board of trustees presentation 4 oct07 final ii

BOARD OF TRUSTEES’ PRESENTATIONNTMA 2007 FALL CONFERENCE

PITTSBURGH, PASUNDAY, OCTOBER 14, 2007

9:00 – 11:00 amRenaissance Pittsburgh Hotel, Pittsburgh, PA

NTMA Office Building9300 Livingston Road

Ft. Washington, MD 20744

NTMA Office History: 1943-2007

• NTDMA formed 1943 in Chicago• First staffed office in Washington DC 1943-1944• Office moved to Cleveland Ohio in 1944• NTDMA changed to NTDPMA in 1960• Office moved to Washington DC in 1964• Land purchased in Oxon Hill, MD in 1969• Original Wing construction completed in 1972• NTDPMA changed to NTMA in 1980• Second Wing construction completed in 1982

Original Wing Built in 1972

Second Wing Built in 1982

Office Building Specifications

• Year Built: 1972/1982• Parcel Size (land): 73,805 square feet (or 1.69

acres)• Total office space square footage: 24,880• NTMA staff square footage: 13,914• Tenant square footage: 10,966• Real Estate Taxes: 38,000• Insurance: 14,149• Utilities: 85,000• Contract Services: 100,000• Building Mgmt (staff): 5% to 20% (time allocation)• Tenant Rental Income: $120,000 • Expenses to operate: $257,000 (approximately)

Recommendation to Sell NTMA Office Building

• Rationalization

• Questions & Answers

• Summary

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive

In the last five years the NTMA Office Building has suffered….

•Three incidents of flooding •One incident of a sewer backup•Two incidents of storm damage to the building and landscape•Water damage requiring mold remediation•Parking lot damage requiring repair•Other damage needing repairs (as listed)

Auditorium – several floods, water damage, wall damage, mold damage

Auditorium (after mold remediation)

Parking Lot

Landscaping

• Overgrown and Dead Trees

• Vulnerable to windstorms, etc.

• Liability – Vehicles and/or personal injury

• Sprinkler System must be replaced

Overgrown trees – rear view of lobby and executive office

Overgrown Trees

Windows

• All of the windows are old, cloudy and damaged

• Seals are broken on many of the windows, which results in higher utility bills

• Store-front style atrium windows in and off of the lobby leak and are extremely expensive to repair and/or replace

Leaking Windows – Lobby and Atrium

Windows-Replacements Required

Windows-Replacements Required

Windows-Seals Required Throughout

Ceiling Water Damage

Mechanical Room – Water Damage

Foundation Shifts

Ground Sink Around Foundation

Broken Stairwell Doors

Flooding: Temporary Fix of Drainage

Broken Stair Rails & Debris

Repairs

Repairs made within last 5 years– Renovated Executive Office – Approximately 12,000– HVAC Units - $50,000– Water and Sewer Pump Replacements –

Approximately 36,000– Air Quality Assessment – Approximately $5,000– Mold Remediation Work Performed - $36,000– Mold Remediation Work Validated - $750– Repaved Parking Lot - $28,000– Plumbing Repairs – Approximately $3,000

Repairs Repairs Needed – Extensive and Expensive

– Parking Lot – Concrete bed – Approximately $100,000– Overgrown Trees & Landscaping – Approximately $10,000– Damaged and Leaking Windows – Approximately $500,000– Ceiling Water Damage - $10,000– Wall Water Damage - – Foundation Wall Damage– Ground Foundation Damage– Door and Lock Replacements and/or Repairs – Approximately $3,500– Security Door - $4,000– Water run-off Drains to prevent flooding– Defective Electrical light units – inside and outside– Roof Replacement – Approximately $50,000– Underground Sprinkler System Replacement - $20,000– New Generator - $20,000– Plumbing Repairs (on-going)

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive– Employee Safety/Area Deterioration

Employee Safety and Area

During the 1972-1982 timeframe, the present address of the office building was then considered a safe and desirable location. Within the last ten to fifteen years, the area has suffered a constant deterioration in both appearance and safety. The next few slides will highlight the situation in greater detail.– Area– Street View– Vandalism to NTMA Property – Trash & Debris– Vagrants

Area

• Prince Georges’ County – highest crime rate in the Metro DC area (several incidents of car theft and/or damage to staff and tenant vehicles)

• Remote location: no public transportation available• Recent vandalism on office premises• Area invites vagrants• Public disposes trash on property• Open parking lot – invites open “use”• Discourages “professional” tenants• Staff reluctant to work beyond regular business hours

Street View

Vandalism

Vagrants living on property

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive– Employee Safety/Area Deterioration– Landlord-Tenant/Property Management

Landlord-Tenant and Property Management

• Approximately 15 years ago, NTMA reduced its core office staff, which eliminated the need for an office building of almost 25,000 square feet.

• A decision was made to lease the vacant offices to professional groups in the area.

• Long-term, the decision to do lease office space has not been beneficial to NTMA. Whereas at times the tenant income did in fact offset some of the operational expenses, there have been too many occasions wherein NTMA has had to evict tenants, or suffer the loss of revenue because of the delinquency of tenant payments. The income has historically not been reliable.

Landlord-Tenant and Property Management

• Property Management for the office building has primarily been the responsibility of an NTMA staff member.– Maintenance contractors & repairs, as well as service calls and

appointments related thereto:• Lawn• HVAC• Generator• ADT Security• Elevator Service• Fire Extinguisher Service• Terminex• Janitorial Service• Plumbing• Building Lighting• Supplies• Police Reports and Complaints

– Utilities• Washington Gas• Pepco

– Tenant and Landlord Services• Advertise for Office Space• Interview potential tenants• Write and review Lease Agreements• Collect and Monitor tenant payments/delinquencies• Handle Evictions and collections

– Process Insurance Damage Claims – All other related duties thereto

Landlord-Tenant and Property Management

Property Management – flooded lobby cleaned by staff

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive– Employee Safety/Area Deterioration– Landlord-Tenant/Property Management– Organizational Current and Future Needs

and Strategic Direction

The next few slides will speak to the strategic planning for NTMA and address the current needs, and well as future needs of the organization

Organization Needs

• Current staff at this location– 19

• Current square footage used– approx. 14,000 sq. ft.

• Square footage required– 10,000 sq. ft.

Proposed Future Office Floor Plan (10,000 sq. ft)

Strategic Direction

• Financial Viability

• Sale/Leaseback

• Identify “Ideal” Location

• Feasibility Study– costs to relocate– current staff/new staff– virtual office– member needs

NTMA Strategic Direction

FOR DISCUSSION PURPOSES ONLY NTMA STRATEGIC PLANNING MEETING

SATURDAY, AUGUST 19TH, 2006NTMA IDEAL LOCATION CRITERIA

Location Recommendations (for discussion purposes only):• Fort Washington, MD• Other Metro D.C. (DC, VA, MD)• Cleveland, OH• Columbus, OH• St. Louis, MO• Nashville, TN• Atlanta, GA• Indianapolis, Indiana• Pittsburgh, PA• Chicago, IL

Strategic Plan (cont’d)

Criteria WeightEase of Delivery of ServicesTransportation Access 10%

Key Staff RetentionFuture Staff Recruitment 35%

Operating Costs 35%

Alignment with Future Core and Outsourced Services Model 10%

Attractiveness to Stakeholders (perception of professionalism) 10%

NTMA Ideal Location Criteria

Location Rate per sq. ft.• Ft. Washington, MD $15 – 17• Other Metro DC (DC, VA, MD) $10 – 25• Cleveland, OH $15 – 24• Columbus, OH $12 – 25• St. Louis, MO $15 – 23• Nashville, TN $14 – 22• Atlanta, GA $14 – 31• Indianapolis, IN $15 – 35• Pittsburgh, PA $17 – 23• Chicago, IL $19 - 25

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive– Employee Safety/Area Deterioration– Landlord-Tenant/Property Management– Organizational Current and Future Needs

and Strategic Direction– Cost to Operate (Costs Benefit Analysis)

Cost To Operate

• To evaluate the cost to operate, NTMA developed a Cost Benefit Analysis to assess ownership versus leasing.

• Figures in the “Own” column are based on actual revenues and expenses

• Figures in the “Lease” column are based on projected revenues and expenses based on current market conditions

Costs Benefit Analysis

Sale = $1,600,000 Net OWN LEASE

Benefits/Income:*Tenant Rental 120,000**Investment Income 96,000Total Revenue 120,000 96,000Margin of Error @ 10% 12,000 9,600Total: 108,000 86,400

Costs/Operating Expenses:***Rental 0.00 $150,000Utilities 85,000 0.00Maintenance 100,000 0.00Property Management 20,000 0.00Taxes 38,000 0.00Insurance 14,000 7,000MiscellaneousCapitalTotal Expenses 257,000 157,000Margin of Error @ 10% 25,700 15,700Total Costs 282,700 172,700Profit (Loss): (174,700) (86,300)

*Based on 80% occupancy at $15.00 per square foot**Developed from a net sale of the building at $1,600,000 invested at 6%*** Based on 10,000 square foot at $15.00 per square foot (estimated cost from C.B.R.E.)

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive– Employee Safety/Area Deterioration– Landlord-Tenant/Property Management– Organizational Current and Future Needs

and Strategic Direction– Cost to Operate (Costs Benefit Analysis)

• Questions & Answers

Questions/Answers

• If the building sells immediately, where do we go? – 1 year guaranteed lease back with annual options to renew up to

5 years.• What are the tax implications to NTMA?

– According to BDO Seidman, there would be no tax implications to NTMA.

• What are the costs to sell the building? – C.B. Richard Ellis (CBRE), a national real estate firm, has

quoted 6% of sale price.• What is the estimated sale price:

– Based on the professional opinion of CBRE, the following two scenarios are most viable:

• $1.9 user purchaser• 1.6 investor purchaser

Questions/Answers

• If NTMA relocates to another part of the country, how will the organization be staffed? – Strategic Planning by Executive Team Team is in process.

• Will key staff be willing to relocate?– Feasibility Study will be commissioned.

• How much square footage will be required?– 10,000 – 12,000 sq. ft.

Recommendation to Sell NTMA Office Building

• Rationalization– Repairs – Extensive and Expensive– Employee Safety/Area Deterioration– Landlord-Tenant/Property Management– Organizational Current and Future Needs

and Strategic Direction– Cost to Operate (Costs Benefit Analysis)

• Questions & Answers• Summary

Summary

1. Current building exceeds the space needed to operate NTMA today.

2. Building deterioration, employee safety, and ongoing maintenance/repair continue to be problematic.

3. Given the CBA it is better to lease than own the current space.

4. Leasing would allow NTMA to strategically plan for future office/location needs.

5. NTMA should be serving members, not a building.

Thank you.

For additional information and/or comments, please contact any one of the Building Task Force Team members.