US Government to Sell Up to $750 Million in Excess Property

The Public Buildings Reform Board, a federal advisory committee established by the Federal Assets Sale and Transfer Act of 2016, has recommended that the General Services Administration put 12 properties worth about $750 million on the market. The recommendation is part of the panel’s efforts to trim a government real estate portfolio that includes roughly 77,000 underutilized properties.

The list of recommended properties includes a 75-year-old National Archives building in Seattle; a former Cold War-era missile launch facility in Gaithersburg, Maryland; and the 1 million-square-foot Chet Holifield Federal Building in Orange County, California, that stands out for its ziggurat-style architecture.

David Winstead, an attorney in Ballard Spahr’s Washington, D.C., office, told CoStar News this is only the first round, with the board expected to make at least two more rounds of recommendations.

“These sites will have high value, they will have redevelopment potential, they can return land to the tax rolls so that local jurisdictions can start getting revenues from the commercial property tax value, and they will create jobs,” said Winstead. “There’s a whole city block in Menlo Park [in California] that could be worth hundreds of millions of dollars.” Winstead, who served as commissioner of GSA’s public buildings service in the last few years of President George W. Bush’s administration, was appointed in May to the five-member board after being nominated by former Speaker of the House Paul Ryan, R-Wis.

Winstead said that during President Barack Obama’s administration there was a lot of concern in Congress that there was a lack of focus and scrutiny on surplus, underutilized real estate. “That’s really what caused all this. It was the feeling that a lot of agencies dragged their feet and kind of hold on to real estate that really isn’t critical to their mission.”

The act, known as FASTA, requires the Office of Management and Budget and GSA to identify opportunities for the federal government to reduce its inventory of nonmilitary properties. The act had bipartisan support and was signed in to law in 2016 by President Obama before he exited the Oval Office.

The GSA, as the real estate agency for the federal government, maintains a database called the Federal Real Property Profile that stores real estate data on all civilian federal agencies. Winstead said it is from that database, after the FASTA legislation got started, that the GSA began to review which properties were surplus and could be sold in the marketplace.

The GSA partnered with a real estate consultant and began with roughly 100,000 properties.

To be considered surplus, the properties had to meet two sets of criteria: The building had to be nonmission critical, and it had to be valuable. Eventually, the list was whittled down to around 1,000 properties. Winstead said that, by the law, the board was required to recommend the sale of between $500 million to $750 million of federally owned real estate.

One of the incentives of FASTA is that agencies that contribute a surplus property have the ability to get those funds back to reinvest in an existing property or build a new one. And according to Winstead, that is quite an incentive.

“Under the federal law, if the Department of Commerce has a [National Oceanic and Atmospheric Administration] facility that’s no longer needed, historically, if they were to excess that and sell it, the revenue would go to the general Treasury to offset the budget deficit,” Winstead said. “Whereas with FASTA, the agencies are really incentivized because the funds that come in from the sale of these assets need to be appropriated back to that agency. If the Department of Commerce sold a property for $100 million, they ultimately can get that money” after a congressional review.

Winstead said the law also exempts properties from public benefit conveyance, where another agency can take over a property at a discount on the grounds it benefits the community. “Congress really wanted to get that money back into the fund to reappropriate to the real estate needs of the agencies who excessed those properties. So we got exempted from public benefit conveyance, [and] we’ll go to the market” looking for the best offer.

Winstead added that despite several of the properties being located in areas with significant housing issues, this first batch of properties is exempt from a law that allows for sponsors of homeless housing to get access to federal properties for that purpose, clearing the sites for traditional commercial development.

“What Congress is really doing was trying to see if the board, together with the GSA and other experts, could come up with a list that would have enough high value that could be benefited by this exemption of claims by other government agencies for using these properties and really get these assets to the marketplace for purchase and redevelopment.”

Winstead said the Office of Management and Budget approved the 12 properties for sale, and now the recommendation goes to Congress for a 30-day review period. The agencies that own these properties have 60 days to submit a report of excess, and then GSA begins the one-year sale process.

“It’s a very short window,” Winstead said. “When I was public building commissioner, I remember dealing with the Auburn complex in Auburn, Washington. We were trying to figure out how to surplus some of those buildings because they were not being used. So 10 years later, now it’s on this list.”

Winstead noted that, despite the Public Buildings Reform Board being a federal committee, he expects developers and brokers to play a critical role in which sites are selected in future rounds.

“I think a lot of the ideas will come from the private sector who are in every market and know every foot of ground and know what the market demands in the way of new office, industrial, residential,” said Winstead.

“I’m hoping the private sector will bring to the board opportunities, saying, ‘Look, we’ve checked this out. This is federal land. It certainly doesn’t seem to be highly utilized. It seems to be surplus. Why don’t you guys report it and get it on the sales rolls so we could increase our potential redevelopment?’ So I think that’s going to happen.”

The initial round of properties include:

• Sacramento Job Corps Center, excess land sale only, 3100 Meadowview Road, Sacramento, California, Department of Labor.
• Information Operations and Research Center at 1155 Foote Drive and the Shelley‐New Sweden Park & Ride Lot off Shelley‐New Sweden Highway, Idaho Falls, Idaho, Department of Energy.
• Southwest Fisheries Science Center, 1352 Lighthouse Ave., Pacific Grove, California, Department of Commerce.
• Edison Job Corps Center, excess land sale only), 500 Plainfield Ave., Edison, New Jersey, Department of Labor.
• Veterans Affairs Denver Medical Center, partial sale, 1055 Clermont St., Denver, VA.
• Ronald Reagan Federal Building and Courthouse, 228 Walnut St., Harrisburg, Pennsylvania, GSA.
• Auburn Complex, 400 15th St. SW, Auburn, Washington, GSA.
• Menlo Park Complex, 345 Middlefield Road, Menlo Park, California, GSA.
• Chet Holifield Federal Building, 24000 Avila Road, Laguna Niguel, California, GSA.
• Nike Site, 770 Muddy Branch Road, Gaithersburg, Maryland, Department of Commerce.
• WestEd Office Building, 4665 Lampson Ave., Los Alamitos, California, Department of Education.
• Federal Archives and Records Center, 6125 Sand Point Way NE, Seattle, National Archives and Records Administration.