Real Estate

A Plan to Hasten the Sale of Surplus Federal Property Gets Bogged Down

The plan sounded easy sufficient.

The federal authorities has lengthy owned extra actual property than it is aware of what to do with — buildings that sit empty and websites which can be underdeveloped — but it surely should soar by way of hoops earlier than it will possibly promote its holdings. So surplus properties languish whereas taxpayers foot the invoice for upkeep.

The resolution, springing from laws handed in 2016, was an unbiased company that will shortly determine underused properties and expedite their disposal.

But nothing has been easy about the Public Buildings Reform Board, as the little-known company is named.

It took three years for the 5 present board members to be sworn in, and two empty seats stay, together with that of the chairman. The Government Accountability Office reported that the board didn’t adequately doc the way it went about choosing properties on the market. The board was sued when it sought to promote a Seattle constructing that could be a repository of essential tribal information. The General Services Administration, the company that disposes of most federal properties, has flouted the board’s recommendation.

And to date, solely a single property that the board has beneficial on the market has truly been bought.

“It’s taken a lot more effort to get rid of this stuff than the reformers had hoped,” mentioned Demian Brady, vice chairman for analysis at the National Taxpayers Union Foundation, a lobbying group.

The board’s tribulations are a reminder of how troublesome it may be to untangle authorities purple tape. Some of the points might be chalked up to rising pains and the difficulties of working throughout the pandemic, and board members contend that the company has turned a nook.

But the rise of remote work implies that federal businesses are seemingly to want much less office space, leading to a better want for the authorities to scale back its footprint.

“This tool is going to be more, not less, important going forward,” mentioned Daniel Mathews, head of federal gross sales at WeWork and the former employees director of the House subcommittee that drafted the laws creating the board.

But whether or not the board can have its supposed impression stays to be seen.

“It’s turned into an arm-wrestling contest,” mentioned Norman Dong, a managing director at FD Stonewater, an actual property company. He supported the laws as commissioner of the public buildings service in the General Services Administration.

The downside of surplus federal property dates again a long time, nicely earlier than the Public Buildings Reform Board was created. By 2003, the Government Accountability Office had positioned the administration of federal actual property on a “high risk” listing, partially as a result of of longstanding difficulties unloading unneeded property.

The General Services Administration capabilities as the federal landlord, managing the buildings the authorities owns. But it can not promote a constructing except the company occupying it declares it “excess.” And businesses have had little incentive to try this.

It may cost a little an company much less to preserve a constructing on an annual foundation than to relocate staff to a smaller space and put together the outdated constructing on the market, even when it is sensible in the long term to get the property off its books. And businesses might not profit financially from a sale as a result of the proceeds usually go straight to the Treasury Department.

If an company does deem a constructing “excess,” there are extra hurdles: The property should first be supplied to different businesses and, if there are not any takers, made accessible for homeless companies and different makes use of. The course of can take years, main to a backlog.

In the federal authorities’s 2015 fiscal year, businesses reported more than 7,000 excess or underutilized properties, in accordance to the Government Accountability Office.

Attempts have been made, by way of Republican and Democratic administrations, to treatment the downside. A bipartisan breakthrough got here in 2016 with the passage of the Federal Assets Sale and Transfer Act, often called FASTA, modeled on a profitable course of of whittling down Defense Department installations after the Cold War. FASTA, it was hoped, would do for civilian properties what the Base Realignment and Closure course of had accomplished for army websites.

Signed into regulation by President Barack Obama simply earlier than he left office, FASTA approved the board to give you three rounds of gross sales, starting with a bunch of “high value asset” properties that will fetch $500 million to $750 million. The high-value spherical was additionally seen as a high-speed technique as a result of these properties may skirt the ordinary procedural hoops and go straight to sale, with the earnings funding the preparation of different properties on the market. Total projected earnings over the board’s six-year time period: $7 billion.

But members weren’t sworn in till May 2019, leaving them scrambling to hire employees and determine high-value properties by a fall deadline.

A former Nike missile web site in Gaithersburg, Md., a suburb of Washington, made the lower. So did 17 acres in Menlo Park, Calif., dotted with buildings the United States Geological Survey was vacating. Real property is at a premium in each areas.

But the board stumbled with its choice of a Seattle building the place the National Archives and Records Administration shops historic paperwork. Board members felt that the run-down constructing was ripe for redevelopment, however protests by students and tribes involved about shedding entry to the information led to a lawsuit by Washington’s legal professional normal and, finally, the withdrawal of the property.

The board additionally beneficial the sale of the Chet Holifield Federal Building — a ziggurat-like office constructing on 92 acres in Laguna Niguel, a metropolis in Orange County, Calif. — however historic preservation points have held up the course of.

The final list of FASTA properties was narrowed to 11. To expedite gross sales and maximize returns, the board beneficial that the General Services Administration hire a brokerage agency to promote the remaining properties collectively. The board believed {that a} portfolio sale would appeal to “the largest and best potential buyers,” mentioned D. Talmage Hocker, a board member who’s founder and chief govt of an actual property company in Louisville, Ky.

“We’re supposed to be making money,” mentioned Angela Styles, a board member and former Office of Management and Budget official.

But after hiring a brokerage agency, the administration reversed course, deciding to promote the properties itself, one after the other, on its auction website — the similar place the place it unloads used forklifts, office furnishings, railroad spikes and fight boots.

Last year, the General Services Administration bought 59 properties on the public sale web site for a complete of $52.59 million, however this can be a fraction of what was envisioned for the FASTA properties.

“G.S.A. determined that offering properties based on an individual asset sale, rather than in a bundled portfolio sale, was the best course of action,” mentioned Christina Wilkes, an company spokeswoman.

But to date, solely eight of the FASTA properties have been put up for public sale; of these, a car parking zone in Idaho Falls, Idaho, has been bought for $268,000.

“The proof is in the pudding,” mentioned David L. Winstead, a board member and a former General Services Administration official. “It’s taken longer to get these sales done, and we’re anxious to get them done and funds into the public assets fund.”

While proceeds dribble in, the board is assembling its subsequent listing of properties, due in December, with some adjustments in the manner it does business. In response to the criticisms by the Government Accountability Office, the board has beefed up documentation. After the debacle with the Seattle property, members are doing extra outreach to public officers in whose districts potential websites are sitting.

“We learned a lesson,” Ms. Styles mentioned. “Communication is just absolutely critical.”

Despite their early struggles, board members stay upbeat about their mission, which incorporates making suggestions about consolidating company operations — doubtlessly releasing up extra buildings on the market — and about making their voice heard.

The board has till 2025 to make its mark.

Back to top button