Slow Going for Federal Property Disposition Effort

Lew Sichelman

The dozen underutilized or no longer needed federal properties identified for disposal more than a year ago by Uncle Sam have yet to be brought to market.

The plan now is to put them up for sale some time this year, but not as originally planned. Now the idea is to sell all 12 properties as a single portfolio rather than selling each one individually.

“This broader approach will help ensure the sale or sales will be completed within the statutory deadline” set by the Federal Assets Sale and Transfer Act of 2016, the Public Buildings Reform Board says.

The PBRB also will entertain offers for individual properties. But “given the impact of the coronavirus pandemic on the commercial real estate market,” it decided to try to sell them in bulk in order to meet its lawful requirements.

The properties that must be sold by the end of the year range from a 14-acre Nike missile site in Gaithersburg, Md., a few miles outside of Washington, D.C., to an expansive 170-acre Jobs Corps campus in Sacramento. A full list of the 12 properties can be found here.

The PBRB was created under FASTA to reform the federal property disposal process, expedite the sale of unneeded and/or underutilized real estate and maximize value for the government. It has been working with the General Services Administration to “prepare the properties for sale” and will soon begin searching for brokerage and advisory services to help in the disposition effort.

But the Government Accountability Office continues to find fault with how the board determines which properties are ripe for turning over to private developers who would reinvigorate them into apartments, office space and other potential uses.

Last February, (I wrote a column for CPE) reporting that the GAO, the investigative arm of Congress, found that the General Services Administration’s database of structures and land misidentified numerous properties.

The publically available database of federal real estate can be accessed by anyone for any reason, such as finding property to be used for a cell tower. But the GSA found numerous issues with the inventory, including the fact that 67 percent of the addresses were either incomplete or incorrectly formatted.

Now, the watchdog agency has come down on the process again, reporting that the five-member review board failed to fully detail the process used to evaluate the first of 44 high-value properties recommended for disposal.

For example, the panel’s rationale for why some properties were chosen while others weren’t was “vague or incomplete,” the GAO said in its Jan. 28 report. Documenting the board’s decision-making process would “help stakeholders, including Congress, understand the rationales for and financial implications of disposing of federal real property,” it said.

The watchdog agency also found fault with FASTA, saying the law’s impact on such long-term challenges as preparing properties for sale “is unclear.”

FASTA was enacted to decrease the federal government’s costs by reducing its inventory of federal civilian real property.

Here, the agency noted that while the law created a dedicated funding source to cover such costs as relocating personnel, accessing those funds is “not automatic and must go through the annual appropriations process”—a process that “rarely coincides” with the timing for selling the properties.

The PBRB has said it plans to develop more and better documentation in future disposal decisions. It’s next submission is required by law by Dec. 31, when the total value of the assets recommended for disposal must not exceed a total market value of $2.5 billion.

The board says it expects to identify dozens of assets for disposal as well as potentially multiple opportunities for agencies to reduce and consolidate their real estate portfolio. But the second round’s success, it warns, will be contingent upon the availability of funds appropriated to and deposited into the Asset Proceeds and Space Management Fund.