More P3 for new VA Facilities: Lease-Lease-Back for 30 years + Design Build

The San Francisco Business Times reports that the VA Medical Center San Francisco is looking for a public private partnership to fund a new $500 million hospital and research facility in Mission Bay.  That's next to McCovey Cove where the Giants hit their home runs for those of you not from around these parts. 

J.K. Dineen:

Given the tight fiscal constraints, and the slim chances that Congress would allocate money for a state-of-the-art medical center in San Francisco, U.S. Senator Dianne Feinstein (D-Calif.) asked San Francisco VA officials to come up with a public-private alternative, according to Bob Obana, executive director and CEO of the Northern California Institute for Research and Education, a nonprofit institute set up to support the local facility’s research.

“We went to Senator Feinstein and the senator said, 'If you guys bring back to me a public-private partnership alternative, something that would figure out a way to bring to the VA a different mechanism for financing medical centers, I would be more than happy to support that and bring it to the secretary,'” Obana said. ....

 The public-private partnership — known as a P3 — could look similar to one that financed another Mission Bay building, UCSF’s $200 million, 237,000-square-foot neuroscience center. In that case a nonprofit group put together by UCSF is leasing the property from the UC system and financed construction through state bonds. The group then subleased the site to a partnership between McCarthy Cook & Co. and Edgemoor Real Estate Services, which in turn is leasing the building to UCSF over 30 years.

The report also explores the partnership that is financing the $1.1 billion Doyle Drive project. The $488 million second phase of that undertaking is paid for up front by a group of European investors in charge of designing, building and maintaining the parkway. It will be paid back over 30 years.

In addition to the San Francisco examples, Randolph’s team looked at P3s formed to finance a court house in Long Beach, a building at the University of Buffalo and public buildings in England, Canada and Australia.

“What we are finding is that the project is viable as a P3,” said Randolph. “It would be attractive to private investors. There is good precedent for this kind of facility.”

In other words, lease-lease-back for 30 years, private financing, and no competitive bidding.