of environments and buildings that are designed for multiple purposes, generating dynamic, interdisciplinary interaction among students, faculty and staff. To accommodate changing needs over time, the design and construction approaches are flexible and highly adaptable, helping the campus achieve long-term life-cycle and sustainability goals.
The project is expected to create more than 10,000 construction jobs in the San Joaquin Valley (more than 12,000 statewide) during the four-year construction period. The one-time economic benefit to the region will be an estimated $1.9 billion ($2.4 billion statewide).
The campus expects to add faculty and student support services by 2020 to accommodate enrollment growth.
Leland said the university’s expansion will significantly strengthen its capacity to achieve its critical mission as the first UC campus in the San Joaquin Valley – increasing college-going rates within the region’s highly diverse, largely underserved population while serving as a powerful engine of economic development. The campus has already pumped more than $1.3 billion into the regional economy ($2.5 billion statewide) since start-up operations began in 1999.
The new buildings will fully support UC Merced’s environmental sustainability objectives, including its “Triple Net Zero” goal (zero net energy usage, zero landfill waste and zero net greenhouse gas emissions by 2020). The campus has been recognized by the U.S. Green Building Council as one of the greenest in the nation.
”The UC Merced 2020 Project will put UC Merced at the forefront of higher-education design and delivery in the U.S.,” Dale Bonner, executive chairman of Plenary Concessions, said. “Plenary is delighted to be a part of this partnership.”
Financing for the project will include up to $600 million in regents-issued revenue bonds, pending approval by the Board of Regents in July, with the rest coming from the developer and UC Merced’s own funds.
“The 2020 Project effectively leverages private capital in conjunction with UC funds to both cover project costs and allow UC to make efficient use of our own financial resources,” said UC Chief Financial Officer Nathan Brostrom.
The delivery approach provides a long-term incentive for building performance and preventative maintenance, a unique aspect of the public-private partnership, and ensures annual costs are within the limits established last year by the regents.
About UC Merced
UC Merced opened September 5, 2005, as the newest campus in the University of California system and the first American research university of the 21st century. Situated near Yosemite National Park, the campus significantly expands access to the UC system for students throughout the state, with a special mission to increase college-going rates among students in the San Joaquin Valley. It also serves as a major base of advanced research, a model of sustainable design and construction, and a stimulus to economic growth and diversification throughout the region.
About Plenary Properties Merced
PPM brings a wealth of experience with proven, effective approaches to leadership, communication, project oversight, operation and management, and life-cycle management and complex issue resolution on social P3 projects in North America. The PPM team includes the following organizations: Plenary Group, lead developer, equity provider and financial arranger; Webcor Construction LP, lead contractor; Skidmore Owings & Merrill Inc., lead campus planner; and Johnson Controls Inc., lead operations and management firm.
Sidney Morning Herald (Aus)
Taxpayers left in dark over public private partnerships
A maze of companies obscures the money trail in Plenary's PPP deals, writes Michael West.
They are the hotshots of structured finance, the corporate overlords of our public hospitals and high-security government buildings, army bases, courthouses and convention centres.
They preside over $10 billion in public assets. They have stormed the world of government privatisations, yet few have heard of John O'Rourke, Ray Wilson and Paul Oppenheim.
The three investment bankers parted way with the Dutch giant ABN Amro in 2004 and set up Plenary Group to invest in, develop and operate privatised assets in partnership with governments.
Just eight years down the track, Plenary has won no fewer than 20 public private partnership (PPP) deals in Australia and Canada.
Their prolific deal-making even thrust O'Rourke and his team into Dealogic's global top 10 last year for project finance transactions - in the elite company of Exxon and the Russian oil giant Gazprom.
Having whipped the venerable Lend Lease in the beauty parade for the Melbourne Convention Centre mandate in 2009, a $1.4 billion deal, Plenary now finds itself head to head with Lend Lease again in a bidding duel for the new Sydney Convention Centre.
Unlike many of its rivals in the infrastructure space though, Plenary is not listed on a stock exchange where its financial statements are there for all to see, and where it can access public equity.
Although a few entities within its burgeoning corporate empire do disclose, Plenary's ultimate financial position is unknown. A byzantine maze of companies winds to a cul-de-sac: a private trust controlled by the three Plenary principals and associated entities.
Zero transparency. As one privatisation source told Weekend Business, the use of trusts at the top of corporate structures is a ''massive loophole which promotes a totally opaque disclosure regime and leaves the public [and government] in the dark as to the true financial position of hundreds of high-profile corporate groups. As a result, there is no public disclosure whatsoever of trusts holding billions of dollars of sensitive government PPP assets.''
Plenary itself can hardly be expected to disclose any more than it has. Its chief, O'Rourke, was helpful in providing detailed responses to questions, at least within the remit of his firm's legal and regulatory obligations.
''We defer to the government,'' O'Rourke said this week. ''Each project has its own disclosure regime. [Our reporting] includes full transparency in the way the project is financed.''
The Department of Treasury and Finance and Partnerships Victoria - which look after PPPs - were not so forthcoming. Both were unable to confirm this week if they even had access to the ultimate accounts of Plenary. Some responses to questions, said a spokeswoman, might ''take a few days''.
Transparency however is a serious responsibility of government, particularly in light of such large financial transactions involving public assets.
Like other PPPs, Plenary's structures are highly leveraged.
The 2011 financial accounts for the Melbourne Convention Centre, owned by Plenary Conventions Pty Ltd, were lodged late last week. They showed such aggressive debt levels that the company was technically insolvent. Its liabilities, that is, exceeded its assets.
This doesn't mean the Plenary parent company is in financial trouble. As O'Rourke says, infrastructure assets are often highly geared. The convention centre PPP was performing beyond expectations, he said.
Also typical of infrastructure projects, each of Plenary's projects is housed in its own structure. The debt is project financed, non-recourse, so if one went belly-up it would have no effect on the others.
And so far, Plenary's record is spotless, well almost. Although some projects have performed better than others, the only failure has been that of the South Wharf Retail project associated with the Melbourne Convention Centre following the collapse of the troubled Austexx DFO Group - one of Plenary's partners.
Yet this has led to a peculiar situation where the Tax Office is trying to wind up a company which is 100 per cent-owned by Plenary Group on the ''grounds of insolvency'' because Plenary is refusing to pay $2.35 million in overdue BAS payments.
The Tax Office action, again deferred by the Federal Court last week, is against Plenary Conventions Tower Pty Ltd and relates to a tax debt of the convention centre hotel and retail business of Plenary Group after the Austexx collapse. It followed the placement of two Plenary Group 25 per cent-owned associates, South Wharf Retail Pty Ltd and South Wharf Tower Pty Ltd, into external administration in November 2011.
''The matter is before the courts and I can't really comment,'' O'Rourke said. Although he did explain that the group had left cash in the vehicle for the tax to be paid but the ''lenders have locked up the funds''.
Given the government had tipped in $370 million for the development of the convention centre, was it suitable to allow Plenary's related companies to be wound up for not paying tax?
That is now a matter for the courts. ''All of our projects are run by non-recourse stand-alone businesses established to operate and maintain the PPP assets,'' a Plenary spokesman, Kelvyn Lavelle, said this week. ''These lodge their financial statements with ASIC and are fully compliant.''
There is no doubt that the failure of Austexx has put some pressure on Plenary, though. O'Rourke said the South Wharf Retail deal had been refinanced by Plenary and its joint venture partner Colonial First State.
''We joined with CFS to buy out Austexx's interest,'' he said. ''Our ownership interest is in a new vehicle which again has project finance specifically secured against the South Wharf asset.''
O'Rourke declined to be drawn into specifics about the increased debt exposure taken on by Plenary Group except to say that it was north of $100 million. A recent press report, unconfirmed, put the figure at $160 million.
Whatever the exposure, it is only relevant to the group's asset base and capacity to repay. Yet thanks to the poor disclosure regime there is no public information about this.
Given the tax dispute and the fact that the convention centre company is operating under a high-risk capital structure after receiving $370 million of government funding, there is even more reason for full transparency by government of its PPP partner's accounts. The City of Melbourne might also explain the fate of its $43 million investment in the South Wharf Retail concept.
From the information which is now available, the company at the top of the corporate tree (Plenary Group Pty Ltd) does not reveal its financial position.
A spokeswoman for the Australian Securities & Investments Commission confirmed yesterday that as Plenary Group was the holder of an Australian Financial Services Licence its financial statements did not have to be disclosed, despite its status as a ''large proprietary company''.
Strangely, three of its subsidiary companies lodge their audited accounts with ASIC annually. Plenary Group Pty Ltd certainly seems to qualify as a ''large proprietary company'' but it has never lodged, at least visibly. ASIC said that its 2010 accounts had been filed but were not available to the public.
In any case, as O'Rourke said, the real ''game is in the trust''. Plenary Group was merely the corporate trustee. The group's assets in Canada, he said, were structured along similar lines. Deutsche Bank, which supplies the debt for Plenary Conventions, also has equity.
The important point is how much of the $400 million of debt, which had been arranged by its senior partner in the convention centre project (Austexx), Plenary has guaranteed.
Plenary Group is one of the largest (if not now the largest) participants in the Australian and Canadian PPP markets. Its financial position is of vital interest to Australian and Canadian governments.
Plenary Group Unit Trust effectively owns all its assets and distributes its income to the four individual majority owners and two corporate minority owners.
Some of the largest government PPP assets in Australia and Canada therefore are majority-owned and controlled by four individuals - the founding members of the Plenary Group, Messrs O'Rourke, Oppenheim, Wilson and Ms Cox, who is the widow of the deceased founder Jim Cox.
According to ASIC searches, Plenary Conventions Holdings Pty Ltd (the former 50.1 per cent owner of Plenary Conventions), has recently sold down 39.9 per cent of its shares to the Canadian fund manager CDPQ. This means that the convention centre is now 30.1 per cent owned by Plenary Conventions and 20 per cent owned by CDPQ with the other 49.9 per cent owned by a New Zealand-based institutional investor.
O'Rourke says the equity sales to market professionals are not part of a prudent sell-down to address risk but rather reflect the success of Plenary Group. They are a vote of confidence in the company which owns the convention centre.
Despite their spectacular success, there are now signs of timidity or consolidation. O'Rourke says Plenary will deploy the cash from recent asset sales to expand the group's interests elsewhere.
U.S., China talks ratchet up a BIT
Adam Behsudi, Doug Palmer, Victoria Guida and Jenny Hopkinson
...BRIGHTENING SKIES FOR TPP? U.S. business leaders emerged from meetings with Lew, Trade Representative Michael Froman and other top administration officials on Thursday with a new determination to push for a vote this year on the Trans-Pacific Partnership, a top lobbyist told Morning Trade.
“We had a great meeting,” said Bill Miller, a senior vice president for the Business Roundtable. “We’re more committed than ever to pressing for a TPP vote and passage this year.”
The CEO group includes financial services firms such as Bank of America, Citigroup and JPMorgan Chase, which have been unhappy they were excluded from a breakthrough provision of the TPP that would ban governments from requiring companies to store data within their borders. Such “data localization” requirements are a new-generation trade barrier that businesses say reduces efficiency and increases costs.
Two weeks ago, the administration rolled out a proposal for addressing the issue in future trade agreements. BRT’s quarterly CEO meeting on Thursday provided an opportunity for Cabinet officials to brief the corporate chiefs and answer any questions they have. BRT is “very pleased with how far the administration has worked to address this important issue,” Miller said.
Commerce Secretary Penny Pritzker, White House National Economic Council Director Jeff Zients and senior adviser Valerie Jarrett also met with the business leaders on Thursday. In another sign of possible momentum for the Asia-Pacific trade deal, BRT joined the U.S. Chamber of Commerce and the National Association of Manufacturers in a letter urging President Barack Obama and congressional leaders to resolve other remaining issues and push toward a vote on TPP this year...
Obama Confident Trans-Pacific Partnership Will Pass After Political Primaries
President Obama expressed confidence that his Trans-Pacific Partnership deal will pass Congress after members survive their contentious primaries and the presidential nominees of both parties are sorted out.
“I think after the primary season is over the politics settle down a little bit in Congress, and we’ll be in a position to start moving forward,” Obama explained during a press conference with Angela Merkel in Germany today.
Obama reminded reporters that a majority of Congress already passed the authorities for his administration to negotiate the complex deal with 11 countries, and it was only a matter of political nervousness.
The House of Representatives passed trade promotion authority in June 2015 with a narrow vote of 218-208. In the Senate, 13 Democrats joined Republicans to help pass the legislation with a filibuster proof majority of 60-37.
The deal has led several political candidates to flip their support of the deal to oppose it for political reasons.
Former Secretary of State Hillary Clinton, who helped lay the groundwork for Obama’s trade deal in his administration, unexpectedly turned against it as a presidential candidate of the Democratic party.
Sen. Ted Cruz voted against giving President Obama authority to negotiate the deal, after voicing support for the legislation.
In his press conference with Merkel, Obama acknowledged that people around the world were “unsettled” by the globalization of the economy and suspicious of trade deals.
“Although trade has brought enormous benefits to many of our countries that have been engaged in trade, although, typically, jobs that are produced from exports have higher wages and better benefits than those that are not involved with the export market, people visibly see a plant moving and jobs lost, and the narrative develops that this is weakening, rather than strengthening, the position of ordinary people and ordinary workers, and it’s forcing them to compete with low-wage labor,” he said.
Obama argued that it was important for the United States to open markets to the rest of the world so that America’s businesses could be more competitive.
“95 percent of the world’s markets are outside of our borders, and if we’re not there, present, we’re going to have problems,” he said.
Investor-State Attacks: Empowering Foreign Corporations to Bypass our Courts, Challenge Basic Protections
Among the most dangerous but least known parts of today's "trade" agreements are extraordinary new rights and privileges granted to foreign corporations and investors that formally prioritize corporate rights over the right of governments to regulate and the sovereign right of nations to govern their own affairs. These terms empower individual foreign corporations to skirt domestic courts and directly challenge any policy or action of a sovereign government before World Bank and UN tribunals.
Comprised of three private attorneys, the extrajudicial tribunals are authorized to order unlimited sums of taxpayer compensation for health, environmental, financial and other public interest policies seen as frustrating the corporations' expectations. The amount is based on the "expected future profits" the tribunal surmises that the corporation would have earned in the absence of the public policy it is attacking. There is no outside appeal. Many of these attorneys rotate between acting as tribunal "judges" and as the lawyers launching cases against the government on behalf of the corporations. Under this system, foreign corporations are provided greater rights than domestic firms.
This extreme "investor-state" system already has been included in a series of U.S. "trade" deals, forcing taxpayers to hand more than $440 million to corporations for toxics bans, land-use rules, regulatory permits, water and timber policies and more. Under a similar pact, a tribunal recently ordered payment of more than $2 billion to a multinational oil firm. Just under U.S. deals, more than $34 billion remains pending in corporate claims against medicine patent policies, pollution cleanup requirements, climate and energy laws, and other public interest policies. Continue reading...
· Lori Wallach in the Kluwer Arbitration Blog: Brewing Storm over Investor-State Dispute Resolution Clouds Trans-Pacific Partnership (TPP) Talks Part 1 | Part 2 — Japanese translation available here(January 2013)
· Chart: See all corporate investor-state cases and claims launched under U.S. 'free trade' deals
· Case Studies: Investor-State Attacks on Public Interest Policies
· Find out more on the blog: Read the latest on investor-state on Eyes on Trade