P3: Federal Property and Public/Private Partnerships

Logo of the United States General Services Adm...

A few days ago, Stephanie Spear,  NAR’s Policy Representative for Commercial Real Estate attended the 3rd Annual Washington DC Federal Property & Public/Private Partnerships Summit put on by Bisnow.  As Stephanie was kind enough to share her notes, a quick report follows on the three sessions, each dedicated to a different aspect of public/private partnerships.

Take it away, Stephanie:

GSA is undergoing a cultural shift in terms of how they approach space and how space is used. This is a result of the Total New Workplace initiative and the executive order to Freeze the Footprint. There are enough large sized, high profile P3 projects that have been successful that it is reasonable to expect more P3 opportunities in the future.

Bottom line for commercial members is that while government funding isn’t increasing, it’s staying steady and there are many opportunities to do business with the government through traditional landlord/tenant relationships and the emerging P3 arrangements. Building owners/lessors who can accommodate the changing needs of the modern workforce will have a better chance of a successful working relationship with the GSA.

Session Notes

Panel 1:  GSA Operations Now And The Future, featuring the Commissioner of the GSA Public Buildings Service and the director of the GSA’s National Capital Region office.

 

  • Freeze the federal footprint – is happening but is creating more opportunities for private industry partners (landlords, building owners) because agencies have to be more creative with how they use space
  • Market is more competitive because agencies are signing shorter leases so there is more churning going on
  • GSA wants to have agencies be more forward-thinking about the end of their leases and work with landlords to think about it well in advance, work with landlords to get new needs met, concessions, manage the progress from upstream
  • Increased emphasis on reducing the number of lease holdovers being held by GSA
  • Agencies are being responsive to funding challenges and cooperating with shrinking footprint efforts because they understand that it frees up more money for running the actual program
  • “Total New Workplace” – GSA encouragement of new building designs for a remote workforce, hoteling spaces and cooperative work spaces
  • GSA personnel, telework, technology, IT priorities all go into the shrinking footprint and what exactly the remainders look like
  • GSA transparency goals
  • Making a lot of use of Section 14/412 construction/swap authority to be creative about using space, rebuilding, etc
  • Many success stories of P3 projects – The Yards, Old Post Office, St Elizabeth’s – hope to be a model because private industry partners are where the money is – govt doesn’t have, won’t have access to huge cash needed to do these big deals
  • GSA surplus property
  • Trying to be more mindful of using govt resources, part of a larger data-driven effort to be more efficient
  • Property Disposal Unit – 669% increase in properties sold in FY2013 over Fy2012

Panel 2: Talked about a P3 project in DC – was very interesting but hyper-local to DC

Panel 3: Perspectives on Leasing with GSA

  • Cultural shifts from GSA are having an impact on the way agencies use space – ‘total new workplace’ goals are main culprit
  • Skepticism about whether this new style of work will stick around, we have seen it come and go in private sector
  • Competition for contracts has focused on price only instead of best value
  • Structural requirements in procurements are challenging to accommodate in leases
  • Avoiding holdover leases
  • Working with tenants in advance of the lease termination to avoid vacancies
  • Shorter leases will favor new buildings because old buildings can’t be prepared fast enough to accommodate tenants’ needs

 

24. June 2014 by Wayne Grohl
Categories: Property | Tags: , , , , , , | Leave a comment

Destination Los Angeles: Build Your Global Real Estate Business

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Global capital loves real estate. Attracted by its stability, performance and close indication of economic health, the wealth of the world sees real estate as a haven for growth. Opportunities abound for anyone looking out for them.

Making the transition from doing business in a single country to going international is not without its challenges, but as with any specialty, there are proven ways to get there. As always, networking and education top that list of ways. So, heads up: in October, Los Angeles will play host to a global real estate event packed full of both.

Destination Los Angeles is a special conference focused exclusively on working with global clients. Located just a few miles from downtown L.A. on October 2-3:

Destination L.A. will include:

The current lineup of speakers includes:

  • Jennifer Bodetto, the “Hollywood Feng Shui Master,” who has been featured on HGTV’s “Selling LA” show and authored books and articles on this ancient science of design principles.
  • Carmela Ma, CIPS, an international real estate practitioner since the 1970s, is a longtime CIPS instructor who has done business in dozens of countries and spoken around the world on a variety of business topics.
  • Ronald Wong, a political and communications strategist with more than 30 years of experience who has worked for Fortune 500 corporations and served in President Clinton’s Administration. Wong is an expert in targeted outreach, marketing and communications.

Destination LA takes place at the Pasadena Convention Center, nestled in between the city’s Old Pasadena and Playhouse Districts and located just a few miles from downtown Los Angeles. The Pasadena Civic Auditorium, which hosted the Emmy Awards for two decades, sits adjacent to the Destination LA venue.

Access to all events will be $175, though registration for the CIPS course, the networking reception and one-day global event can be purchased a la carte. To learn more about or to register for this event, visit bit.ly/destinationLA or contact Jamie Hu at 626/446-2115 or Jamie@TheAAR.com.

18. June 2014 by Wayne Grohl
Categories: Conferences | Tags: , , , , , , , | Leave a comment

Commercial Podcast: Get Involved With Your Local Association

Leil Koch

Leil Koch, NAR Commercial Committee Chair

In the latest Commercial Connections Podcast: Alex Ruggeri interviews Leil Koch,  Chair of the 2014 NAR Commercial Committee and President of Equity One Real Estate. Leil is an international property specialist and former president of the Hawaiian Association and Maui Board of REALTORS.

When you’re willing to give your time and expertise to serve on local professional organizations, it’s a win for your local association and a win for your own career.  Networking only adds new relationships, and most new business comes from new relationships.

Listen to the latest Commercial Connections Podcast with Leil Koch here.

 

16. June 2014 by Wayne Grohl
Categories: Careers | Tags: , , , , , | Leave a comment

The GSA’s AAAP Program Makes Leasing To Uncle Sam Easy

gsa-aaap

Commercial real estate professionals should hear that leasing to the federal government just got a lot easier.

The General Services Administration’s mission is to manage and support the space requirements and other basic functions of the “alphabet soup” of federal government agencies. Of course that includes lots of Washington, DC real estate, but a recent expansion of a technology-supported property and space acquisition program has added Los Angeles, Seattle, Boston, Philadelphia, Denver and Dallas to the

It’s a savings to taxpayers to streamline the leasing process, and that’s what GSA has undertaken with its expanded Automated Advanced Acquisition Program (AAAP) program. As the GSA says, AAAP will

[...] [make] it easier than ever before for realtors, brokers, lessors, property managers, building owners and developers to electronically offer building space for lease to the federal government. The goal is to drive savings to taxpayers by improving federal leasing efficiency in the real estate market. GSA’s Automated Advanced Acquisition Program (AAAP), which originally launched in 1991 in the Washington, D.C. area, is now available in LA, Seattle, Boston, Philadelphia, Denver, and Dallas.

Here’s How It Works
Registered commercial real estate participants can submit and update offers to lease space to the federal government within specified time frames, in response to a GSA Request for Lease Proposal. The submission process is web-based, which as you can guess leads to

  • a more efficient lease process
  • cheaper acquisition of real property lease assets
  • improved agency satisfaction

Keep in mind, AAAP is one of several procurement platforms GSA currently uses to lease office space in Washington, D.C., Atlanta, Chicago, New York, and Kansas City.

Click here to check out a post with full introductory information on AAAP, including a schedule of Industry Day events in key cities.

 

13. June 2014 by Wayne Grohl
Categories: Federal Procurement | Tags: , , , , , , | Leave a comment

Politician Cites 1031 Exchanges As…Divine Financial Advisory?

US Capitol Building

Ah, the political season.  The time when persons with sometimes monumentally odd ideas about cause and effect stand on a stump and broadcast these ideas loudly and clearly.

Well, loudly, anyway.

Meet Ben Carson.  A retired surgeon from Detroit, Carson’s political star is rising thanks to a strong showing in a recent straw poll. Riding the wave of recent notoriety brought him to a radio appearance, where an interviewer asked, in the context of Carson’s self-declared religious faith, if he had ever been “angry with God”.

Incredibly, his answer somehow included one of the real estate industry’s most venerable tax deferments and a favorite topic here at The Source: the IRS 1031 exchange.

The only other question I was given time to pose came [...] when I asked Carson, who self-identifies as deeply religious, if he’s ever doubted or been angry with God.

Yes, indeed, he indicated, recounting an incident in which the Lord apparently subjected him to Job-like tortures over a problem involving residential real estate. After buying a new house, he just couldn’t unload the old one. “My house was on the market for five years. And I said, ‘I pay my tithes. I am faithful. I try to help people. So why is this happening to me?’ ” Carson told me.

“And [then] I found out about the ‘1031 Exchange’ [named for a tax code provision] where if you sell a piece of property and you make a very, very large profit on it, you don’t have to pay huge taxes on it if you can roll it over into another property of higher value.”

Carson’s story went on in this disjointed fashion, and didn’t seem particularly illuminating, except to suggest that it definitely wasn’t an ordinary crisis of faith and the Almighty must be a savvy adviser on the Internal Revenue Code.

So Where Did 1031 Exchanges Come From?

While it’s far from clear if Carson believes 1031 exchanges to be the work of a higher power than Congress, his answer provides food for thought. Given that I’ve written about 1031 so many times, I thought I might contribute some clarity on the point.

1031 exchanges first appeared as part of the Revenue Act of 1921, passed as a package of federal tax reductions by a Republican-majority Congress on November 23 of that year. Lauded by Treasury Secretary Andrew Mellon, the Act repealed a tax on wartime excess profits, reduced the top marginal rate on individuals from 73 to 58 percent and instituted a new and more easily avoided corporate tax.

Specifically for Dr. Carson’s benefit: everything Congress votes on is in the public record.  And a quick look at that 1921 Senate vote (found here) lists many luminaries, including  future President William McKinley (voted aye), Wisconsin firebrand Bob LaFollette (nay), and Delaware’s quasi-aristocratic Thomas du Pont (no vote).

The almighty, however, is not listed in the roll call.

(Photo credit: ttarasiuk)

10. June 2014 by Wayne Grohl
Categories: Tax | Tags: , , , , , , , , , , | Leave a comment

LANDU Education Week

 

landu1

Are you working toward the prestigious Accredited Land Consultant (ALC) designation? There’s no better time than this month to come to Chicago to pick up all three required courses and all three electives.   Additionally, three courses on the track for ALCE Advanced designation are on offer.

The dates are set for June 22-30. Check out an ALC information page on ALC Education Week here.

Register here. 

 

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09. June 2014 by Wayne Grohl
Categories: Land | Tags: , , , , , | Leave a comment

A Whole New Meaning For “Office Drone”

Once upon a time, the term “office drone” made us conjure up images of the guy from three cubicles over who keeps handing in his TPS reports late.

But because we’re now living in the era of unmanned aerial vehicles — and because we’ve got office square footage to lease — the entire concept of “office drone” has gotten a serious makeover.

Today’s clip is the in-flight video capture of a radio-controlled vehicle’s tour of a large office space in Orlando.  The “drone” vehicle: the AR Quadricopter.  The video tour: an excellent overview of a raw space, its lighting and views. Usable as part of a sales package in its unedited video form (or even more effectively with time-compression video editing), this kind of fly-through video is packed with descriptive power.

 

 

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06. June 2014 by Wayne Grohl
Categories: New Technology | Tags: , , , , , , , , | Leave a comment

Commercial Real Estate News Roundup: June 5, 2014

 

The commercial real estate crowdfunding space gets…crowded, prime office space in Chicago fetches prices high enough that some are using the dreaded “b”-word, and speaking of high, what’s above your retail ceiling?  It’s all here in today’s commercial real estate news roundup.

General

Office

 

Industrial

 

Retail

 

 

 

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05. June 2014 by Wayne Grohl
Categories: News | Tags: , , , , , , , , , , | Leave a comment

2014 Indiana Commercial Real Estate Conference

Are you a commercial practitioner in Indiana? Don’t miss the 2014 Indiana Commercial Real Estate Conference June 19th-20th and earn up to 8 CEU’s in one day!

Click on the flyer below for more information and to register.

 

ICBRConvention

03. June 2014 by Jorge Rivera
Categories: Property | Leave a comment

CMBS Update: Resolving Defaulted Loans And Plummeting Delinquencies

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The news in the commercial mortgage-backed securities (CMBS) market is positive year-over-year for the five major property sectors.

As suggested by earlier announcements by credit rating agencies including Fitch, distressed commercial real estate assets are receiving the benefit of special servicing, often by third parties, that are lending stabilization to the CMBS market.

From Fitch:

Fitch Ratings-New York-01 May 2014: Delinquencies are likely to continue to recede and special servicer resolutions of distressed assets are likely to continue, supporting the U.S. CMBS market’s stabilization, Fitch Ratings says. We expect rating upgrades to continue to exceed downgrades for the near term. Most downgrades will be in below investment-grade classes. 

In first-quarter 2014, Fitch upgraded 87 classes. For the same period last year, only eight classes were upgraded, with 58 classes upgraded for all of 2013. Downgrades shrunk to 119 classes compared with 333 for first-quarter 2013 and 864 classes total in 2013.

According to Globe St.’s Paul Lubny, nearly 12.5% of industrial CMBS loans were delinquent one year ago.

The number today?  8.94%.

May saw $1.3 billion in new delinquencies, offset by $1 billion in resolutions and $800 million in cured loans. Accordingly, the total balance of delinquent loans fell to $33.6 billion from $34.1 billion in April.

“The CMBS market continues to just plug along nicely,” says Manus Clancy, senior managing director at Trepp. “In each of the past two years, the market has seen springtime swoons that led to noticeable spread widening;” however, at present new-issue spreads “are near their 2014 tights, the new-issue dance card is full for the next few months and the resolution of defaulted legacy loans continue to push the delinquency rate lower.” However, Bank of America Merrill Lynch earlier this month cut its full-year forecast for new issues.

8.94% Is Good News — For Certain Values Of “Good”

It’s no doubt been a good year for structured credit and commercial real estate, one of unambiguous recovery.  Will it hold up? Time will tell.  But one thing we can already tell is that celebrating a delinquency rate in the 8% range is a concept that was utterly alien to the earlier adopters of CMBS as a financial innovation.

To see what I mean, check out this 2002 report from the Commercial Mortgage Securities Association, written by then-Morgan Stanley associate Marielle Jan de Beur.

Seems like the common rate of CMBS delinquencies back then…was closer to 1%.

The industry’s got a lot more recovering to do.

 

02. June 2014 by Wayne Grohl
Categories: CMBS | Tags: , , , , , , | Leave a comment

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