12876 Molly Pitcher Highway

Challenge

The U.S. Federal Emergency Management Agency (FEMA) implemented changes in how it responds to emergencies nationwide and charged GSA with procuring them a 250,000 SF warehouse with dozens of special requirements which no existing building would ever already be equipped with GSA solicited a huge area of the I-81 corridor in both Pennsylvania and Maryland for a “to-be-built” warehouse, incorporating all of FEMA’s special requirements:

• 15-years with 10 years firm and inclusive of a $20.00/RSF tenant improvement allowance with the caveat that the total annual rent must stay below the amount of the Congressional Prospectus Lease Payment Threshold of $3,095,000.00 per year

Solution

• Initial proposal to GSA included a rental rate more than $6.00 above the prospectus rent cap
• CBRE FLAG found a way to recharacterize certain operating costs and shuffle several other costs to be accepted as outside the prospectus rent calculation
• Successfully argued to GSA for a longer term of at least 15 years, which would allow costs to be amortized over the longer period and less expensive financing options would become available

Results

• Being extremely creative with respect to keeping the annual rent under the congressional threshold and working in total collaboration with the Government and the Lessor in exercising the Lessor’s purchase option on the land on the same day as GSA fully executed the lease, this solution allowed the deal to move forward
• Successfully negotiated a 20-year lease with 15 years firm for a “to-be-built” 250,000 SF highly specialized warehouse