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Property sell-off: GSA auctions will finance construction, renovations

Nov. 11, 2012 - 03:54PM   |  
By ANDY MEDICI   |   Comments

The General Services Administration is dramatically stepping up efforts to sell off underused federal properties to help finance federal construction projects, building renovations and new leases.

GSA has seen its building fund depleted significantly in recent years: from $9.1 billion in 2010 to $8 billion in 2012. But GSA is one of the few agencies that can keep proceeds from sales of its own properties. It also earns fees from selling other agencies’ facilities. GSA can use those proceeds to fund other building projects.

Last fiscal year, GSA sold 79 properties for more than $37 million, and gave an additional 35 to state, local or other federal agencies, according to the agency. This year, GSA officials and other experts anticipate GSA will exceed those numbers — the agency has already disposed of, sold or put up for sale more than 28 properties so far this fiscal year.

“We are implementing several strategies that will allow us to shed even more excess property,” said GSA spokesman Dan Cruz.

Specifically, GSA is directing its staff to the task of preparing buildings for sale and working more aggressively with other agencies to get underused properties to market more quickly.

The sell-off is also driven by a White House mandate. President Obama in May issued a directive that requests by federal agencies for additional space must be offset by office consolidations, co-locations or sell-offs.

“GSA is actively working with all federal landholding agencies to identify unneeded assets and move them into the disposal process,” Cruz said.

Among the properties for sale now are:

The 431-acre former Stanley Mickelsen Safeguard Complex in Nekoma, N.D., which includes a chapel, a community center and an office building in its more than 258,000 square feet of building space. The anti-ballistic missile defense site cost about $500 million to build in 1975. Starting bid: $10,000.

A 20,000-square-foot heating plant in the high-priced Georgetown section of Washington. GSA estimates the sale will save $3.5 million annually in maintenance costs.

A 2.7 million-square-foot underground storage facility in Atchison County, Kan., that includes temperature control, lighting, administrative offices and restrooms. Current bid: $110,000.

Darrin Kennedy, executive managing director of government solutions at real estate company Colliers International, said he expects to see a continued increase in government property sales. While agencies were struggling to unload properties during the recession, it is easier now.

“Now, since the real estate market in general has improved, I think there is more case-by-case opportunity for the GSA to sell excess properties,” Kennedy said. “Three years ago it was difficult to sell these properties, but now there are buyers.”

One recent example is the 38-year-old federal building in Moscow, Idaho, which had been chronically underused. Put on auction last month, the building generated a late flurry of bids that netted $2.4 million for GSA.

The buyer, Gritman Medical Center, “saw this as a rare opportunity to invest in a property that would help us stay and grow in the downtown,” said Kelly O’Neill, the hospital’s community relations director.

Kennedy said there is increasing pressure from lawmakers on GSA to do more with its excess properties or run the risk of Congress doing it for the agency.

One bill pending in Congress, for example, called the Civilian Property Realignment Act, would create a commission to group excess properties for quicker sale. The bill passed the House this year and is awaiting action in the Senate.

Bob Peck, former public buildings commissioner at GSA and director of workplace consulting at design firm Gensler, said the agency needs to consider both the market and ongoing maintenance costs when prioritizing which properties to sell first.

Sales can also be delayed when states or cities use their representation in Congress to pressure GSA into giving properties away free or selling them at a discount to local groups, Peck said.

While there are thousands of surplus properties in the government, only a few are valuable and would generate interest from developers, he said.

GSA usually will put properties on the market “as is,” which means that it will not spend money renovating or rehabilitating properties before it attempts to sell them. “If a building needs a lot of work, that may depress its value to potential purchasers,” Peck said.

The condition of the Moscow Federal Building did not deter Gritman Medical Center from bidding. The board of directors knew the building was a good opportunity despite the need for about $3 million in renovations, O’Neill said. The building may be used for administrative operations and will play a role in the hospital’s continued expansion, she said.

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