8NY2683 Redacted JOTFOC.pdf

Justification for Other Than Full and Open Competition, Succeeding Lease

U.S. General Services Administration

Public Buildings Service

GSA Region 2 - Leasing Division

PROJECT NUMBER: 8NY2683

Agency Name:

1. NATURE AND/OR DESCRIPTION OF ACTION BEING APPROVED.

The General Services Administration currently leases 55,040 ANSI/ABOA Office Area square feet (ABOA SF) / 59,394 rentable square feet (RSF) of office space, along with fourteen (14) reserved structured parking spaces at the Federal Centre, 138 Delaware Avenue in Buffalo, NY, under lease number GS-02B-24120 for the The current lease expires December 16, 2023.

Approval is requested to negotiate a Succeeding Lease with the incumbent Lessor, without full and open competition, for continued occupancy at this leased location. The procedures for pursuing a Succeeding Lease are detailed in GSAR 570.402: Succeeding Leases.

2. DESCRIPTION OF THE SUPPLIES OR SERVICES REQUIRED TO MEET THE AGENCY�S NEEDS

(INCLUDING ESTIMATED VALUE).

submitted a continuing need letter on or about December 15, 2020, for 55,040 ABOA square feet of office and related space, along with fourteen (14) reserved structured parking spaces. In February 2023, confirmed no changes to these 2020 requirements.

This requirement is for 55,040 ABOA SF (approximately 59,394 RSF) of contiguous space on one or more floors for a fifteen-year / ten-year firm term. A fully serviced lease is required. The anticipated cost of this lease is $ ($ per RSF) per year, inclusive of shell, parking and fully serviced operating costs. The total anticipated rent cost for the lease term is $

Due to the frequency of the conducting its work mission in the US. Courthouse, the agency requires the space to be located within four (4) blocks of the U.S. Courthouse located at 2 Niagara Square in Buffalo, NY, which is defined using the following street boundaries:

North: East Tupper Street East: Washington Street South: Interstate 190 West: Carolina Street

3. IDENTIFICATION OF STATUTORY AUTHORITY PERMITTING OTHER THAN FULL AND OPEN

COMPETITION.

41 U.S.C. 3304(a)(1): Only one responsible source and no other supplies or services will satisfy agency requirements. This statutory authority is implemented through GSAR 570.402. In accordance with GSAR 570.402, use of the sole source authority is appropriate where it is determined that award to any other offeror would result in substantial duplication of costs to the Government that are not expected to be recovered through competition.

4. DEMONSTRATION THAT THE PROPOSED CONTRACTOR�S UNIQUE QUALIFICATIONS OR

NATURE OF THE ACQUISITION REQUIRES THE USE OF THE AUTHORITY CITED.

It is in the best interest of the Government to remain at the current location. Award to other than the current Lessor would require relocation of the entire requirement and would cause to incur move and replication costs that would not be recovered through competition. Move and furniture costs are estimated to be $ if the lease is awarded to a lessor at an alternative location. Move costs include both the physical move and telecommunications and data move costs, as broken out in the table below. Remaining at the current location allows the Government to make use of existing Tenant Improvements (TI) and Building Specific Amortized Capital (BSAC). For the incumbent location, TI costs are estimated at $ to account for minor alterations during the succeeding lease term, and there are no estimated BSAC costs. However, at an alternative location, TI costs are estimated at $ and BSAC costs are estimated at $ GSA completed a cost-benefit analysis following the procedures set forth in GSAR 570.402-6. The Cost Benefit Analysis utilized the lowest quoted rental rate for a comparable property within the market at in Buffalo, NY. While the anticipated shell and operating costs at the incumbent location are higher, the total cost savings to the Government inclusive of rent and tenant improvement costs is still $

GSAM 570.402-5 allows for negotiation with the incumbent Lessor when a cost-benefit analysis shows that the Government cannot expect to recover relocation and duplication costs through competition.

The incumbent lessor submitted an unsolicited offer on September 30, 2021, proposing rental rates for a 15-year term. On February 14, 2023, the incumbent resubmitted its unsolicited offer, without changes to its proposed rates. The breakout of the proposal is described in Section 6 below.

Market research conducted for Buffalo, NY, produced four (4) properties in the delineated area that could meet the minimum square footage requirements. CoStar and LoopNet were used in the market research.

The market research indicated that the lowest priced alternative location that falls within the delineated area was Additional information regarding the market research and the breakout of the asking rates is described in Section 7 below. Award to other than the current Lessor would require relocation of the entire requirement and would cause to incur $ in TI costs, $ in BSAC costs, $ in physical move costs, $ in telecommunications and data move costs, and $ in furniture costs. These costs would not be recovered through competition.

Figure 1: Cost Benefit Analysis

Cost Benefit Analysis Acquisition of 55,040 ABOA SF

15 years / 10 years Firm Term Analysis

Present Location Alternate Location

138 Delaware Avenue

Anticipated 15-year Total Rent (Shell & Operating Costs Only)1

$ /RSF/year over 15 years

$ /RSF/year over 15 years

New Amortized Tenant Improvements3

$ /RSF/year over 10 years

$ /RSF/year over 10 years

Lump Sum Portion of Tenant Improvements

$ /RSF

$ /RSF lump sum payment

New Building Specific Amortized Capital4

$ /RSF

$ /RSF/year over 10 years

Cost of Physical Move

$ /RSF

$ /RSF lump sum payment

Voice & Data Move

$ /RSF

$ /RSF lump sum payment

Systems Furniture

$ /RSF

$ /RSF lump sum payment

Total 15-year cost

$ /RSF/year over 15 years

$ /RSF/year over 15 years

Full Term Lease Savings $ 1The anticipated rental rate of $ /RSF for the present location reflects average shell rent (inclusive of parking) from the unsolicited offer ($ /RSF) plus operating costs net of electric ($ /RSF) plus estimated electric costs based on 2023-2024 actual electric rates at the incumbent location ($ /RSF). GSA will negotiate for a rental rate in line with the rental range of $ $

2The anticipated total rent of $ /RSF for the alternate location is derived from the asking rate of $ /RSF net of janitorial and parking. Per the attached market research, the operating costs are noted as $ /RSF, leaving a �shell� rate of $ /RSF. However, the asking operating costs are geared towards private sector leases, which include shell items such as taxes and management in the Buffalo market. Shifting the taxes and management from operating to shell, the breakout of the asking rate would be $ /RSF shell and $ /RSF operating. Adding parking to the shell rent ($ /space/month x 14 spaces x 12 months = $ /year or $ /RSF) and janitorial ($ /RSF) to the operating rent, the anticipated total rent becomes $ /RSF shell + $ /RSF operating = $ /RSF.

3Tenant improvements at the incumbent location are estimated to be $ per an Independent Government Estimate completed by GSA on August 22, 2023. The estimated tenant improvements required for the alternate location are $ /ABOA SF ($ The tenant improvement allowance of $ /ABOA SF ($ x 55,040 ABOA SF = $ is amortized over the firm term at a market average rate of 7.0% for a total of $ over the firm term. The remaining $ of the tenant improvements for the alternate location is the lump sum portion.

4BSAC improvements are not anticipated to be required at the present location. BSAC improvements for relocation are calculated using an allowance of $ /ABOA SF ($ x 55,040 ABOA SF =

$ amortized over the firm term at a market average rate of for a total of $ over the firm term.

5. DESCRIPTION OF EFFORTS MADE TO ENSURE THAT OFFERS ARE SOLICITED FROM AS

MANY POTENTIAL SOURCES AS IS PRACTICABLE.

Per the requirements of GSAR 570.402, the GSA and CBRE (the GSA broker for this project) posted an advertisement on the Contracting Opportunities module of the SAM website informing the market of the opportunity on February 7, 2023. The only expression of interest received in response to the advertisement was from the incumbent lessor on February 14, 2023.

6. DEMONSTRATION BY THE CONTRACTING OFFICER THAT THE ANTICIPATED COST TO THE

GOVERNMENT WILL BE FAIR AND REASONABLE.

Market surveys conducted by CBRE in Buffalo, NY, using CoStar online commercial real estate database showed the rental rates within the delineated area ranges from $ to $ per RSF. The market asking rates do not conform to the Government�s requirement for a fully serviced lease, because they typically exclude electricity and/or janitorial service. Adjusting the asking rates to reflect the GSA requirement for a fully serviced lease, the operating costs would be increased by $ to $ per RSF.

Further, parking is excluded from the asking rates and ranges from $ to $ per space per month, so the adjusted market rates would further increase by $ to $ per RSF. These adjustments result in a market range for a fully serviced lease of $ per RSF to $ per RSF based on market data specific to the narrow boundaries of the delineated area. A Bullseye report was prepared on April 5, 2023, with a target rate of $ per RSF. The Bullseye report is applicable to the entire Buffalo Central Business District, which extends beyond the boundaries of the delineated area.

The incumbent lessor submitted an unsolicited offer proposing a rental rate for a succeeding lease of $ per RSF in years 1-5, $ per RSF in years 6-10, and $ per RSF in years 11-15, excluding electricity. Adjusting the incumbent lessor�s unsolicited offer to include an additional $ per RSF in electricity costs for the required fully serviced lease, the asking rate would be $ per RSF for years 1-5, $ per RSF for years 6-10, and $ per RSF for years 11-15, averaging to $ per RSF over the full term of the lease. Although the unsolicited offer is above the market range for this submarket, it represents the current lessor�s starting point for negotiations. The proposal has not been negotiated. GSA anticipates that the rate will be reduced to reflect the market range to achieve a fair and reasonable cost to the Government, as determined by the GSA Lease Contracting Officer.

7. DESCRIPTION OF MARKET RESEARCH CONDUCTED AND THE RESULTS.

A Bullseye report was prepared on April 5, 2023, indicating static vacancy rates and slight increases to the market rates to $ per RSF fully serviced for Class A and B facilities. The Bullseye report is applicable to the entire Buffalo Central Business District, which extends beyond the boundaries of the delineated area. GSA conducted an additional survey of the market via CoStar on November 30, 2023. A total of five (5) locations aside from the incumbent location were identified that may potentially meet the agency�s needs within the delineated area.

The asking rate for the lowest cost alternative property is $ per RSF plus the cost of janitorial at a rate of $ per RSF and the cost of parking at an anticipated rate of $ per space per month which is approximately $ per RSF per year for a total estimated rent rate of $ per RSF. See Figure 1, footnote 2 for additional detail on adjustments necessary to align the asking rent with the requirement for a fully serviced lease and 14 reserved structured parking spaces.

See Figure 1 below for the results of the market research and SAM advertisement, including the incumbent.

Figure 2: Market Research Comparables

Address Source Asking Rental Rate (Year 1)1

Amortized Tenant Improvement

Allowance

Amortized Building Specific Amortized

Capital

Adjusted Asking Rate2

138 Delaware Avenue

Incumbent $ $ $ $ /RSF

CoStar, LoopNet

$ $ $ $ /RSF

CoStar, LoopNet

$ $ $ $ /RSF

CoStar, LoopNet

/RSF

CoStar, LoopNet CoStar, LoopNet

$ $ $ $ /RSF

1Asking rates do not include anticipated annual escalations, thus the asking Full Service Rental Rate above represents the first year of rent only. The rates have been adjusted to account for the fully-serviced lease and parking requirements.

2The adjusted asking rate includes the GSA required TI allowance of $ ($ /ABOA SF) and $ ($ /ABOA SF) BSAC allowance, both of which are amortized at a rate of over 10 years.

8. OTHER FACTS SUPPORTING USE OF OTHER THAN FULL AND OPEN COMPETITION.

The space at 138 Delaware Avenue is well maintained and suits the agency�s needs.

9. LIST OF SOURCES, IF ANY, THAT EXPRESSED, IN WRITING, AN INTEREST IN THE

ACQUISITION.

Incumbent Lessor submitted an unsolicited offer for 138 Delaware Avenue in Buffalo, NY, on September 30, 2021, which was confirmed on February 14, 2023.

No additional parties expressed interest in the acquisition.

10. STATEMENT OF ACTIONS, IF ANY, THE AGENCY MAY TAKE TO REMOVE OR OVERCOME ANY

BARRIERS TO COMPETITION BEFORE ANY SUBSEQUENT ACQUISITION.

GSA will review any future space requirement with anticipation of working with to conduct a Full and Open Lease procurement. Consideration will be given to the customer agency�s mission and security requirements (if applicable) to include limiting any agency space requirements that may be deemed unduly restrictive. The Government will remain conscious of the effort to continuously encourage competition when practicable.

11. CONTRACTING OFFICER CERTIFICATION.

By signature on this Justification for Other than Full and Open Competition, the GSA Lease Contracting Officer certifies that the award of a succeeding lease of 59,394 RSF is in the Government�s best interest and that this Justification is accurate and complete to the best of the GSA Lease Contracting Officer�s knowledge and belief.

Viengkeo Keophommasane, Lease Contracting Officer Date

12. PREPARER�S TECHNICAL CERTIFICATION.

I certify that the supporting data used to form the basis of this Justification is complete and accurate to the best of my knowledge and belief.

Matt Bartlett, Senior Transaction Manager Date CBRE, Inc. (GLS Broker Contractor)

Concurred by:

Rita Bradley, Branch Chief Date

Concurred by:

Raffaela Battiloro, Lease Acquisition Officer Date

Concurred by:

Jeannette Rios, Leasing Director Date

Concurred by:

Leigh Erin Izzo, Senior Assistant Regional Counsel Date

Concurred by:

e Date

Approved by:

Michael Gelber, Regional Commissioner Date