Some local developers were left scratching their heads last month when the federal government, in a decision that carried
an air of intrigue, chose an out-of-state company to develop an FBI field office in Castleton.
The U.S. General Services Administration awarded the $38 million project to Lake Winnebago, Mo.-based BC Development Co., a firm founded by a 12-year veteran of the GSA who previously awarded such contracts. BC's proposal, an answer to a dizzying set of specifications, included a development cost and rent-rate combination that has puzzled other developers. And as of press time, BC did not yet control the 12-acre property where the field office is planned.
The 110,000-square-foot complex--a three-story office building, an enclosed parking garage and a separate maintenance building--is to be built on a tract of land north of 86th Street and east of Allisonville Road behind a Costco store. The FBI plans to lease the property for $54.2 million over 15 years.
The selection in March was the culmination of a 14-month solicitation process that also included bids from locally based Duke Realty Corp. and Lauth Property Group, both of which brought proposals for their own sites. Indianapolis-based Meyer Najem Corp. plans to build the project for BC.
The development cost works out to about $345 a square foot, more than double the average $150-square-foot cost for build-to-suit suburban office buildings, said Jon R. Owens, senior vice president and principal with the local office of St. Louis-based Colliers Turley Martin Tucker.
The development price is pushed north by security systems and technology costs, along with requirements put in place after the Oklahoma City bombing, including setbacks from roads and "progressive collapse" construction that isolates damage from a potential bomb.
It's the low lease rate that has some confused. If rates remain steady throughout the 15-year term, the FBI's deal would be in the range of $32 per square foot, only about 50 percent more than the typical suburban office rate of $20 per square foot, for a building that costs more than twice as much to build.
"Everybody's very surprised and confused how anybody can make sense of the numbers," Owens said. "It's a big deal, obviously. There were a lot of people chasing it. These guys kind of swept in and undercut everybody."
Cathy Baier, a principal and founder at BC, said that's exactly the goal. The firm pursues GSA build-to-suit contracts across the country. The company built an FBI field office in Birmingham, Ala., in 2005, and is building another in Jacksonville, Fla.
The trick, she says, is understanding the government's language and how it evaluates bids. A profile of Baier on BC's Web site says "she possesses an in-depth knowledge of federal procurement policies, procedures and politics."
"I think we surprised a few people in Indianapolis with that one," Baier said. "We have a pretty good formula, lenders love these deals, and we've got experience. I've written the solicitations when I was on the other side."
She said BC has a backup contract on the land in Castleton, for around $315,000 per acre. The first contract is held by a competitor for the project, Westlake, Ohio-based Carnegie Management and Development Corp. BC is negotiating to pay Carnegie to back out of its contract.
Carnegie officials did not return phone messages.
The owner of the land, East 91st Street Christian Church, bought it about five years ago with plans for an expansion, said church administrator Kevin Hart. In the end, the church didn't need the property for its expansion so it decided to sell it to retire debt.
"A developer approached us to buy the ground," Hart said. "We for a long time didn't even know who the client was."
GSA spokesman David Wilkinson said the government provides potential developers with what it's willing to pay and a set of specifications and lets them work the numbers. It has given BC until July 21 to gain control of the property.
"It may be unusual, but this is not your customary deal," Wilkinson said. "It's not an office building. It's a federal facility."
The GSA prefers to find local developers, but that's never a requirement.
"Basically, we're after the best product at the best price, and that's it," Wilkinson said.
Construction is scheduled to begin this fall and finish by late 2008, when the FBI will vacate about 55,000 square feet in the Minton-Capehart Federal Building downtown. That space likely will be taken by other government functions.
About 100 FBI employees will work in the new building, but the exact number is classified, said FBI Special Agent Wendy A. Osborne.