FDIC Law, Regulations, Related Acts
5000 - Statements of Policy
POLICY STATEMENT ON SECURING LEASED SPACE
I. Purpose. To establish:
A. The procedures that the FDIC will follow when leasing space; and
B. Official written guidance for FDIC personnel who have the responsibility of carrying out those procedures.
II. Applicability. The procedures outlined in this policy statement will be used for all FDIC lease acquisitions over 10,000 square feet, except for those executed by the FDIC when acting as the conservator of a failed financial institution or when operating as a bridge bank.
III. Policy. It is the policy of the FDIC to lease space which provides a safe, efficient and pleasant work environment for its employees, meets the programmatic needs of the organization and provides the FDIC with the best value in terms of cost and other factors. Further, the method of competition used to select space will be fair for all offerors that meet the basic criteria.
IV. Procedures. Depending on whether the lease acquisition represents a new lease, a lease renewal or a lease extension, the process for securing leased space will be as follows:
A. New Leases.
(1) Define Geographic Boundaries. Once the general location for a new office has been determined or it is determined that an existing office should remain in a general metropolitan area, the FDIC will define the specific geographic boundaries.
The FDIC will conduct a survey to determine the general market conditions, including current rental rates, vacancy rates and a listing of buildings with sufficient space to fulfill the FDIC's requirements. This information enables the FDIC to set the geographic area in which the space will be competed so that there are a reasonable number of buildings to ensure sufficient competition.
The geographic boundaries are set based on the information in the market survey and the following criteria:
(a) Access to other FDIC offices.
(b) Access to other financial and/or regulatory agencies.
(c) Access to public transportation (walking distance).
(d) Access to major highways and airport.
(e) Located in an area with a low crime rate in order to assure the safety of the FDIC's employees and visitors.
(2) Advertise. Once geographic boundaries have been established, the FDIC will advertise in the local newspaper and the local commercial real estate paper to solicit letters of interest for space meeting the following minimum criteria:
(a) The location must be within the described geographic boundaries; and
(b) The building must meet the minimum space requirements.
(3) Issue the Request For Proposal (RFP). Upon receipt of all letters of interest, the FDIC will call each of the interested parties to verify that they meet the minimum criteria, and if they are a broker, they will be required to submit evidence that they represent the owner of the particular building. RFP's which detail the basic space and facility requirements and include the FDIC's Standard Lease and the Leasing Representations and Certification forms will then be mailed to all offerors who meet the minimum criteria.
(4) Review Responses. When the responses to the RFP are received, an initial review will be made to determine if all basic information is included, especially the Leasing Representations and Certifications Form. The information provided on this form is the basis for determining the fitness and integrity of each of the respondents and whether or not they can do business with the FDIC. Each offeror must submit the form correctly and completely prior to the request for Best and Final Offers (BAFO).
Also, a preliminary financial analysis is made on each proposal.
(5) Tour Buildings. The FDIC tours all buildings that submit a response to the RFP, accompanied by a licensed independent appraiser who is familiar with the local real estate market. The appraiser determines the designation of each building (Class A, B, C, etc.). During this tour, specific issues with each building are noted so that they can be addressed in the request for BAFO's.
(6) Issue Request for BAFO's. The FDIC will compile a short list of potential landlords based on their proposals and the results of the tours. This list will be developed using the below listed items to qualify or disqualify landlords:
(a) Did the ownership clear all conflict and fitness and integrity issues?
(b) Did the space qualify for FDIC use? (Typically, the FDIC utilizes Class A space. In some cases, however, due to market conditions, the FDIC may consider Class B space.)
(c) Are the economics of the proposal in the competitive range?
(d) Is there enough contiguous space to meet the requirement?
(e) Will the space be available within the required time frame?
(f) Does the landlord offer the required flexibility for early termination or downsizing?
It should be noted that when requests for BAFO's are issued, any offeror who has not provided the required fitness and integrity information on the Representations and Certifications Form will be disqualified from further consideration. Unless there is sufficient information to determine that the building owner has no conflicts, it will be assumed that one or more conflicts exist.
(7) Review Best and Final Offers. An economic analysis including all cost factors and using same criteria/assumptions will be performed for each proposal. To assure each proposal is judged fairly, and to take into consideration the time value of money, a net present value analysis is performed.
The following items are factored into the financial analysis:
(a) Cost per square foot.
(b) Efficiency of the building in rentable vs. actual useable square feet.
(c) Rent abatement or lease assumption offered (if any).
(d) Cash concessions, incentives, and non-cash concessions, such as construction, materials, etc.
(e) Estimated cost of architectural fees.
(f) Estimated cost to build-out the space.
(g) Estimated relocation costs for the office move.
(h) Estimated cabling and telecommunication costs.
(i) Estimated increases in operating expenses over the base year amount.
(j) Estimated cost of parking, when applicable.
The location of the office and the availability of public transportation will determine whether or not parking will be included in the financial analysis. If parking is included, participants in the RFP process will be adviced in the initial RFP of the approximate number of spaces needed.
A financial analysis is prepared for each building for which a BAFO has been received. In addition, the FDIC performs calculations from building plans to verify each offeror's stated useable square footage.
(8) Award Lease. Based on the financial analysis of the BAFO's, the FDIC awards the lease to the offeror whose proposal is the most favorable to the FDIC, considering cost and other factors, after obtaining appropriate approvals in accordance with the Corporate Delegations of Authority.
B. Lease Renewals. Normally, when the need for space will continue beyond the lease expiration date, the FDIC will begin the process of seeking competitive offers for the continuing requirement prior to lease expiration. However, if the lease contains an option to renew and the FDIC determines that it is in its best interest to remain at the same location, the option can be exercised provided the following information is collected and shows that remaining in the same location is the best alternative:
(1) Market Survey. Contract with a local real estate professional to perform a market survey that will report on current vacancy rates, current asking rates, and the effective rates of recently completed comparable deals.
(2) Proposal from Landlord. Solicit a proposal from the current landlord that addresses the criteria and needs of the FDIC.
(3) Fitness and Integrity. Obtain a new Representations and Certifications form from the landlord to check fitness and integrity.
(4) Cost Comparison. Compare the cost of staying at the current location under the renewal option to the estimated cost of relocating.
If it appears that the best option is to remain at the current location after gathering and analyzing this data, the FDIC will attempt to renegotiate any terms of the current lease that caused problems during the initial lease term.
If the economic terms of the proposed extension prove that it will be less expensive to stay in the existing space, and if there are no remaining problems with the terms of the lease, a lease amendment will be prepared and executed after appropriate approvals are obtained in accordance with the Corporate Delegations of Authority.
C. Lease Extensions. A lease extension differs from a lease renewal because (1) There are no options to exercise and the FDIC needs to remain in the space beyond the lease expiration date, or (2) the existing option(s) are unacceptable and the FDIC needs to remain in the space beyond the lease expiration date.
A lease extension is not meant to be a long-term solution to a space acquisition problem or to circumvent the competitive space acquisition process. It is meant to provide the FDIC additional time to determine its long-term requirements, which will then be included in a formal competition. Therefore, a lease extension will not be longer than three years.
(1) Long-Term Lease Extensions. As with a lease renewal, the following requirements need to be fulfilled if the lease is to be extended for a period longer than six months:
(a) Market Survey. Contract with a local real estate professional to perform a market survey that will report on current vacancy rates, current asking rates, and the effective rates of recently completed comparable deals.
(b) Proposal from Landlord. Solicit a proposal from the current landlord that addresses the criteria and needs of the FDIC.
(c) Fitness and Integrity. Obtain a new Representations and Certifications form from the landlord to check fitness and integrity.
(d) Cost Comparison. Compare the cost of staying at the current location versus the estimated cost of relocating.
(e) Negotiate. Renegotiate any terms of the lease that may have caused problems during the initial term.
(f) Obtain Approvals and Execute Lease Amendment. Since a long-term lease extensions could be considered a non-competitive procurement, the Board of Directors must approve all such extensions before the lease amendment is executed.
(2) Short-term Extensions. When the term of the proposed lease extension will be six months or less, the lease amendment can be executed after appropriate approvals are obtained in accordance with the Corporate Delegations of Authority.
By order of the Board of Directors, February 6, 1996.
[Source: 61 Fed. Reg. 5553, February 13, 1996, effective February 6, 1996]