The Massachusetts Convention Center Authority jumped into the banking business this week, offering an unusual $18 million loan to a private company seeking to build a new Boston Tea Party Museum attached to the Congress Street bridge over Fort Point Channel.
Historic Tours of America, a privately-held Florida company that operates Old Town Trolley Tours in Boston and similar operations in five other cities, has invested nearly $4 million trying to rebuild the museum, which was destroyed after being hit by lightning in 2001.
Under terms of the deal announced on Sunday, Historic Tours won’t have to invest any more money and will complete the project with the $18 million loan from the convention authority and a $3 million grant from the Boston Redevelopment Authority.
The loan was the first ever made by the convention authority. Officials say they obtained a legal opinion on whether the loan was permissible under the authority’s enabling statute.
According to the loan’s term sheet, the loan carries a low interest rate of 4.5 percent for a 23-year period. The loan is secured largely by the project itself as well as a guaranty from a Historic Tours subsidiary that has not been negotiated yet.
If Historic Tours had used conventional bank financing for the project, financial analysts say its interest rate would have been higher, the term of the loan would have been two to five years, and it likely would have had to pledge additional collateral.
Johanna Storella, chief financial officer at the authority, said the interest rate was comparable to 20-year bond yields. She also said it was significantly more than what the authority is currently receiving on its investments, which she said was less than 1 percent.
The convention authority said in its press release announcing the deal that it will earn back more than $51 million from its $18 million investment, but that figure relies on $14 million in estimated investment returns.
The deal calls for Historic Tours to make a total of $28.9 million in payments over the life of the loan, pay the authority 5 percent of its museum ticket proceeds each year, and provide an estimated $150,000 in annual marketing and facility-usage benefits. That would total approximately $37 million over the 23-year life of the loan.
Convention authority officials said the additional $14 million needed to bring the return on the deal up to $51 million was calculated by figuring expected investment returns on the interest payments and ticketing and marketing fees paid to the authority by Historic Tours over the course of the loan.
Storella said the deal is based on conservative projections about museum business. She said the parties assumed the museum will attract 300,000 visitors each year, with adults paying $18 and children $9. She said the museum is forecasting annual operating revenue of $6.8 million and a return on investment of $1.5 to $2 million a year.
The museum is expected to feature full-scale replicas of two of the original Tea Party ships from 1773, as well as a gift shop, a museum, a restaurant, and other facilities.
Shawn Ford, vice president of Historic Tours, said he couldn’t recall who approached whom about the convention center loan. He referred all questions about the deal’s financing to the convention center authority.
The $3 million coming from the BRA originated with Boston Properties, the developer of the Atlantic Wharf office and apartment project near the Congress Street bridge. The firm paid the $3 million to the BRA as part of a mitigation package for its project, but it will recoup some of that money because it is being hired as project manager for the Tea Party Museum project.
According to budget documents for the museum project, Boston Properties will be paid a management fee of $500,000 and a performance fee of $250,000 for its work.