Suffolk County: New lease will save $1 million
Suffolk County's Health Department building is at 3500 Sunrise Highway in Great River. The county is renegotiating a new lease on the building. Credit: John Roca
Suffolk County is seeking to take advantage of the sagging commercial real estate market by renegotiating its lease on a building that houses the Department of Health — a move that will produce savings of $1 million over 20 years, a top county real estate official said.
The county is seeking to renegotiate its lease for the 63,000-square-foot building on Sunrise Highway in Great River, according to minutes of a legislative committee meeting on Nov. 10.
Cushman & Wakefield, a commercial real estate brokerage company, said in a report they have negotiated a new lease for the county at that location.
The building is owned by the Feil Organization, a New York City-based management firm.
WHAT TO KNOW
- Suffolk hopes to secure savings of $1 million over 20 years by renegotiating a new lease on a 63,000-square-foot building in Great River that houses the Department of Health.
- The proposed 20-year lease would cost $21 per square foot with a 2% annual increase over the life of the agreement.
- Suffolk, which spends about $1.5 million per year to lease the space, would pay $1.3 million in the first year of the new lease. Long-term savings would come from that reduction along with savings from 13 months free rent.
Suffolk is paying about $1.5 million per year to lease the space, according to Marykate Guilfoyle, a spokeswoman for County Executive Steve Bellone.
The new agreement would cost $1.3 million in the first year, and the long-term savings would come from that reduction along with 13 months free rent, county officials said.
“By doing this lease, we saved about a million bucks over the length of the term, by doing it earlier than the expiration date," county Facilities Space Manager Tim Sheehan said during a legislative committee on Nov. 10.
The proposed 20-year lease would cost $21 per square foot with a 2% annual increase over the life of the agreement, according to the Cushman & Wakefield report.
The average asking rent for commercial space on Long Island was $28 per square foot in the third quarter of 2022, according to Colliers, a national commercial real estate services company.
The Suffolk County Legislature must approve the new lease.
David Pennetta, executive managing director of Cushman & Wakefield’s Long Island office, described the Great River site as an aging one-story former Grumman Aerospace Corp. building.
Under the terms of its contract with the county, Cushman & Wakefield would earn a commission of 6% of the rent for years one to three, and 3% in years four through 20 — for $1 million total.
The Feil Organization will cover the cost of Cushman & Wakefield's services, Guilfoyle said.
Even so, Legis. Robert Trotta (R-Fort Salonga) said Bellone administration officials should consider using county staffers to hash out the lease agreement’s terms.
Trotta said if Feil were not required to pay the broker’s fee as part of the deal, the company might be able to offer better rental terms to the county.
“Why we don't have someone in our 6,000 employees, our legal bureau, our county attorney that can't go in there and negotiate it?” Trotta asked during the Space Management Steering Committee meeting on Nov. 10.
“It’s gross mismanagement,” Trotta said.
Randy Briskin, vice president of leasing for the Feil Organization, said Cushman & Wakefield negotiated a good deal for the county.
“A lot of times, a broker can help a tenant negotiate a better deal,” Briskin told Newsday on Friday.
“It's not always that it causes the rent to go up," Briskin said. "It’s just not as black and white.”
Sheehan and Pennetta deferred comment to the county executive’s office.
Guilfoyle said Cushman & Wakefield's contract for brokerage services was approved by the Suffolk County Legislature in 2017 after a request for proposals.
Suffolk has sought brokerage services from outside vendors since 2006, but officials are trying to get away from the practice, Guilfoyle said.
“The administration has been working to change the way these deals have historically been done,” Guilfoyle said in an email to Newsday.
“We have put a [second] Facilities Space Manager in the 2023 budget, thank you to the legislature for approving, and are working to implement an asset management system," she said.
Commercial real estate professionals said Cushman & Wakefield's $1 million brokerage fee is in the normal range for such deals.
Eric Herlands, an adjunct instructor at the NYU School of Professional Studies Schack Institute of Real Estate, said brokerages typically can earn a 3% commission on lease renewals.
“Regardless of perception, the math seems correct and the practice typical,” Herlands said of Cushman & Wakefield's arrangement with Suffolk.
Trotta also raised questions about political campaign contributions by Pennetta.
According to state campaign finance disclosures, Pennetta has donated $14,975 to Bellone's campaign since 2011, including $5,000 in July.
Pennetta also made a $500 donation to the Suffolk Republican Committee in October, campaign reports show.
“Campaign contributions never influence government policy or the selection of outside vendors,” Guilfoyle responded.
Vera Chinese covers Suffolk County government and politics. She joined Newsday in 2017 after working as an editor for the East End lifestyle publication northforker and a general assignment reporter for the New York Daily News.
