8e. Memo - Main Terminal Space Conversions Ph 2
COMMISSION AGENDA MEMORANDUM Item No. 8e ACTION ITEM Date of Meeting April 13, 2021 DATE: February 22, 2021 TO: Stephen P. Metruck, Executive Director FROM: James Jennings, Director AV Business & Properties Wayne Grotheer, Director Aviation Project Management SUBJECT: Main Terminal Space Conversions Phase 2 (CIP #C801055) Amount of this request: $400,000 Total estimated project cost: $3,500,000 ACTION REQUESTED Request Commission authorization for the Executive Director to (1) construct a single office as the second phase of the Main Terminal Space Conversion project at Seattle-Tacoma International Airport, and (2) utilize Port of Seattle crews and Small Works on-call contracts to perform construction work. The amount requested is $ 400,000 of the total project estimate of $3,500,000. EXECUTIVE SUMMARY Seattle-Tacoma International Airport (SEA) has limited pre-security office space ready and available for new entrant airline tenants. When completed, this multi-phased, Main Terminal Space Conversion project will house up to six new tenants. The first phase completed two spaces in 2019 and 2020, now occupied by Singapore Airlines and Qatar Airlines, respectively. This request is to construct a single office as the second phase, adding to two offices completed in the first phase. A future Commission request would be required to complete additional offices for a third phase of the Main Terminal Space Conversion project. If completed in the future, Phase 3 would add several new offices to the mezzanine second floor, along with required egress and restroom improvements. JUSTIFICATION This project supports critical objectives of the Port's Century Agenda to meet the region's air transportation needs at the airport and encourage the cost-effective expansion of domestic and international passengers and cargo service. This provides SEA with much needed leasable space to meet the needs of our growing airline partners. It also supports the Aviation Division's financial performance by increasing occupancy of leasable space without constructing new facilities. Template revised January 10, 2019. COMMISSION AGENDA Action Item No. _8e_ Page 2 of 4 Meeting Date: April 13, 2021 SEA has added at least one new international route annually over the past decade. Although the pandemic has significantly slowed current international traffic levels, having at least one office available for lease is a best practice, as there is not adequate time to complete improvements once an international airline announces new services. Diversity in Contracting Work performed will draw from existing executed Small Work rosters and/or performed in-house with Port Construction Service crews. The Small Works roster offers opportunity for women-and minority business enterprise (WMBE). As such, no additional aspirational goal will be set for this construction project. DETAILS The second phase space to be constructed is located on the ticketing level near passenger Security Checkpoint 3. Construction will include electrical, lighting, data, heating and ventilation, and standard office finishes to provide an office suitable for future occupancy. This construction will be completed using a combination of Port Construction Services crews and Small Works contractors. Scope of Work Phase 2 Construction of Ticketing level space: (1) Modify heating, ventilation and air conditioning (HVAC), electrical, communications and lighting system. (2) Construct basic interior including finished walls, ceilings and flooring. Schedule Activity Second Phase Construction Start Q2 2021 Second Phase In use date Q4 2021 Cost Breakdown This Request Total Project Design $0 $720,000 Construction $400,000 $2,780,000 Total $400,000 $3,500,000 ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Stop the entire project. Do not construct the second phase (ticketing) and cease further work on the third phase (second floor). Cost Implications: $0 further cost (approximately $350,000 of cost to date would be expensed) Pros: (1) Vacant space could be re-designed for another purpose in the future. (2) Remaining budget could be re-allocated. Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA Action Item No. _8e_ Page 3 of 4 Meeting Date: April 13, 2021 Cons: (1) No new spaces would be available for any new entrant the short term. (2) Would not meet Port Century Agenda Objectives. This is not the recommended alternative. Alternative 2 Construct the second phase (ticketing) and continue evaluation work on the third phase (second floor). Cost Implications: $400,000 Pros: (1) One new tenant space will be ready by end of 2021. (2) Remaining budget could be re-allocated. Cons: (1) No second-floor code improvements would be made by this project. (2) Further new tenant spaces would not be created and may impact new entrants in 2022 or 2023. This is the recommended alternative. FINANCIAL IMPLICATIONS Cost Estimate/Authorization Summary Capital Total COST ESTIMATE Original estimate $2,515,000 $2,515,000 Previous changes net $985,000 $985,000 Revised Estimate $3,500,000 $3,500,000 Art (Transfer to Art CIP) ($7,000) ($7,000) Revised Total $3,493,000 $3,493,000 AUTHORIZATION Previous authorizations $1,465,000 $1,465,000 Current request for authorization $400,000 $400,000 Total authorizations, including this request $1,865,000 $1,865,000 Remaining amount to be authorized $1,635,000 $1,635,000 Annual Budget Status and Source of Funds This project (CIP C801055) was included in the 2021-2025 capital budget and plan of finance with a budget of $3,500,000. $3,000 has been transferred into the Art Pool (C102066) with an additional $4,000 to be transferred pending this request. The funding source would be Airport Development Fund (ADF) and revenue bonds. The previous change cost increase shown in the table above was driven by the need to provide more office space to new airline tenants. Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA Action Item No. _8e_ Page 4 of 4 Meeting Date: April 13, 2021 Financial Analysis and Summary Project cost for analysis $3,500,000 Business Unit (BU) Terminal Building Effect on business performance NOI after depreciation will increase due to inclusion of (NOI after depreciation) capital (and operating) costs in airline rate base. IRR/NPV (if relevant) N/A CPE Impact Less than $0.01 in 2022 Future Revenues and Expenses (Total cost of ownership) Once occupied, maintenance of exclusive premises is the responsibility of the lessee, thus freeing the Port of our current obligation to maintain the space. In addition, these premises are currently leased to signatory airlines at the rate of $177.17 per square foot per year. The final billable lease area is dependent on exactly how the space gets divided, and how much space is consumed to create a shared access vestibule (which would not be leased premises). ADDITIONAL BACKGROUND Preliminary design work on the project's third phase has uncovered building code deficiencies and additional study is underway to determine the impact of these deficiencies. ATTACHMENTS TO THIS REQUEST (1) Presentation slides PREVIOUS COMMISSION ACTIONS OR BRIEFINGS February 26, 2019 The Commission authorized design of all phases and construction of first phase. Template revised June 27, 2019 (Diversity in Contracting).
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