Evolution of Asset Management at GSA

1
Evolution of Asset Management at GSA

• William Matthews
• Assistant Commissioner for Real Property Asset
  Management
• Public Buildings Service
• United States General Services Administration

2
GSAs Inventory
Courthouses
Courthouses/Office Buildings
Customhouses
Office Buildings
Warehouses
Border Stations
Residence
Laboratories
Other (Sheds and Pump
Houses)
Garages
Parking Lots and Decks
Federal Centers
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A Historical Perspective

• 200 year tradition
• Federal Property and Administrative Services Act
  of 1949
• Economical and efficient system for procurement
  and utilization
• Public Buildings Act of 1959
• Federal Buildings Fund created in 1972
• Commercial market rent operations and
  maintenance
• A tradition of stewardship
• Changing our business model

4
PBS Inventory Challenge

• Many properties are physically and functionally
  obsolete
• Many properties are in the wrong location to meet
  customer needs
• Costs of repairs to the owned inventory are
  beyond our ability to fund

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Historic 1810 1941
US Courthouse San Juan, Puerto Rico
Alexander Hamilton Custom House New York, NY
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World War II 1942 1949
Federal Center Auburn, WA
Federal Center Kansas City, MO
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Great Society 1950 1979
Federal Building and Courthouse Phoenix, AZ
Federal Building Los Angeles, CA
8
Contemporary 1980 1993
Thomas O Neill Federal Building Boston, MA
Alan Bible Federal Building Las Vegas, NV
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Design Excellence 1994 Present
Lloyd George Courthouse Las Vegas, NV
Federal Courthouse Islip, NY
10
A Decade of Change

• Government Performance and Results Act
• GAO more investment/better utilization
• OMB focus on results
• Executive Order 13327
• Market premium on value
• Outsourcing
• Customer demand shifts

11
Portfolio Strategy A Balanced Approach

• STRATEGIC VALUE
• Community Perception
• Historic Value
• Location
• Federal Need
• Asset Use

• REAL ESTATE MARKET
• Type of space available
• Ability to meet customer need
• Price
• Market Forecast
• Moving Costs

ASSETS
MARKETS

• FINANCIAL VALUE
• Return / Financial Picture
• Vacancy / Utilization
• Condition of Asset
• Environmental Risk
• Market Value

PORTFOLIO STRATEGY

• CAPITAL MARKET
• Availability of Funds
• Cost

CUSTOMERS

• RISK ASSESSMENT
• Budget Constraints
• Political Environment
• Space Trends
• Customer Mission

• HOUSING PROFILE
• Build-out Requirements
• Security Requirements
• Build-out Requirements
• Community Perception

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PBS Asset Management Principles

• Customer needs drive portfolio
• Assets must perform financially
• Assets should be applied where they fit best
• Reinvestment is essential
• Income/Expense should be comparable to the market
• Redeploy assets in a timely fashion
• Use industry practices and metrics

13
Asset Management A Continuous Cycle

• Financial performance
• Occupancy / demand
• Physical condition / lifecycle
• Market
• Operating expenses
• Historic status
• Asset valuation

14
Asset Performance Metrics

• FFO Funds From Operations
• NOI Net Operating Income
• Vacant space
• Operating costs vs. market
• Customer satisfaction
• Asset value

15
Portfolio Strategy

• Restructuring portfolio to consist primarily of
  strong income producing assets
• Defining holding periods strategies for every
  asset
• Targeting reinvestment
• Renegotiating rents
• Creating solutions and adding value
• Exchanges
• Ground Lease Leaseback 585c
• Disposal
• Demolition

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Tiering the Owned Portfolio

• Performing
• Tier 1. Solid financial performance
  
  satisfies long-term customer needs
• Tier 2a. Good financial performance - large
  capital improvements required
• Under-performing
• Tier 2b. Poor financial performance
• Non-performing
• Tier 3. Poor financial performance
  assets with negative cash flow

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Restructuring HighlightsRentable Square Feet
18
Portfolio Progress

• 325 buildings removed from tiering since FY2002
• 178 excess buildings
• 47 buildings demolished
• 100 building data corrections
• 9.3M RSF to disposal
• 1.3M RSF to demolition
• 2.2M RSF reclassified to reflect actual ownership
• Over 200 million reinvestment avoided

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Federal Real Property Asset Management (E.O 13327)

• Given the enormous size and value of the federal
  inventory, a mere one percent reduction in the
  total amount of unneeded federally owned
  properties would yield billions of dollars in
  savings. Therefore, in the next four years,
  agencies will establish and achieve an aggressive
  set of goals for disposing of unneeded or
  underused properties. The Council anticipates
  that these efforts could reduce the overall size
  of the federal inventory by at least 5, yielding
  significant savings and efficiencies
• -Clay Johnson III, Deputy Director for
  Management, March 2, 2004

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Stakeholder Support

• Retention of net proceeds
• Ground lease/leaseback
• Increased reinvestment

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Successful Reinvestments
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Evolution of Real Property Asset Management at GSA

• Establishing Holding Period
• Identifying Core Assets
• Refining Reinvestment Forecast
• Refining Disposal Forecast
• Leading Us To Predictable End State

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End State

• More leased than owned
• Larger owned properties
• Owned assets concentrated in larger markets
• Specialized space in other markets
• Self-sustaining portfolio
• Quality of space improvements

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GSA Evolution of Asset Management
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