Evolution of Asset Management at GSA William Matthews Assistant Commissioner for Real Property Asset Management Public Buildings Service United States General Services Administration 9/21/2018 2005 TWN Workshop

GSA’s Inventory 9/21/2018 2005 TWN Workshop Courthouses Courthouses/Office Buildings Customhouses Office Buildings Warehouses Border Stations Residence Laboratories Other (Sheds and Pump Houses) Garages Federal Centers Parking Lots and Decks 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

Alexander Hamilton Custom House Historic 1810 – 1941 Alexander Hamilton Custom House New York, NY US Courthouse San Juan, Puerto Rico 9/21/2018 2005 TWN Workshop

World War II 1942 – 1949 Federal Center Federal Center Auburn, WA Kansas City, MO 9/21/2018 2005 TWN Workshop

Federal Building and Courthouse Great Society 1950 – 1979 Federal Building Los Angeles, CA Federal Building and Courthouse Phoenix, AZ 9/21/2018 2005 TWN Workshop

Contemporary 1980 – 1993 Thomas O’ Neill Federal Building Boston, MA Alan Bible Federal Building Las Vegas, NV 9/21/2018 2005 TWN Workshop

Design Excellence 1994 – Present Lloyd George Courthouse Las Vegas, NV Federal Courthouse Islip, NY 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

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 Community Perception 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

Asset Management: A Continuous Cycle Financial performance Occupancy / demand Physical condition / lifecycle Market Operating expenses Historic status Asset valuation 9/21/2018 2005 TWN Workshop

Asset Performance Metrics FFO – Funds From Operations NOI – Net Operating Income Vacant space Operating costs vs. market Customer satisfaction Asset value 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

Restructuring Highlights: Rentable Square Feet 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

Stakeholder Support Retention of net proceeds Ground lease/leaseback Increased reinvestment 9/21/2018 2005 TWN Workshop

Successful Reinvestments 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

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 9/21/2018 2005 TWN Workshop

GSA: Evolution of Asset Management QUESTIONS? GSA: Evolution of Asset Management 9/21/2018 2005 TWN Workshop