GSA
Public
Building
OCT
3
0
2007
MEMORANDUM TO ASSISTANT REGIONAL ADMINISTRATORS. PBS
REGIONAL REALTY S S OFFICERS
THRU: ANTHONY E.
DEPUTY
FROM: SAMUEL
J.
MORRIS Ill
'-,
%M
ACTING ASSISTANT COMMISSIONER
FON
OFFICE OF
REAL ESTATE ACQUISITION
-
PQC
SUBJECT:
Free Space in a Leased Location
1.
Purpose. This Realty Services Letter (RSL) issues policy and criteria applica
when free space is included as part of a lease.
2. Background.
a. Regional practices have, with minor variations, allowed for acceptance and
incorporation of portions of leased space termed "free," when provided by a
Lessor in a space procurement. "Free" is herein defined as provided
affwit
additional cost to the Government.
b. On September 21,2007 the Office of Real Property Asset Management iss
Pricing Policy Clarification #22, Free Space
in
Lease Locations, to provide
and guidance when incorporating free space under lease. This RSL is bein
issued coincident with Clarification #22 to avoid inconsistencies, clarify
processes, and promote proper methodologies when incorporating free spa
into a lease.
.
Effective DateIExpiration Date. This RSL is effective immediately and will expi
months from the date of issuance unless modified, cancelled, or reissued.
.
Cancellation. None
.
Applicability. This RSL applies to all real property leasing activities.
.
Instructions/Procedures.
See Attachment 1.
ttachments:
1: Policies
I
Procedures for Free Space in a Lease
2: Pricing Policy Clarification #22
3:
OA Tool and STAR instructions for Free Space
U.S.
General Services Admi
1800
F
Street,
NW
3
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6
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Service
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policy
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nistration
Washington.
DC
20405-0002
www.gsa.gov
Attachment
1
Policies
I
Procedures for Free Space in a Lease
1.
General. The policies in this RSL must be applied in all space procurements where
free space is offered as a portion of the total leased space.
a. When space in excess of a stated space requirement is offered for free prior to
award of a lease, the tenant agency must either
1)
agree to accept the extra free
space and sign an Occupancy Agreement (OA) for the actual square footage, or
2) reject the free space. If the customer agency accepts the free space, the rent
for the total square footage, including the free space, will be assessed on the
rent bill, with the overall rate blended over the entire square footage (free and
leased). When creating the OA with free space, the responsible GSA associate
must enter the full amount of space -including free space square footage, and
include the free space adhoc clause as part of the OA. The clause contains a
narrative accounting for the presence of free space. This is explained in greater
detail in Pricing Policy Clarification
#22
and in Instructions
-
Free Space in a
Leased Location OATool and STAR. If the customer agency rejects the free
square footage, the Offeror must show that the free space will be partitioned off
from the leased space.
b. When offered, Contracting Officers, Realty Specialists, and Broker Partners must
advise the Offeror that any space offered as free will not be considered during
negotiations, will not be evaluated as part of price evaluations, and will not be
considered a factor in lease award.
2. The Lease.
a. The Realty Specialist must clearly indicate in the lease contract that for the
purposes of all rental calculations, all space offered as free is excluded from
tenant improvements, operating costs, overtime utility rates, CPI escalations, and
percentage of occupancy for tax escalations. The Realty Specialist must also
include in the contract that maintenance of free space be provided at no
additional costs to the Government.
b. When incorporating free space into the lease, the entire square footage of the
free portion of space must be clearly cited on the SF2 (both in Rentable and
ANSIIBOMA Office Area).
c.
To document free space in the SF2, the following language is suggested for use:
"xxx,xxx rentable square feet of [officelwarehouse] and related space,
which yields xxx,xxx ANSIIBOMA Office Area square feet of space and an
additional xxx rentable square feet (yielding xxx ANSIIBOMA Office Area
SF) of free space (for which the Government will not be charged rent,
including real estate taxes and operating cost escalations) in excess of
the total xxx,xxx rentablelxxx,xxx ANSllBOMA square footage indicated
above, for a total of yyy,yyy rentable square feet, (yielding yyy,yyy usable
square feet) under lease, at Building Name and Address".
3.
Lease Rider. The lease agreement must specifically state that "All rights,
responsibilities, and obligations that bind the Lessor and Government under this
lease agreement, including the General Clauses, and any other attachments hereto,
shall pertain to the entire space under lease, including the free space."
-.
4.
Tenant Improvement Allowance. The Realty Specialist must not increase the TI
allowance to cover build out for any portion of space identified as free under the
lease agreement. All space designs and floor plans must clearly delineate all areas
identified as free under the lease agreement, as situated in relation to the demised
leased space under rent, copies of which must be maintained in the lease file.
5.
Lease Metrics. For the purposes of lease metrics (i.e., Lease Cost Relative to
Market, etc.), all leases containing free space must be noted as such when reporting
on the particular lease in question. When National Office adjudicates a lease in
relation to the LCRM, all free square footage will be deducted out of the lease, and
not considered a component for adjudication.
6.
Release of Space. If the customer agency accepts the free space, and during the
term of the lease decides to return space to GSA, an amount of square footage up
to the total free space square footage must be returned first, with no rental
adjustment, before any space under rent can be released. This will apply even if the
physical space that was initially counted as free remains in the tenant's possession,
in accordance with Pricing Policy Clarification
#22
and the free space OA clause.
7.
Scoring. When submitting a lease containing free space to Portfolio for a scoring
analysis, the Realty Specialist must exclude all free space square footage from
scoring calculations.
8.
Prospectus Leases. When free space is offered as part of prospectus lease
procurements, Realty Specialists must consult with their regional Portfolio office.
The regional Portfolio office will obtain guidance from the National Real Property
Asset Management office prior to accepting free space for such leases.
Attachmen
GSA
Public
Buildings
Se
SEP
2
1
2007
MEMORANDUM FOR ADMINISTRATORS (PBS)
FROM:
ASSISTANT COMMISSIONER
(PV)
SUBJECT: Pricing Policy Clarification #22,
Free Space in Leased Locations
The attached pricing policy clarification covers policy when free space is offered at a
leased location. Also attached are implementation instructions and a sample of the O
Clause used in accordance with this clarification.
This clarification has been cleared through the PBS Issuance System. It was drafted i
coordination with the Pricing Network and the Real Estate Acquisition Division. A
Realty Services letter will be issued to provide operational guidance in support of the
policy.
If you have questions regarding this clarification, please contact one of the National
Pricing Points of Contact, Beth Lemanski at 202-501-3277, David C. Baker at
202-595
4648 or Kelly Juarez at 816-823-2545.
Attachments
cc: Assistant Commissioners, Regional PT Directors, Regional Pricing POCs, and
Realty Services Officers
t
2
rvice
A
n
-
U.S.
General
Services
Adminlst
1800
F
Streef,
NW
Washington.
DC
20405.0002
w.gsa.gov
ration
-
-
-.
FREE SPACE CLARIFICATION
#22
Effective Date: September
10,2007
Puroose: Pricing Policy Clarification
#22
on Free Space in a Leased Location
No policy currently exists for the treatment of free space in leased locations. This
clarification is provided for consistent treatment of the issue.
Existinq Desk Guide Lanquaqe:
The existing Pricing Desk Guide does not address free space in leased locations.
Clarification:
Add to Section
3.2
after Rent Concessions.
Free Space
in
Leased Locations
When an offeror has a contiguous block of space that exceeds the maximum amoun
which GSA has solicited, he or she may offer this space at no charge to the
Government. When the offered space exceeds the maximum solicitation for offers
(SFO) requirement, the tenant agency must be consulted. The agency must agree t
accept the extra space and sign an occupancy agreement (OA) for the actual squar
footage, or it must reject the additional square footage.
If
the customer agency accepts the space, then rent for the total square footage
(including the free space) will be assessed on the rent bill. However, the overall rate
be reduced (blended in the OA Tool) to essentially make the additional space free. I
the customer agency rejects the extra square footage, the
offeror must show that th
free space will be partitioned off from the requested block of space.
Once free space is accepted, the following apply:
0
The contracting officer must not consider the free space during negotiations o
evaluations of a competitive lease action.
The tenant improvement allowance must not be increased to include the squ
footage of the free space.
A clause must be completed and included in the OA to explain the terms of th
free space and details of the blended rate.
The square footage of the free space must not be included in the base cost of
services.
The annual Consumer Price Index (CPI) adjustment is not applied to the free
space.
The percent of government occupancy, for real estate tax purposes, must not
include the free space.
t for
o
e
will
f
e
r
are
e
If space is returned by the agency prior to expiration of the lease, an amount
square footage up to the total free space square footage must be returned firs
with no adjustment to the rent, before any paid space can be released. This i
the case even if the physical space that was initially counted as free remains i
the tenant's possession. This information is included in the free space OA
clause.
The free space square footage is not included in any scoring analysis pertaini
to a location with free space.
Seek further guidance from Real Property Asset Management (RPAM) at
national office prior to accepting free space for a prospectus level leased
Charges outside of the lease contract, such as security costs billed through the Fed
Protective
Service (FPS), will be assessed on the entire block of space since it is
occupied by the customer agency.
of
t,
s
n
ng
eral
Attachment
3
Instructions
Free Space
in
a Leased Location
OATool and STAR
In situations where the offeror is providing more space than the maximum in the
Solicitation for Offers (SFO), data should be entered
in
the OATool and STAR to
capture both the amount of space as reflected in the SF0 and the free space. Data
should be entered as follows:
OATool
1.
Create OA for full amount of space including both the SF0 space and the free
space reflecting the correct USF, RSF. Also include Parking and appropriate
Effective and Expiration Dates.
2.
On the OA Main Screen enter "Includes
##
RSF of Free Space" in the Version
Description.
3.
On Rates page, enter the annual amount for each Rent Component based on the
square footage we are paying rent to the.lessor. The OATool will then calculate
the blended rate.
4.
Add the Optional Clause
-
Free Space by checking box next to the clause.
5.
Fill in the appropriate amounts for all text boxes in this clause and save
STAR
1.
The Project should reflect the square footage requested by the agency
2.
The Lease should use the total of the "paid" and "free" space. This total should
be entered on the Lease Details screen in the ANSI rentable field.
3.
Add Remarks
-
"Includes
###
RSF of Free Space" to the Lease module.
4.
Space records should be created in one CBR for the full amount of usable and
,rentable square footage including the "paid" and "free" space. A separate record
for the 'Tree" space should be created with Space Category of Assigned
-
New,
Space Type based on build out and "Free Space" should be added to the Activity
Name field. (For Senate and House space, the separate space record should
still be created but
it
will not be possible to add Free Space to Activity Name field
since the member name appears there)
OA Clause for Use When Free Space is
Offered and Accepted
in
a Leased Location
Although the maximum requirement for this assignment was
?%#
RSF, the Lessor has
included ### RSF of space free of charge which brings the total square footage to
###
R
SF. The actual square footage occupied is documented in this OA and will be
r
eflected on the rent bill. However, only
W
RSF is being assessed rent. The blended
rates (to accommodate the free space) per rentable square foot are reflected on the
financial summary pages of this
OA.
If space is returned by the agency prior to
expiration of the lease, an amount of square footage up to the total free space square
footage must be returned first, with no adjustment to the rent, before any paid space
as free remains in the tenant's possession.
