11/14/02
The Chicago Transit Board today approved the recommendation of its real estate advisors to relocate its headquarters to a build-to-suit location at 555 West Lake Street in 2004. This relocation will reduce the CTA's annual operating expenses by saving an average of $7.7 million annually over the life of a lease alternative.
A team led by Mesirow Stein Real Estate, Transwestern Commercial Services and OWP/P Architects presented its evaluation following an analysis of 70 alternatives, including 14 submissions that met CTA's criteria and objectives for leasing, purchasing and build-to-suit proposals.
Currently, the CTA occupies office space at the Merchandise Mart, 350 N. Orleans and 120 N. Racine at an annual cost of $5.5 million. Consolidating administrative offices and owning rather than leasing will provide the strongest long-term investment value and allow the CTA to use capital funds rather than operating funds for its office space. The total base building development cost is $75.9 million, with additional costs such as architectural services, relocation costs, and furnishings bringing the total to $94.6 million.
"The CTA has approached the decision to relocate as a financial opportunity to not only reduce office space expenses, but to shift them from the operating budget to capital," said CTA President Frank Kruesi. "Ownership will reduce the CTA's annual operating expenses by saving an average of $7.7 million annually over the life of a lease alternative."
In addition to the cost savings, the CTA will have more efficient work areas ? going from approximately 260 square feet per person to 240, and it will improve productivity by having key personnel in one location. Sole ownership will also allow the CTA greater financial control of capital expenditures, operating expenses, operations and security.
"Through careful, responsible administration, the CTA has effectively managed its operating expenses and obtained more funds for capital investment," said J. Douglas Donenfeld, chairman of the Finance Committee of the Chicago Transit Board. "Owning instead of renting will allow CTA to move the expense of rent out of its operating budget. Using capital funds for our headquarters will help balance our budget and meet the RTA's recovery ratio."
Federal funds will be used for the majority of the cost of the building. This allows the CTA to use the operating money saved to maintain and improve bus and train services for customers.
"Ownership makes the most sense financially. By eliminating our lease payment from the operating budget, those funds can be used to support service for our customers," explained Kruesi. ?It is the same basic principle as home ownership. In the long run, it is cheaper to buy than to rent."
The developer of the 555 W. Lake location is Fifield Companies.
Building ownership is not new for the CTA. Since 1995 the CTA has owned a building at 120 N. Racine, which currently houses the administrative offices for Transit Operations and Facilities and Maintenance.
The timing of this decision was driven by CTA's current lease. Although the lease with the Merchandise Mart runs through 2007, the lease agreement contains a clause that allows the CTA to leave the Mart in November 2004 as long as notification is provided by the end of November 2002.
The CTA's headquarters have been located in the Merchandise Mart since the agency's inception in 1947. The majority of the CTA's 11,500 employees work in transportation operations and maintenance, and report to bus garages, rail terminals and other field locations throughout the CTA's service area.
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