Good afternoon, everyone.
Thank you for joining us today.
This is the Finance and Neighborhoods Committee.
It's 2 p.m.
Friday, March 22, 2019, and we're very happy that we are moving forward with just one agenda item today.
Our regularly scheduled committee meeting on March 27th has been canceled, hence we're having it today, and we're going to have our next meeting on April 10th.
So thank you again.
We have two people signed up for public comment, and then I'm going to ask my Parks friends to join me at the table.
David Haynes and Alex Zimmerman, you two are up.
Councilman Bagshaw, the City Council needs to reject this shady deal to hustle taxpayer money propping up artificially inflated rent located in front of a toxic coal and gas train yard.
The Parks and Recreation Department doesn't need any more employees sitting down on the job distracted by rumbling horn honking trains.
We don't need corrupt political donors tied to President Trump, buying off our local politicians to abuse tax dollars, propping up commercial real estate speculations, getting wealthy, overcharging on leases every month.
while the same government solicitates off squandered property taxes to buy more votes.
City Council must reject this deal because it further drives inflated costs of living, oppressing this city by corporate welfare subsidizing Martin Selig and his banking donors, laughing at their artificially inflated capital gains every three months, ripping off parks and recreation budget.
Perhaps we should investigate City Council lucrative retirement favors from their work financing rich people ripping off the city every month.
collecting of rent.
We need parks and rec to stop ignoring all the trash in the city as they refuse to get out of their trucks as if blaming the homeless guarantees a lazy workforce protected by a suspect union.
We don't need to give Parks and Rec a waterfront interrupted by coal and gas train view while giving charity to Martin Selleck because he chose a bad location where no one wants to rent because it causes PTSD by toxic rumbling horn honking trains that echo throughout Martin Selleck's building.
Noise polluted throughout his buildings causes frustration and it derails the productivity So we demand that Martin Selig take a zero off his perception of value and noise abate the building before anybody else is forced to rent an inflated cost.
And remember, Ed Murray still has influence on the Parks and Recreation, the budget, because his husband controls it.
Mr. Haynes.
Mr. Zimmerman.
Thank you, ma'am.
Hi.
of my sweet sugar fuhrer.
My name is Alex Zimmerman.
I want to speak about this agenda that we have today.
This always makes me a little bit complicated when we have some kind of agreement with private corporations.
Because my experience for 30 plus years as I live in Seattle and analyze government like a business consultant and businessman, show me something, a situation that is World corruption is not working because world corruption, when we're talking about one Apple or two Apple, we're talking about corrupt all three right now.
So we have a corrupt government who dominate in control by criminals.
It's exactly what's happened.
So the situation that we have with private corporations is always overpayment.
We're talking about total, we're talking about a billion and billion dollars and nobody investigates this.
We don't have an auditor office or we don't have somebody who can investigate this.
So this is a very interesting situation.
Right now we have a very unique situation in Seattle in a consul chamber.
Because many consuls right now are pure criminals, you know what I mean, and the court recognizes.
So this is very strange to me right now.
I don't understand, for example, why in the first place these consuls sit here.
For example, consul Johnson goes to work ten days from now, by law he cannot do this because he has personal interests, and by law you cannot go and work for one year.
Contract what is we have in Seattle with private corporation by definition is a criminal contract.
It's all supposed to be going in jail and exactly we have right now.
So my proposition is very simple.
When we don't establish an auditor office who can do this, nothing will be changed.
I complained to Seattle, King Country, Olympia many times.
Nothing happened.
Nobody listened to me.
This how degree of government corruption, pardon, of government criminality working right now.
So stand up America right now.
We need clean this dirty chamber.
Thank you very much.
Okay, enlightening as always.
I'd like to invite our Parks friends up to talk about the office space and lease.
Thank you.
And Allison, if you would kindly read in Council Bill 119485. Happy to.
Item number one, Council Bill 119485, an ordinance authorizing the superintendent of Parks and Recreation to execute a lease agreement between the City of Seattle and the Sea League Holding Company.
Thank you.
And would you like to start off with introductions, Ms. Tracy?
Yes.
Tracy Rassap, Council Central Staff.
Michelle Finnegan, Parks and Recreation.
Max Jacobs, Parks and Recreation.
Hillary Hamilton, Finance and Administrative Services.
Thank you.
Thank you all for being here.
So Tracy, you're going to give us a little.
overview of this and then Michelle maybe you can talk about how several months ago we were going to be in a different building and why we're doing this now.
Very briefly happy to have the legislation in front of us to operationalize a new lease which is seems like it's taken many months to actually bring to fruition so happy to have that here in front of you today and I think they'll have them go through all the details of that lease agreement.
Very good.
Great.
We're happy to present this lease for your consideration today.
I want to thank our colleagues at the Finance and Administrative Services Department who have helped us find a new site, negotiate this lease, and do some preliminary space planning.
As you know, most of our administrative staff are in three locations.
Our Denny headquarters, our Westbridge facility down by Marginal Way, and then this subject group, which is at our RDA building in the International District in Chinatown.
So we have a few other staff at community centers across the city, but most are there.
And in this particular case, we've had staff in the RDA building in the International District Chinatown for about 20 years.
About 113 staff are down there.
And the lease expires at the end of this year.
So we've been analyzing whether to renew this lease, which is why it's been taking some time.
understanding our options, visiting several properties, comparing rental prices and other factors.
And in the course of doing this, we concluded the best option was to move both from an operations and cost perspective.
So we've found a location that's actually very close compared to where our current site is to our headquarters building by Denny Park.
And we're going to be able to, with your approval, we'd be able to move the staff down there as well as move a group of staffing out of the Green Lake Community Center, which is a goal of ours as well.
So this team of SPR staff, FAS staff, commercial real estate brokers, and attorneys negotiated the lease that we're presenting today.
We believe it's a beneficial transaction for the city, and I'd now like to ask Max and Hillary to give you the details.
Very good.
Thank you.
I'm just glancing through the charts.
Maybe you can talk a little bit about your efforts to renew the lease down in next, it's off of Airport Way, right, where you are now, and why that was not successful and why you're recommending this.
I'm happy to.
Thank you so much, council members, for having us today.
And I want to echo the deputy superintendents.
Thanks to FAS, the real estate team led by Hillary Hamilton, and also the construction development team led by Dove Alberg have just been fantastic partners.
To answer your question, Council Member Bagshaw, we reached out to our landlord as part of our site search.
And primarily, we started the site search for the purposes of having a strong negotiating position and having some strategy in our back pocket so that I think we were probably assuming that we'd stay in the RDA building, frankly.
Working through brokers, we reached out to the landlord and heard nothing for an extremely long time.
So as we were looking at other options in order to kind of understand the market and understand what we should be negotiating from, it became clear throughout the process that we are probably going to need to look seriously at moving.
The landlord actually weighed in at the very end of our way late in the process with a kind of a casual email about being willing to entertain a renewal, but it was extremely, extremely constrained.
First of all, they had sold the parcel where our parking is, so our fleet parking was going to go away.
Secondly, they had been kind of flirting with possibly selling the building as well, and so they said they would only renew for a short period of time.
Third, they were going to increase the rent dramatically to market rent, which would have then been competitive with some of the other sites we had seen that were way better.
And then fourth, they were not going to be willing to entertain a renewal.
So we kind of knew we were going to have to move anyway in the future, probably in a higher rent situation.
And so just briefly, in the process of doing that, we kind of, the initial work is to develop our requirements so we can tell the brokers what we're looking for.
So we looked at not only the number of staff we had in our current building, but also as the Deputy Superintendent said, we had some staff in some other facilities that were intended to be temporary and we really need to bring them into a more kind of updated office environment.
So we had a staff need of approximately 130. It was the RDA staff plus a couple of other folks and a little bit of staff growth.
And we used that to start looking at the market.
We wanted to be close to downtown.
We wanted to be close to City Hall and SMT, but also close to the park's headquarters.
And we were very cognizant of the need to not be driving back and forth through downtown.
Currently, a lot of staff travel from our RDA building in the international district up to parks headquarters, it's usually a good half hour one way.
So every time there's a meeting, there's another hour of travel time.
We also wanted to have a lot of staff involvement in this process.
We were very deliberate to make sure that folks who were going to be affected by a potential move kind of had a voice in what's this going to look like and how could a space be sort of optimally designed so that it would be kind of intentional.
Because after 20 years in the RDA building, The space had evolved kind of organically, but it wasn't necessarily optimal for the way the workflow is happening nowadays.
So, I think that's probably good for the requirement part.
So I'm interested when you say need fleet parking and good transit options.
I know about the good transit options.
D-Bus goes right by there.
What else for the fleet space?
How much space did you need and does this building accommodate what your needs are?
It does.
Thanks, Council Member Baggio.
So we get one stall per 1,000 square feet.
So this building would give us up to 28 parking stalls, which is more than what we need.
We're going to be looking at reducing our fleet possibly.
And also a nice thing about this building is we're going to have electric charging stations included in part of the tenant improvement build out in the garage.
And thank you, and secured bicycle storage.
So it's kind of a little bit more moderate in terms of multiple modes of transportation.
We're going to have showers for bicycle commuters in our space.
So it's going to be really helpful for lots of different modes.
Great.
And the monorail.
Good.
And as you're talking about electric charging stations, that's great.
Remember, electricity for those of us who are riding e-bikes, it's nice to have access there.
I have a quick question.
In terms of the summary and fiscal note, the tenant improvements that you just described, is that included in the summary and fiscal note?
It is, yes.
Okay.
Can you point me to it just so I can get to it really quickly?
And actually, Council Member Gonzales, so this deal, The tenant improvements are being paid for by the landlord, so there's not a dollar figure in the fiscal note.
What's in the fiscal note is our budget, which was in the 2019 budget, for buying furniture, equipment, the IT connections, and some of the other, the actual move itself.
So our cost, the city's cost, are those which the landlord's not paying.
The landlord's cost, the actual design construction of the space, is gonna be borne by the landlord.
I appreciate that.
Sometimes I miss things in the summary and fiscal now, and so when I heard you talk about tenant improvements, I thought maybe I didn't see it in the summary and fiscal though, and wanted to give you an opportunity to point it out, but I really do appreciate knowing the additional information that that is a cost that's actually going to be picked up by the landlord, which is a savings to the city.
Yeah, exactly.
Thank you.
Appreciate it.
Okay.
Parks reached out to Finance and Administrative Services to provide assistance, first of all, with searching for a site.
As we do typically with larger spaces, this was about 28,000 square feet, as Max indicated.
We did bring on a brokerage firm that works specifically on tenant representation.
Their goal is to represent the tenant and get the best deal for the tenant.
They started out by searching pretty much everything from Fremont to Georgetown and looking very broadly at Class A and Class B office space so that we didn't miss anything.
When you get into Class A, the closer you get to downtown, it's getting almost impossible to find a floor that's available in a building.
Luckily with parks, their goal wasn't really to be downtown, but as Max said, to be close to headquarters and with good access to transportation because a lot of folks are traveling around the city all day every day to site parks and so on.
The chart that's in the presentation shows some of the final contenders that we looked at with parks.
A tour was done.
They hew mostly north and south directly of downtown.
There was one building that came to our attention in southeast Seattle, so we took a hard look at that.
Unfortunately, the space available was primarily in the basement on that, and it wasn't very good workspace.
So after some trials and tribulations, landing on the Elliott Bay Office Park was a good solution.
It is comparable in price and All of the other needs, the criteria, $33 a square foot is the rental rate.
Max will talk next a little bit about how that escalates over time.
But I think it's very competitive.
Good.
That was a question I was going to ask you.
And thank you for bringing that up.
The $33 a square foot, you know, it's somewhat breathtaking in this market.
But if that's competitive, that's what we needed to know.
Yeah.
As you can see, the buildings Mostly methanates here ranged in the $32 to $38 range.
If you were downtown, we're pushing $50 now in the $40s and $50s per square foot.
Thank you, Hillary.
All right, Max, what else do you have for us?
So, well, the next slide is just showing the location of 300 Elliott.
So it's really quite close to Park's headquarters.
It's also fairly conveniently located to downtown.
It's a little bit of a different location, but it helps folks not have to cross up and down through downtown going to the headquarters building.
So that's actually a really big plus.
What is it, about a half mile?
I think, yeah, a little.
I think it's a little bit more than a half mile, but it's right around just under a mile.
And then the key terms of lease, just really quickly, it's 28,000 square feet.
So it's a tiny bit bigger than our current space, but this is really a deliberate attempt to create an office space that's really going to work for the department.
It gives us a little bit more flexibility.
It's going to accommodate all of our office needs and also with a kind of a strategic eye to future needs.
We have one feature of this lease, which was the result of a lot of negotiation, was there's going to be additional growth space of 4,000 square feet that's baked into the lease.
So within six years of beginning the lease, we will add 4,000 additional square feet, so making a total of 32,000.
The rental rate, as Hillary said, is $33 a square foot to start.
It's very much what all the other properties were asking for.
It's with a $1 a year rental increase, and that's pretty typical as well.
Per square foot, right.
So the rent goes up every year, which is standard.
The operating expenses, this lease, and I think pretty much every other lease we looked at, and it seems to be the trend in the market now, is what's called fully serviced, which means the operating expenses are included in the first year's rent, and then the tenant pays the delta between the base year operating expenses and any increases over time.
So, for example, in the first year, which is 2020, there'll be zero dollars for operating expenses.
The second year, we'll pay whatever the incremental increase was, which...
Can you give me an example?
What are the operating expenses that you're going to pay?
Absolutely.
So basically every utilities, cleaning, maintenance, everything that has to be done to keep a building working, taxes, insurance.
pretty much everything.
Some things are excluded, like major capital costs to the exterior of the building are not considered operating costs.
But the cost to keep a building functioning is all, there's about 15 items that are traditional operating costs, including those I mentioned.
Would you describe how that compares to triple net?
Yeah, absolutely.
I mean, triple net's kind of a really simple lease structure because you pay a fixed rent plus all your operating costs, whatever they may be.
So the problem with that is you don't know from one year to the next what the total cost is going to be, but the rental rate is always, it's whatever the lease says, and usually it goes up just like this case.
The difference really with the base year model is that the the bulk of the operating costs are built into the rent.
It's, I mean, at the end of the day, very, very similar, because either way, you have to look at the operating costs, figure out what the actual costs were, and figure out what portion is yours.
The only difference is you have to then back out the base year portion.
Frankly, if you're a landlord, it's a little bit harder.
Triple net's easy, because you just pass on all the costs directly to the tenant.
But that seems to be the trend now in the office market.
Just so I am clear, the market rental rate, if we go for the full 25 years, that's 15 plus the two five-year options to renew, it takes us up to $58 a square foot.
That's, I didn't, I don't know the math right on the front of me, but that's probably right.
It's a dollar a year.
I'm just looking, you said a buck a year, that's 25 years.
Yep, you're right.
And I just add 25 to 33, higher math, I appreciate it.
Very exact.
That's exactly right.
What's the projection 25 years out?
Is this, you think this is reasonable?
We do, absolutely.
And I mean, real estate is always difficult because nobody knows what's going to happen in the market.
But one thing we can say, trending decade after decade, is real estate prices go up.
So we are very, very confident that this is a good rate now and it's going to trend at an acceptable rate.
It's probably much better than seeking to find a new lease from scratch five or ten years from now when rents could be much higher.
Okay.
That's a good answer.
One thing about a regular escalator like a dollar a year is that when you get a renewal, you're already closer to the market.
If you were flat for five years, you're going to have a jolt.
when it comes time to look at renewing.
And it may well be, I don't have the lease with me, but it's not unusual that a lease will reset to market during a renewal.
But you're much closer to that because you've had the annual escalators.
And at the first committee hearing on this, you described the building, I know where it is, and you're taking the first floor, is that right?
That's right.
So it's the entire first floor?
We'll have the entire first floor.
There is a shared conference room that's gonna be used by other tenants, including the city, so we don't have to pay for it.
It's actually a really great situation because we can have public meetings there, we can reserve it 30 days or more in advance so we can notice those.
We don't pay for it, but we get to use it pretty much whenever we want.
So other tenants in the building will also be able to use that.
Okay.
Who else is in the building for now?
I don't know yet, but they're negotiating leases with a few other parties.
Okay.
All right.
And we talked about it being closed to public transit right out in front.
You've got your bike storage, conference space, market rent, term.
What else do we need to know?
I don't think we need to know anything else.
We feel really good about this lease.
It's a great opportunity.
You're all smiling.
That's nice.
So any reasons why we shouldn't do it?
Frankly and confidently, no.
I think it's a very, very good decision for the city.
Okay.
Do you have any questions?
I don't.
Okay.
Well, if we don't have any further questions, I know you'd like us to vote on this today, and I'm going to recommend that we do.
So I would move to pass Council Bill 119485, which will authorize our superintendent to execute the lease agreement.
Second.
Did you have any other input, any information?
Tracy, did you have something you wanted to add?
I was just asking whether you were planning to bring it to full council on Monday or just wait the week since we've missed the cutoff.
We could move, well let's first vote.
And we will address whether or not the rules should be suspended.
Thank you very much.
All those in favor say aye.
Aye.
There's nobody here to oppose or to abstain.
All right, so what is your timeline?
We would love to have this approved as soon as possible.
We are actively working with the landlord on design right now, and we have a very, very short timeline to build, design and build the space.
Council Member Bagshawn, I have no objection to suspending the rules to allow this to be considered at full council on Monday, this Monday.
if you are so inclined to make that motion.
Thank you very much.
I appreciate that.
And if you feel comfortable with it, then I will move to suspend the rules that would allow us to recommend, since it was unanimous, allow us to recommend that this go forward this coming Monday, the 25th.
Second.
Those in favor, say aye.
Aye.
Aye.
Thank you.
We will do that.
and I think the only time we can't suspend the rules is if there's a divided report, correct?
Correct.
All right, very good.
That's my understanding.
Okay, very good.
Is there anything else for the good of the order?
All right, this meeting's adjourned and thank you all.
Thank you so much, council members.