Template revised September 22, 2016.
COMMISSION
AGENDA MEMORANDUM
Item No.
6f
ACTION ITEM
Date of Meeting
November 14, 2017
DATE: November 7, 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:
Estimated Lease Cost:
Estimated Expense Cost:
$2,145,000
$6,829,000
$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.
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 over the
next five years.
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.
COMMISSION AGENDA – Action Item No. _6f___ Page 2 of 7
Meeting Date: November 14, 2017
Template revised September 22, 2016; format updates October 19, 2016.
Staff is working on the development of a long-term plan to accommodate the increased staff
growth for Aviation and CDD. A follow-on study is budgeted in 2018, and is anticipated to be
completed in Q4 of 2018. This follow-on study will develop the Aviation Division and CDD’s
longer term staff growth forecast, which will help determine the long-term sizing of a future
facility. The study will also include a sighting study, as well as determine if a purchase, new
development, or continued lease of office space is the best approach going forward.
JUSTIFICATION
The AOB is at capacity with the existing furniture and footprint and cannot accommodate
projected staffing growth. Projected building occupancy growth for employees and consultants
is estimated at an average of 30 people per year over the next five years, but does not yet fully
factor in projects anticipated to be part of the Sustainability Airport Master Plan (SAMP).
Beginning in January 2018, there will be new employees who will not have an available desk or
office. Temporary and shared spaces will need to be set up to accommodate the growth until a
proposed solution can be implemented later in the year.
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, and per the
direction of Aviation and CDD leadership, we determined the best option to meet the needs of
the projected growth was to move a large group of people out of the building and into an
expanded leased space in STOC.
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.
Termination Option: The Port may elect to terminate the lease after year five, which would
require the repayment of any unamoritized improvements, plus two
months’ rent. The cost of early termination is estimated at $443,705.
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.
COMMISSION AGENDA – Action Item No. _6f___ Page 3 of 7
Meeting Date: November 14, 2017
Template revised September 22, 2016; format updates October 19, 2016.
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:
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
COMMISSION AGENDA – Action Item No. _6f___ Page 4 of 7
Meeting Date: November 14, 2017
Template revised September 22, 2016; format updates October 19, 2016.
Design start
Construction start
In-use date
Cost Breakdown
This Request
Total Project
Lease Amendment
$6,829,000
Capital
• Design
$272,000
• Furniture and Communications
Infrastructure
$1,873,000
Capital Total
$2,145,000
Expense
• Design
$17,000
• Furniture ,Communications and
modifications to West Side Office
and Logistics Offices
$39,000
• Relocation fees
$27,000
Expense Total
$83,000
Total
$9,057,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Densify AOB to accommodate growth
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.
COMMISSION AGENDA – Action Item No. _6f___ Page 5 of 7
Meeting Date: November 14, 2017
Template revised September 22, 2016; format updates October 19, 2016.
Alternative 2 – Purchase an existing building to accommodate growth
Cost Implications: Unknown
Pros:
(1) Could potentially offer greater long-term value and flexibility to the Port’s capital
investment
(2) Could provide a longer term solution to office growth needs
(3) Would be a Port-owned asset
Cons:
(1) Timing associated with acquisition of building could not meet the immediate need
(2) No location proximate to the Airport is currently available for sale
(3) Cost associated with a potential purchase is unknown
This is not the recommended alternative.
Alternative 3 – Construct a new building to accommodate growth
Cost Implications: Unknown
Pros:
(1) Could potentially offer greater long-term value and flexibility the Port’s capital
investment
(2) Would provide a longer term solution to office growth needs
(3) Would be a Port owned asset
Cons:
(1) Timing could not meet the immediate need
(2) Port owned real estate is limited and would require a siting study (currently included
in study budgeted in 2018)
(3) Minimum time frame to implement a construction solution would be five to six years
This is not the recommended alternative.
Alternative 4 – Lease additional space in STOC to accommodate growth. Would require the
relocation of Capital Development Departments located at the AOB and the Central
Procurement Office – Major Works Department located at the Logistics Office.
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 anticipated five year need for space
in the AOB
COMMISSION AGENDA – Action Item No. _6f___ Page 6 of 7
Meeting Date: November 14, 2017
Template revised September 22, 2016; format updates October 19, 2016.
(4) Provides more reasonable phasing for relocations within the AOB
(5) Costs spread out over 6 years
(6) Provides ability to further expand if merited with additional lease opportunity
Cons:
(1) Added travel time to and from Airport and between office locations for staff
(2) CDD staff will be spread throughout more locations than at present
(3) Does not create a long-term Port asset
This is the recommended alternative.
FINANCIAL IMPLICATIONS (non-lease)
Cost Estimate/Authorization
Summary
Capital
Expense
Total
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
$83,000
$2,228,000
Total authorizations, including this
request
$2,145,000
$83,000
$2,228,000
Remaining amount to be
authorized
$0
$0
$0
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)
NOI after depreciation will decrease
IRR/NPV (if relevant)
N/A
CPE Impact
$0.03 in 2018
COMMISSION AGENDA – Action Item No. _6f___ Page 7 of 7
Meeting Date: November 14, 2017
Template revised September 22, 2016; format updates October 19, 2016.
ATTACHMENTS TO THIS REQUEST
(1) Draft lease amendment
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
None