6e
COMMISSION AGENDA MEMORANDUM Item No. 6e ACTION ITEM Date of Meeting October 24, 2017 DATE: October 13, 2017 TO: Dave Soike, Interim Executive Director FROM: Ralph Graves, Senior Director, Capital Development Jeffrey Brown, Director Aviation Facilities and Capital Programs SUBJECT: Capital Development Department (CDD), and Central Procurement Office (CPO) Major Works Department move to the SeaTac Office Center (CIP #C800982) Total Authorization Request: $9,057,000 Estimated Project Cost: $2,145,000 Estimated Lease Cost: $6,829,000 Estimated Expense Cost: $83,000 ACTION REQUESTED Request Commission authorization for the Executive Director to (1) execute a lease amendment for office space for the Capital Development Department (CDD) and Central Procurement Office (CPO) Major Works Department to move into the SeaTac Office Center (STOC) for $6,829,000 and (2) Execute contracts to purchase office furniture, and design and install communications infrastructure to support business needs for $2,228,000 (CIP #C800982). EXECUTIVE SUMMARY This project will lease additional office space in the STOC where the International Arrivals Facility (IAF) project team currently holds a lease. This additional office space is needed to accommodate growth in both the Aviation Division and CDD because there is no additional capacity in the Airport Office Building (AOB) to accommodate anticipated staff growth. Beyond the need to accommodate growth, the additional leased space allows CDD and related departments to reorganize staff areas by project team versus traditional departmental lines. This reorganization of staff will facilitate greater efficiency in project delivery and communication for the capital program that continues to expand at Sea-Tac. The action requested includes costs for communications design and construction, office furniture, and relocation of staff to support business needs. Template revised September 22, 2016. COMMISSION AGENDA Action Item No. _6e___ Page 2 of 5 Meeting Date: October 24, 2017 JUSTIFICATION The AOB is at capacity with the existing furniture and footprint and cannot accommodate projected staffing growth. In early 2017 an office space study was conducted for the Aviation Division to determine how to accommodate 5-year projected staffing growth in the AOB. Based on the study, the best option to meet the needs of the Aviation Division's projected growth is to move a large group of people out of the building and into a leased space. Moving CDD and CPO would provide the opportunity to co-locate project teams. Project teams will occupy space in STOC as well as the off-site offices currently being used by these work groups including the West Side Office, Water Tower Office, and Logistics Office. Grouping project teams allows them to work more collaboratively and efficiently. SCOPE OF AGREEMENT Landlord: STOC LLC Tenant: Port of Seattle Term/Effective Date: A term of seventy two (72) months to commence on May 1, 2018, or upon completion of tenant improvements and receipt of a Certificate of Occupancy. Use: General Office and Project Management Administration Area: Expansion premises is 24,424 rentable square feet (RSF) of the fourth floor of Building III at the SeaTac Office Center (17900 International Blvd. S, Seattle, WA, 98188). The original lease for the IAF Project is 22,302 RSF and the total combined premises are now 46,726 RSF. Rental: Rental rate scheduled is based on a triple net lease. Months 01 - 12 @ $16.12/RSF/yr. = $32,809.57/month Months 13 - 24 @ $16.62/RSF/yr. = $64,715.51/month Months 25 - 36 @ $17.12/RSF/yr. = $66,662.43/month Months 37 - 48 @ $17.62/RSF/yr. = $68,609.34/month Months 49 - 60 @ $18.12/RSF/yr. = $70,556.26/month Months 61 - 72 @ $18.62/RSF/yr. = $72,503.18/month Tenant Improvements: Landlord shall provide a tenant improvement allowance up to $1,111,854. Operating Expenses & Real Estate Tax Costs: Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. _6e___ Page 3 of 5 Meeting Date: October 24, 2017 Landlord currently estimates operating expenses at $9.04 per RSF for a total annual cost of $220,725. With an estimated increase of 2% per year, the total for six years of operating expenses is $2,410,802. The total estimated lease value includes operating expenses. Security Deposit: Not required. Parking: Two hundred thirty four stalls are included in the lease rate, five stalls provided per 1,000 RSF leased. Scope of Work Capital (1) Design and install communications infrastructure in the STOC (2) Purchase and install furniture in STOC Expense (1) Use Port Engineering Design staff to design minor modifications to the West Side Office and Logistics Office, including communications infrastructure (2) Purchase new and use existing furniture to make modifications to the West Side Office and the Logistics Office (3) Use Port Construction Services and Maintenance to construct modifications and reconfigure office furniture in the West Side and Logistics Offices (4) Physical Relocation Schedule Commission authorization 2017 Fourth Quarter Design start 2017 Fourth Quarter Construction start 2018 First Quarter In-use date 2018 Second Quarter Cost Breakdown This Request Total Project Lease Amendment $6,829,000 $6,829,000 Capital Design $272,000 $272,000 Furniture and Communications $1,873,000 $1,873,000 Infrastructure Capital Total $2,145,000 $2,145,000 Expense Design $17,000 $17,000 Furniture ,Communications and modifications to West Side Office and Logistics Offices $39,000 $39,000 Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. _6e___ Page 4 of 5 Meeting Date: October 24, 2017 Relocation fees $27,000 $27,000 Expense Total $83,000 $83,000 Total $9,057,000 $9,057,000 ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Densify AOB Cost Implications: $12,021,000 Pros: (1) All current departments within the AOB stay in the AOB (2) Provides room for 2-3 years of growth Cons: (1) Each floor would need to be vacated for 1-2 months during construction (2) Facilities & Infrastructure Library is eliminated and the contents are redistributed into open areas and consolidated (3) New cubicle and conference room furniture will be required (4) All costs would occur in one year (5) Based on information received from the Aviation staffing study conducted subsequent to the AOB office space study, this option is not viable to accommodate 5-year growth. This is not the recommended alternative. Alternative 2 Relocate Capital Development Departments located at the AOB and the Central Procurement Office Major Works Department located at the Logistics Office to the STOC and other airport area locations outside the AOB Cost Implications: $2,228,000 Capital and Expense, $6,829,000 Lease Pros: (1) Provides the opportunity to collocate project teams at STOC, Water Tower, Westside and Logistics office locations (2) CPO Major Construction Department will be collocated with their major customer, CDD (3) Can be implemented in 2018 and should meet the need for space in the AOB (4) Provides more reasonable phasing for relocations within the AOB (5) Costs spread over 6 years Cons: (1) Added travel time to and from Airport and between office locations (2) CDD staff will be spread throughout more locations than at present This is the recommended alternative. Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. _6e___ Page 5 of 5 Meeting Date: October 24, 2017 FINANCIAL IMPLICATIONS (non-lease) Cost Estimate/Authorization Capital Expense Total Summary COST ESTIMATE Original estimate $2,145,000 $83,000 $2,228,000 AUTHORIZATION Previous authorizations $0 $0 $0 Current request for authorization $2,145,000 $83000 $2,228,000 Total authorizations, including this $2,145,000 $83,000 $2,228,000 request Remaining amount to be $0 $0 $0 authorized Annual Budget Status and Source of Funds for Capital The capital amount of $2,228,000 for this project, CIP #C800982, was not included in the 2017- 2021 capital budget and plan of finance. This amount will be transferred from the Aeronautical Allowance CIP (#C800753) resulting in no net change to the Aviation capital budget. The expense portion of this project - lease costs and relocation fees, will be included in the operating budget for 2018 and beyond. The annual costs of rent and operating expense will be allocated to capital projects through projects overhead allocations. The funding source for the capital costs will be the Airport Development Fund. Financial Analysis and Summary for Capital Project cost for analysis $2,228,000 Business Unit (BU) Division-wide Effect on business performance NOI after depreciation will decrease (NOI after depreciation) IRR/NPV (if relevant) N/A CPE Impact $0.03 in 2018 ATTACHMENTS TO THIS REQUEST (1) Draft lease amendment PREVIOUS COMMISSION ACTIONS OR BRIEFINGS None Template revised September 22, 2016; format updates October 19, 2016.
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