JOTFOC_-_Redacted.pdf

GENERAL SERVICES ADMINISTRATION – LEASING DIVISION

JUSTIFICATION FOR OTHER THAN

FULL AND OPEN COMPETITION

LEASE # GS-02B-23402 AND

LEASE # GS-02B-23410

PROJECT # 6NY0602 AND

PROJECT # 6NY0603

FEDERAL BUREAU OF INVESTIGATION (FBI)

85 TENTH AVENUE, NY, NY

PROPOSED ACTION: To negotiate a Twenty-Four (24) Month lease extension for FBI Leases GS-02B-23402 and GS-02B-23410, located at 85 Tenth Avenue, New York, NY. Both Leases are a part of the same FBI operation, located in the same building with the same expiration date and approved under the same prospectus approval, as such, only one Justification for Other Than Full and Open Competition, coalescing both Leases, is being submitted for approval.

DESCRIPTION OF REQUIREMENTS (INCLUDING ESTIMATED VALUE):

The Federal Bureau of Investigation (FBI) currently occupies 168,000 Rentable Square Feet (RSF) yielding 118,173 ANSI BOMA Office Area square feet (ABOA) of office and related space at 85 Tenth Avenue, New York, NY under Lease Numbers GS-02B-23402 and GS-02B- 23410. The Leases expire on September 30, 2018. GSA intends to negotiate a 24 month lease extension, without a full and open competition, for each lease with the current Lessor in order to provide sufficient time for the relocation and backfill of this tenant into vacant space at the Jacob K. Javits Federal building, located at 26 Federal Plaza, N.Y. N.Y.

The long-term plan is to relocate both Leases from 85 Tenth Avenue to government-owned space at 26 Federal Plaza, New York, NY through a backfill project; a lease extension is needed as space is readied at the Government-owned location. FBI will maintain its current office utilization rate of 148 USF per person and its overall utilization rate of 218 USF per person.

In 2015, both Leases were approved for a 5 year extension term pursuant to prospectus approval PNY-02-NY15. These Leases were subsequently extended in 2015 for a 3 year term expiring in September 30, 2018 . The Government now seeks to extend an additional 2 years, up to the prospectus approved extension term of up to 5 years. Over this past year, GSA project teams created a master schedule that over-lays the projects that are predecessors for the FBI backfill to 26 Federal Plaza. The schedule shows that the FBI backfill project will not be completed until late 2019, at the earliest. Moreover, the schedule involves the restacking of several agencies in 26 Federal Plaza and several internal RWA projects all occurring within a 4 year period, so there is risk that the schedule will experience delays. GSA, therefore, intends to negotiate a 2 year, 1 year firm term extension for both Leases, which is the remaining term approved under prospectus approval PNY-02-NY15, at the current location, to provide sufficient time for the completion of the backfill project. The 2 year, 1 year firm term protects the Government’s occupancy at its present location and provides flexibility on the back end of the extension term by protecting the Government from potentially being contractually obligated to pay rent for space at the current location, while simultaneously backfilling space at 26 Federal Plaza. The extension of the both Leases will enable FBI to provide continued housing for its personnel and meet its current mission requirements.

The anticipated total annual rent for the lease extensions is $14,778,960.00 ($87.97 per RSF).

This amount reflects the current rate of $87.05 per RSF adjusted for CPIs increases to 2018, estimated.

The aggregate rental value for these two leases for this extension term is $29,557,920.00.

IDENTIFICATION OF STATUTORY AUTHORITY:

41 U.S.C. 3304(a) (1)

UNIQUE QUALIFICATIONS:

The mission of the FBI New York Joint Terrorism Task Force (“JTTF”), located at 85 Tenth Avenue, Manhattan-New York, NY (hereafter referred to as the “Chelsea Offsite”) is to enhance communications, coordination and cooperation between federal, state and local government agencies representing the intelligence, law enforcement, defense, diplomatic, public safety and homeland security community by providing a point of fusion for terrorism investigations and intelligence. Currently, JTTF operations are centralized at the Chelsea Offsite and comprised of over 450 personnel, representing 32 federal and 20 state and local member agencies, and 19 non-member liaison agencies. The JTTF area of responsibility (“AOR”) encompasses metropolitan New York City, including the five city boroughs, Long Island and the lower Hudson Valley counties of Westchester, Putnam, Dutchess, Rockland, Orange and Sullivan. In addition, the JTTF AOR extends internationally to Africa, Europe and Canada. The Chelsea Offsite includes JTTF executive management offices and conference space, a Secure Compartmentalized Installation Facility (“SCIF”) for sensitive investigative and intelligence activities and technical and information technology space and infrastructure. The Chelsea Offsite enables JTTF member and non-member liaison agencies to operate seamlessly in an operationally secure and safe environment.

The Chelsea Offsite currently provides a venue for the unified command and control of JTTF operations. JTTF management’s close proximity to core investigative and intelligence activities enables supervisors to provide appropriate leadership, oversight and accountability for operational matters and efforts. Because the JTTF is comprised of over 50 member agencies, the ability to collaborate and share information is of paramount importance to the JTTF’s terrorism prevention mission. The benefits of the JTTF concept in an era of complex and diverse terrorism threats cannot be overstated. Relocating JTTF function on a short term basis would create an unnecessary operational and administrative burden on managers, adversely impact productivity and efficiency, and diminish the effectiveness of the JTTF’s command and control. This lease extension provides continued operation to the FBI’s operation without interruption until the construction of their space at 26 Federal Plaza is completed.

Further, if GSA were to conduct a competitive lease procurement for this extension, approximately $7,838,633.71 ($66.33, rounded, per ABOA x 118,173 ABOA) worth of Tenant Improvements would be required to duplicate the existing space. Additional costs would be required to replicate telecommunications service and physically move the FBI office space.

Moreover, 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. GSA placed an advertisement conforming to GSAM 570.402-2 on the Federal Business Opportunities Web site (febizopps.gov) on September 1, 2016 for 15 days indicating its intent to enter into an extension with the incumbent landlord with Other Than Full Competition. GSA received 0 responses to its advertisement.

Finally, award to other than the current Lessor would require relocation of the entire requirement and would cause the FBI to incur move and replication costs that would not be recovered through competition. Although no other location responded to the Government’s advertisement, attached is a cost-benefit analysis for similar office space in the Chelsea section of New York, NY.

The cost of relocating the FBI using the Bullseye prospectus rate of $110.25 in this submarket of NY, adjusted for GSA’s warm/lit requirements exceeds the cost of remaining at 85 Tenth Avenue, New York, NY location using the anticipated fully-serviced rate in 2018 of $87.97. The saving to the Government is $18,293,909.19 over the 24 month extension term. (see attached cost benefit analysis.) Based on this cost-benefit analysis, the Government cannot expect to recover relocation and duplication costs through competition. Therefore, the Government intends to negotiate an extension and remain at its current location.

EFFORTS TO ENSURE SOLICITATION FROM MAXIMUM SOURCES PRACTICAL:

Advertisement placed on September 1, 2016.

DETERMINATION THAT ANTICIPATED COST WILL BE FAIR AND REASONABLE:

The anticipated rate per square foot for this lease extension is $87.97 per RSF. With a dearth of quality space in buildings with floor plates over 50,000 square feet in Midtown South, tenants in the technology, advertising, media, internet (TAMI) and high-end fashion companies (firms that are attracted to this market) are constantly searching for buildings and space that will make a statement and help further their brands. As evidence of this, in recent years there has been an explosion of technology tenants infiltrating and growing within the Midtown South markets of Manhattan, including the following:

▪ Alibaba: leased 25,000sf at 860 Washington Street

▪ Facebook: leased 200,000sf at 225 Park Avenue South, and expanded by 80,000sf at 770

Broadway

▪ Intersection: leased 68,000sf at 10 Hudson Yards

▪ Galvanize: leased 54,500sf at 315 Hudson Street

▪ Nielson: leased 44,000sf at 675 Avenue of the Americas

▪ Dropbox: leased 31,000sf at 50 West 23rd Street

▪ IPG: expanded by 95,000sf at 100 West 33rd Street

▪ FanDuel: leased 41,013sf at 300 Park Avenue South

▪ Grovo: leased 70,000sf at 50 West 23rd Street

▪ SYPartners: leased 55,000sf at 395 Hudson Street

These tenants were seeking buildings with large open floor plates in trendy neighborhoods that embody their brand and attract their employees. Companies will pay a premium to be in well-positioned buildings within these neighborhoods. Examples include Winton Capital paying $100.00psf at 315 Park Avenue South and Facebook, Inc. paying mid-$80’s psf blended at 225 Park Avenue South.

The Meatpacking district has come a long way since its name befitted its actual purpose. Today it is a highly-desirable mixed-use neighborhood featuring high-end office, hotel, retail, and residential properties. Renovated older buildings including 75 Ninth Avenue (Chelsea Market), 111 Eighth Avenue, 85 Tenth Avenue and 450 West 15th Street transformed the Meatpacking office submarket beginning in the late 1990’s and early 2000’s. This submarket is currently undergoing another transformation as new office developments are driving the rental rates in this submarket above $100.00 psf. 860 Washington Street a newly completed office recently leased four floors above this figure: Alibaba leased the 7th and 8th floors (25,000sf) at $140.00psf, and Delos Living leased the 4th and 5th floors (21,979sf) at $150.00psf, blended. The remaining four floors have asking rents between $145.00psf to $175.00psf. 412 West 15th Street and 413 West 14th Street are currently under construction and will be completed by October 2017. 412 West 15th Street is an 18-story building and 413 West 14th Street is a 5-story building, both with asking rents ranging from $105.00psf to $170.00psf. Below is a summary of recently concluded leases that are believe are indicative of achievable rents in this Market.

Tenant

Building Address

Floor(s)

SF

Transactio n Type

Rent ($/Sqft)

Winton Capital 315 Park Avenue South E.19-20 34,844 Direct Yrs 1-5: $100.00 Yrs 6-10: $106.00

Alibaba 860 Washington Street E.7-8 25,000 Direct Yrs. 1-5: $130.00 Yrs. 6-10: $140.00

Verve Wireless 79 Fifth Avenue E.4 21,500 Direct Yrs 1-5: $74.50 Yrs 6-10: $78.00

Facebook, Inc. 225 Park Avenue South E.8-10, E.17-19

200,000 Direct E.8th – 10th Yrs 1-5: $79.00 Yrs 6-10: $85.00 E.17-19th Yrs 1-5: $89.00 Yrs 6-10: $95.00

Peloton 125 West 25th Street E.9-12 40,748 Direct E.9th – 11th Yrs 1-5: $71.50 Yrs 6-10: $77.50 E.12th Yrs 1-5: $82.00 Yrs 6-10: $88.00

Delos Living 860 Washington Street E.4-5 21,979 Direct E.5th Yrs 1-10: $140.00 E.4th Yrs 1-10: $160.00

Facebook, Inc. 770 Broadway E14 79,998 Expansion Yrs 1-5: $105.00 Yrs 6-10: $115.00 Yrs 11-13:$125.00

Managed by Q 161 Avenue of the Americas E.11 26,022 Direct Yrs 1-5: $77.50 Yrs 6-10: $83.50

The approved prospectus rate under PNY-02- NY15 is $87.00 in 2014. The prospectus rate for any future actions for this area is $110.25, please see attached Bullseye report. Based on the foregoing information, the anticipated fully serviced rate of $87.97/RSF rate for this area can considered to be fair and reasonable and best value to the Government.