Approval of Warehouse Acquisition

Transcription

1 Planning, Program Development and Real Estate Committee Item V D July 9, 2015 Approval of Warehouse Acquisition

2 Washington Metropolitan Area Transit Authority Board Action/Information Summary Action Information MEAD Number: Resolution: Yes No TITLE: Acquisition of 3636 Pennsy Drive in Landover, MD PRESENTATION SUMMARY: This presentation presents an overview of Metro's proposed acquisition warehouse located at 3636 Pennsy Drive in Landover, Maryland for department relocations and consolidation from leased space. PURPOSE: To obtain Board approval to acquire a warehouse located at 3636 Pennsy Drive in Landover, Maryland for department relocations and consolidation from leased space. DESCRIPTION: Metro leases 206,292 sq. ft.of enclosed warehouse spaces and 284,766 sq. ft. of surface lots throughout the WMATA service region. Staff has performed a cost/benefit analysis and determined that it is more financially sound to acquire a warehouse property into which to relocate the leased functions. The proposed acquisition will also accommodate the relocation of the functions currently located in the Stone Straw facility thereby enabling WMATA to dispose of Stone Straw, a long-sought goal, and save substantial capital funds for its repair. Key Highlights: The acquisition of 3636 Pennsy Drive is a financially sound investment and will result in the following benefits for Metro: Enables consolidation from leased locations, avoidance of renovation expenses for obsolete buidlings, and sale of those obsolete buildings Achieves an 11-year payback period for the warehouse purchase based on operating expense savings and sale proceeds from obsolete facilties Secures ownership of a strategic location as it is adjacent to other WMATA operations facilities Supports future Heavy Rail Overhaul facility, given site's adjacency to Orange Line rail corridor Facilitates consolidation from four separate leased locations into a WMATA-owned facility

3 Background and History: Certain departments have responsibility for maintaining Metro s RAIL and BUS facilities throughout the service region: Plant Maintenance (PLNT) has responsibility for maintenance, noncapital repairs, janitorial functions, and general site care of Metro s facilities and Systems Maintenance (SMNT) has responsibility for the electrical systems and electronics in the facilities. SMNT and PLNT were displaced from the Greenbelt Storage and Inspection Yard into leased space to provide space for the RAIL commissioning facility and the employee parking garage. These displaced functions were accomodated in three warehouse leases in the Greenbelt area. In a separate transaction, in 2012 staff leased a separate warehouse space in Alexandria, Va for the storage of capital inventory for which no storage space was available in existing WMATA-owned facilities. The Board subsequently approved an initiative to relocate maintenance departments from rail yards in support of rail car fleet expansion. As part of this effort staff began a search for additional warehouse space to complete the relocation of these remaining functions from rail yards. Discussion: The acquisition of 3636 Pennsy Drive will consollidate all of these existing leased spaces into a single WMATA-owned facility. Further, WMATA will be able to relocate functions currently located in the Stone Straw facility thereby enabling WMATA to dispose of the Stone Straw Building. This building is in need of significant capital funds for repair and renovation, and even if renovated, it does not efficiently support WMATA's space needs Relocating from the Stone Straw building will facilitate (1) avoiding the renovation/repair costs, and (2) realizing proceeds from the sale of the facility. By acquiring the proposed warehouse, consolidating from the leased locations, and selling the outdated buildings, the transaction will achieve an 11-year payback period. In addition to the recommended option to purchase the warehouse outright, staff also explored pursuit of a lease of the warehouse with an option to purchase. While this option would allow WMATA to occupy the warehouse with a lower upfront cost, it would ultimately result in a higher price when WMATA exercises the purchase option. The higher cost of the lease with purchase option is due to the fact that today Metro has an opportunity to buy the building priced as a mostly-vacant property. At the time of when the option is exercised, the building will be fully-leased, and the purchase price will be significantly higher to reflect this fully-leased status.

4 FUNDING IMPACT: Program: Capital Improvement Program Project: TBD Project Manager: Anabela Talaia Project Department of the Chief Financial Officer / Office of Real Estate and Department/Office: Station Planning Year One FY16 Year Two & Beyond Total Budget: 35,000, ,000,000 This Action: 35,000, ,000,000 Prior Approval: Remaining Budget: The purchase of the warehouse is budgeted for and funded in the Board approved FY2016 Capital Improvement Program. The purchase of this property will be funded using non-federal local funding sources. If WMATA does not purchase this property the agency will not recognize $5 million in planned revenues associated with the sale of the WMATA owned facility at Stone Straw. Furthermore, WMATA will need to make significant capital investments into this facility if it continues to occupy this property. From an operating cost perspective, WMATA participates in several leases today that total $1.5 million in costs annually that will need to be extended and paid for through the operating budget if the purchase of the property is not approved. TIMELINE: Remarks: One-time capital expenditure Maintenance Operating Budget Impact: Previous Actions Anticipated actions after presentation None Offer, Negotiation, Due Diligence, and Acquisition of 3636 Pennsy Drive RECOMMENDATION: Board approval for the acquisition of a warehouse located at 3636 Pennsy Drive in Landover, Maryland for department relocations and consolidation from leased space.

5 Washington Metropolitan Area Transit Authority Acquisition of Warehouse Planning, Program Development, and Real Estate Committee July 9, 2015

6 Purpose Obtain Board approval to acquire a warehouse for department relocations and consolidation from leased space

7 Background Metro s rail and bus maintenance teams are located in facilities across the region Plant Maintenance (PLNT) responsible for maintenance, noncapital repairs, janitorial functions, and general care of Metro facilities Systems Maintenance (SMNT) responsible for the electrical systems and electronics in the facilities SMNT and PLNT were displaced by Greenbelt RAIL commissioning facility into leased space Board approved an initiative to relocate maintenance departments that are not required to be in rail yards

8 Proposed Warehouse Location Staff conducted search for space to relocate functions from Greenbelt and New Carrollton yards M Greenbelt M New Carrollton 3636 Pennsy Drive M Landover

9 Proposed Warehouse - Details Floor Area: 346,014 sq ft warehouse 7,377 sq ft office Metro Supply Facility Zoning: I-1 Parking Spaces: 222 Loading Docks: 22 Trailer Storage: 50 Additional Amenities: 120 Loading Court Metrobus Parking Proximate to CTF, MSF, Landover Bus, Pennsy Contiguous land to CTF and MSF Strategic parcel adjacent to orange line ROW Carmen Turner Facility

10 Relocations and Consolidations Location Users Building Size (Sq. Ft.) 6840 Distribution Drive PLNT, SMNT 24,400 interior 108,900 exterior Tucker Street PLNT, SMNT 4,100 interior 135,036 exterior 6901A/6901B Distribution Drive PLNT, SMNT 27,816 interior 6,000 exterior 6100 Fairington Avenue PLNT, SMNT 80,776 interior 34,830 exterior Stone Straw Building Records Mgmt., MTPD, RADS Owned / Leased Leased Leased Leased Leased 68,700 interior Owned (to be sold) Blair Road Facility PLNT 15,000 interior Owned (to be sold) Totals 220,792 interior 284,766 exterior Proposed Warehouse: 346,014 interior sq. ft. 250,000 exterior sq. ft.

11 Alternatives ALTERNATIVES PROS CONS Do Nothing Lowest upfront cost Ongoing leased-space operating expense Lease Warehouse with Option to Purchase Defers upfront cost of purchasing warehouse Purchase Warehouse 11-year payback on investment Secures ownership of strategic site Supports future Rail Overhaul facility Consolidates from leased space to WMATA-owned space Avoids repair/renovation costs Sale proceeds from old facilities Renovation costs of Stone Straw Building Ongoing operating and maintenance costs for Stone Straw and Blair Road properties Lost opportunity to secure strategic parcel near New Carrollton for future rail yard Future purchase price will be greater than today s price Option to purchase may be accelerated if owner receives other offers

12 Recommendation Board approval to acquire a warehouse located at 3636 Pennsy Drive for department relocations from rail yards and consolidation from leased space

13 SUBJECT: APPROVAL TO ACQUIRE A WAREHOUSE AT 3636 PENNSY DRIVE IN LANDOVER, MARYLAND RESOLUTION OF THE BOARD OF DIRECTORS OF THE WASHINGTON METROPOLITAN AREA TRANSIT AUTHORFfY }-j~)c/ ' WHEREAS, The Washington Metropolitan Area Transit Authority (~~~TA) has ~entered into four leases since 2012 for a total of 206,292 square feetiot enct&"sed wafehouse / ->.,,. '\%~'" fif,,{'f spaces and 284,766 square feet of surface lots throughout;the.,,wmata seklice region; and :Y \,,;,,, ''".JY,.:J.,,, /;;'!ii>,, ~::;~~> WHEREAS, WMATA staff has performed a cost/be11efiranalysis a[l~~lgletermined that it is more financially sound to acquire a property in w6ich t0;,,felqc::ate;ithe leased functions; ';\,;~>' "<Xi and -- -,c''1 WHEREAS, The proposed acquisition will" al~~ ~cc;ifi'ffi6clate the relocation of the functions currently located in the Stone Sfr~w facility)/~hereby enabling WMATA to dispose of Stone Straw, a long-sought dev~t~:mrnentsite; ang' -~:.';~"~ ~" -- '~- _ _,--' ' - - f/~ WHEREAS, Staff has identified- 36:qp P~~hsy D;;~~"~s an appropriate warehouse property and needs Board of Direct()rS apptby$f to acquire the property; now, therefore be it RESOLVED, That the ~ >~rd of Direp:ors:cf~proves the acquisition of 3636 Pennsy Drive in Landover, Maryland; al].d be it fina(ly ~:;r-~ - :// RESOLVED, ljf{(;hi~; ~~sofution'';~i~all be effective 30 days after its passage by the Board of Directors:fb.accprC:l9oc:e with the 8(b) of the Compact. '-t..'. ' L o--;:-o,-;-.- -~~-~::~~ {. (':fj-']- -;;i:-:'" W,form and legal sufficiency, ''' ";? Mark R. Pohl Acting General Counsel WMATA File Structure No.: Fee Simple Acquisition