West Heating Plant

June 19, 2012

FLAVIO PERES
DEPUTY ASSISTANT COMMISSIONER
REAL PROPERTY UTILIZATION & DISPOSAL
PUBLIC BUILDINGS SERVICE
U.S. GENERAL SERVICES ADMINISTRATION
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND 
EMERGENCY MANAGEMENT

“West Heating Plant”

June 19, 2012

Good morning Chairman Denham, Ranking Member Norton, and members of the Subcommittee. My name is Flavio Peres, and I am the Deputy Assistant Commissioner for Real Property Utilization & Disposal at the U.S. General Services Administration’s (GSA) Public Buildings Service (PBS).  Thank you for the opportunity to join you here today at the Georgetown Heating Plant, a property GSA will auction off later this year, generating millions of dollars in proceeds while allowing the property to be returned to productive use for the community.

This property is an example of GSA’s successful management of our assets, and our ongoing efforts, in line with Administration goals, to better utilize Federal real property.  I appreciate the opportunity to come to highlight GSA’s role in the disposition of property government-wide, and how that fits into the broader Federal government real property portfolio.

The Federal Real Property Portfolio –

While GSA has a large real estate portfolio to manage, the broader Federal government portfolio is far more extensive.  GSA manages the Federal Real Property Profile (FRPP) which is the Government’s inventory database of Federally owned and leased assets including buildings, land, and structures.   The  FRPP  is the “single, comprehensive, and descriptive database of all real property under the custody and control of all executive branch agencies, except when otherwise required for reasons of national security,” in accordance with Executive Order 13327.

In FY 2010, 24 agencies reported a total of 893,381 buildings and structures government-wide.  These assets are broken down in different categories such as utilization or status.  In FY 2010, 78,000 assets government-wide were identified as being under- or not utilized.   These assets could include buildings that are being modernized, buildings or structures in the middle of a campus, or other structures such as sheds, fences and flag poles.  Agencies described approximately 14,000 assets government-wide as excess, indicating that agency had no further mission need for the asset.

Better Utilizing Federal Real Estate –

The Administration has moved aggressively to ensure that Federal agencies better utilize their real estate.  In June 2010, the President issued a Memorandum entitled “Disposing of Unneeded Federal Real Estate,” which charged civilian agencies to more effectively utilize space, reduce operating costs, and dispose of unneeded real property to save $3 billion by the end of 2012.  GSA has played a role both in generating savings from its own real estate as well as helping other agencies to find savings, and the Administration recently announced that the Federal government will not only meet, but also exceed, this $3 billion goal.

To further save money on real estate, the President proposed a bill that would usher in a new approach to Federal real estate, the Civilian Property Realignment Act.  Building upon the successful model established by the Defense Base Realignment and Closure Commission, the President’s proposal would create an independent Board of experts to identify opportunities to consolidate, reduce, and realign the Federal civilian real estate footprint as well as expedite the disposal of properties.

This proposal would utilize bundled recommendations, a fast-track Congressional procedure, streamlined disposal and consolidation authorities, and a revolving fund replenished by sales proceeds to provide logistical and financial support to agencies in their disposal of high-value properties.  It would be a comprehensive solution to key obstacles such as red tape and competing stakeholder interests that hinder the Federal Government’s progress on improving real estate management decisions.

And most recently, Acting OMB Director Jeffrey Zients issued a May 11, 2012, memorandum entitled “Promoting Efficient Spending to Support Agency Operations” that stated, among other things, that agencies shall not increase the size of their civilian real estate inventory.  Any increase in an agency’s total square footage of civilian inventory must be offset through consolidation, co-location, or disposal of space.

All of these initiatives are improving the Federal government’s management of real estate, ensuring that agency decisions are made in a cost-effective way, and saving taxpayers money.

GSA as Asset Manager –

Of the 893,381 buildings and structures reported in the FY2010 FRPP, GSA controls 9,476 assets.  In square footage, this comprises about 12.3 percent of the total government’s portfolio.

In GSA’s capacity as one of many landholding agencies, we supply office space to other Federal agencies in support of their mission.  We have a robust asset management program to track the utilization of our inventory, strategically invest in our assets where needed, and aggressively dispose of unneeded assets.

Because of our efforts, we lead the market with our vacancy rates and utilization; 3 percent of our portfolio has been classified as an under- or not utilized asset.  Although we work diligently to identify unneeded assets for disposal, it is important to note that not all properties labeled as underutilized are available for sale.  In fact, the majority of GSA’s properties labeled as underutilized in the FRPP are not candidates for disposition.  Approximately one-third of these underutilized assets were leases that are now occupied or have expired; another third of the properties are undergoing major building modernizations, being backfilled with tenants from leased space, or assigned to agencies with new requirements.  When we find underutilized space in areas where there is a continuing Federal need, GSA works aggressively to renovate and reuse the asset to achieve greater utilization.

Of the 14,000 assets categorized as excess in the FRPP, GSA identified 124 assets as excess to our own agency needs and began the disposal process for these assets.  The other 13,876 assets are from agencies other than GSA, constituting the vast majority of excess Federal assets.  Again, let me stress: 13,876 of the 14,000 assets cited as excess in the FRPP are managed by landholding agencies other than GSA.

Our low numbers of underutilized or excess assets are a testament to a major portfolio restructuring implemented over the past decade aimed at “right-sizing” our real estate portfolio.  In the last 10 years, we have disposed of over 280 GSA assets, valued at $260.5 million.

GSA has saved more than $300 million dollars, as part of the $3 billion goal outlined in the June 2010, Presidential Memorandum, “Disposing of Unneeded Federal Real Estate.”

These savings have come through a variety of actions, including disposals.  One example of a recent disposition is the sale of a surplus federal building in Brooklyn, NY.  GSA negotiated a sale of the property with the New York City Economic Development Corporation (NYEDC).  NYEDC and its development partner purchased the property for $10 million with a goal of ensuring the site is redeveloped for the primary purpose of retaining and attracting industrial jobs.  They are currently renovating the building for use as a state of the art industrial center.  The once-vacant federal building will soon be a hub of activity that is projected to create 400 short term construction jobs and 1,300 permanent jobs.  This project is expected to be a catalyst for the industrial redevelopment of Sunset Park and complement the other industrial complexes in the area.

Another property we have recently begun disposing of is a GSA-owned warehouse located in Gaithersburg, MD that currently houses the U.S. Consumer Product Safety Commission (CPSC).  Although the CPSC is not scheduled to move out until this summer, GSA has already declared the property excess and begun the disposal process.  This 9.5 acre site has eight structures and its disposal from the Federal real estate inventory will save the Government approximately $2 to $3 million in avoided maintenance and repair costs.

GSA as Disposal Agent for the Government –

In addition to managing our own inventory, GSA has authority to dispose of most properties government-wide.  GSA provides strategic direction and oversees the development of programs related to the utilization and disposal of Federal excess and surplus real property government-wide.

GSA’s disposal authority was provided in recognition of the expertise related to repositioning property.  GSA develops tailored disposal strategies specific to an asset’s characteristics, environmental issues, community interests, political concerns, market conditions and other factors impacting the repositioning of the unneeded asset. Similarly, when preparing a property for public sale, GSA develops marketing plans that optimize the public offering. We use tools and techniques designed to reach very broad audiences and we target specific niche interests.

While GSA has the expertise to successfully navigate properties through this disposal process, each individual landholding agency is responsible for making their own asset management decisions on whether that asset is excess to their needs.   In the last 10 years, GSA has disposed of over 2,600 government-wide assets, returning proceeds of $4.2 billion.  The majority of these public sales were conducted on www.realestatesales.gov  (previously known as www.auctionrp.com ), which provides a cost-effective way to reach the widest possible developmental interests and ensure a good return for taxpayers.

As part of the efforts to dispose of unneeded Federal real estate outlined in the June 2010 Presidential Memorandum, GSA’s Office of Real Property Utilization and Disposal has been assisting other landholding agencies as well in meeting their aggressive targets through disposals.

The West Heating Plant –

Today, the committee has chosen to host a hearing at the West Heating Plant, a property that will soon be available for sale.  The plant sits on 2.08 acres of land in a prime location in the District of Columbia, with stunning views of the city.

The plant was built in 1948 to provide steam service to government buildings on the west side of the city.  The plant ceased steam service in 2000, and since then, the site has served as a backup steam location as well as providing backup fuel storage capacity and spare parts for GSA’s Central Heating Plant.

As part of GSA’s efforts to right-size the portfolio, and in accordance with the direction provided by the Administration on disposing of unneeded Federal real estate, GSA formally declared the parcel excess to its needs on October 19, 2011.  As the first step in the disposal process, we screened the property for other Federal needs, and with no expressions of interest, declared the property surplus to the Government’s needs in November 2011.

After conducting required homeless screening in accordance with the McKinney-Vento Homeless Act, GSA has commenced marketing and appraisal efforts in support of a public sale of the property.  The property will be sold “As-Is, Where-Is.”  GSA is currently proceeding with required reviews under the National Environmental Policy Act and the National Historic Preservation Act, and these evaluations are slated for completion in the late summer.  The online auction at realestatesales.gov  will commence in the fall, and already interest from private sector developers has been incredibly high.

The sale of this property is expected to return millions of dollars to taxpayers, eliminate ongoing operations and maintenance costs, and make the property available for productive use by the local community.

GSA is one of many landholding agencies in the Federal government.  We continue to aggressively manage our inventory to dispose of unneeded properties and increase the utilization of our buildings.  And we continue to work in concert with the Administration and other landholding agencies in the government to more effectively utilize real estate.

The West Heating Plant is a prime example of GSA’s asset management strategies.  The plant will be auctioned off later this year, generating millions of dollars in proceeds, saving money in ongoing operations and maintenance, and putting the property back into productive use.

I welcome the opportunity to be here and I am happy to answer any questions you have.