ACTING DIVISIONAL HEAD : REAL ESTATE MANAGEMENT SERVICES

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Presentation transcript:

ACTING DIVISIONAL HEAD : REAL ESTATE MANAGEMENT SERVICES Date: 16/08/2018 Presented by: MR M GOVENDER ACTING DIVISIONAL HEAD : REAL ESTATE MANAGEMENT SERVICES on Behalf of the DIRECTOR GENERAL of DPW REPORT BY THE PMTE REAL ESTATE MANAGEMENT SERVICES AND SMALL HARBOURS AND COASTAL DEVELOPMENT UNITS OF THE DPW, ON STEPS TAKEN TO IMPROVE LEASE MANAGEMENT AND ACHIEVE THE STATED TARGETS TO REALISE SAVINGS ON IDENTIFIED PRIVATE LEASES

CONTENTS Purpose PMTE Business Case PMTE Business Model REMS Operating Environment REMS Operations Preparing for the new REMS Addressing Government Savings through Acquisition and Leasing IN Addressing revenue generation through Disposal and Letting OUT Increasing Property Payments and Administration efficiencies Improving how we provide services through tailored Business Processes Increasing our capacity through a Skills Improvement Programme

PURPOSE REMS is committed to conduct its business in terms of section 217 of the Constitution. When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or s services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost effective. We will address the following issues in pursuance of the above: Give context on the REMS operations and mandate Respond to performance concerns Give feedback on the REMS interventions to address performance concerns Business improvement interventions: Expedited lease renewal and renegotiation Business Processes review

4

PMTE BUSINESS MODEL DETERMINE IMMOVABLE ASSET MANAGEMENT STRATEGY PROPERTY MANAGEMENT REAL ESTATE INVESTMENT PLAN / ACQUIRE / DISPOSE CONSTRUCTION PROJECT MANAGEMENT REAL ESTATE INFORMATION & REGISTRY DETERMINE IMMOVABLE ASSET MANAGEMENT STRATEGY EXECUTE: PROVIDE ACCOMMODATION REAL ESTATE MANAGEMENT OPERATE (LEASES) FACILITIES MANAGEMENT MAINTAIN Finance Supply Chain Management PMTE Operationalization through Business Process Review

PROPERTY PAYMENTS AND ADMINISTRATION REMS OPERATING ENVIRONMENT ACQUISITIONS Lease to own Short term leasing Out-right purchase BoT DISPOSALS Letting OUT PROPERTY PAYMENTS AND ADMINISTRATION Utilisation Client Billing Property Payments REMS State: R4,3 billion Other: ±R20/30 million Rates and taxes: R1,3 billion Lights/ water and utilities: R4,3 billion R4,5 billion Our mandate The REMS balance sheet total leased in 2566 Total valid 1846 Total expired 720 Total vacant state owned 5720 Total occupied by user deps. 88 300 Total let out privately 1270 Total illegally occupied 1300 Debit Credit User Charges R4,5 billion Rates and Taxes R1,3 billion Leasing reimbursement from users R4,5 billion Landlords (creditors) Lights and Water R1,3 billion Lights and Water R1,3 billion Letting OUT(revenue) R31 million R10, 331 billion R7,1 billion Surplus R3,231 billion The extent of our work

REMS OPERATIONS Acquisitions and leasing IN Provision of suitable functional accommodation for client departments Leasing in (Short-term) Build Operate and Transfer (Permanent solution) Out-right purchase (Permanent solution) Lease to own (Permanent solution) Ensure the efficiency in acquiring properties Acquisition Framework Implementation of the Property Empowerment Policy Establishment of a panel of landlords Establishment of proper governance processes 4. Expedited lease renewal and negotiation State Owned and Disposals and Letting OUT Management of state owned property occupied by: Private tenants User departments Management of vacant state owned properties Letting OUT Other forms of disposal Marketing of vacant state owned properties Property Administration and Payments Administration and payments of the following services: Rates, Municipal services, Lease rentals, Shared Savings, Day to day maintenance, Cleaning & Gardening; and Security services Resolve disputes and disconnection of services by suppliers such as municipalities, Eskom General administration Management of illegally occupied properties 4. Property ownership verification REMS operations and manages an estimated R9 Billion in collections (receivable) and R7 Billion in payments

PREPARING FOR THE NEW AND IMPROVED REMS - Expedited lease renewals - Disposal Framework - Business Process Review - Marketing and advertising of surplus state owned properties - Acquisition Framework - Conclude user department issues (itemised billing, state to state lease agreement) - Review standard leasing IN lease agreement ( incorporate SIU recommendations and lease reversions) - Establishment of satellite offices - Conduct regional visits: Leasing IN (new), Lease renewals, Planning meetings for investor conferences, regional investor conferences, national investor conference - Municipal engagements to discuss rates and taxes and water and electricity to reconcile accounts (savings) - Finalisation of strategy for Illegally occupied properties 31 July– 2 August: HO Finance, HO: REMS, Regions, UDM 2-4 May: Regions, HO:REMS, Client Departments, UDM, AG, SIU 14 -16 June: Regions, HO: REMS, UDM, Client Departments

ACHIEVING GOVERNMENT SAVINGS THROUGH: ACQUISITION AND LEASING IN

LEASED PORTFOLIO REGION EXPIRED LEASES VALID LEASES TOTAL BLOEMFONTEIN 118 62 180 CAPE TOWN 55 313 368 DURBAN 74 310 384 JOHANNESBURG 82 102 184 KIMBERLY 88 90 178 MMABATHO 60 162 MTHATHA 68 111 179 NELSPRUIT 47 150 197 POLOKWANE 13 161 174 PORT ELIZABETH 70 253 323 PRETORIA 28 209 237 720 1846 2566

ACTION PLAN PROBLEM INTERVENTION IMPACT   PROBLEM INTERVENTION IMPACT Acquisition and Leasing IN (Temporary) Existing leases Escalated rental and escalation rates Expedited lease renewal and renegotiation programme Revision of SCM circular savings on lease costs bargaining power to address maintenance and general building upkeep, capital investment into leased buildings normalise industry rental rates for office accommodation promote the transformation of the property industry Backlog on the procurement of new accommodation Procurement of new , alternative and additional space - implementation of the Acquisition Framework - engage with user departments to establish their needs for functional accommodation for possible conversion into permanent solutions - Engagement with regional offices to determine the extent of the backlog (350) - engagement with regions to share the new procurement approach - engagement with landlords to inform them of the new opportunities for the provision of permanent accommodation solutions improve the efficiency of procuring user specific, functional accommodation for client departments as per the approved PI/ investment decision improve efficiencies in the procurement of emergency and urgent accommodation as well as procurement from single source providers

EXPEDITED LEASE RENEWAL AND RENEGOTIATION: PROJECT IMPLEMENTATION PLAN Minister briefed Top 100 landlords, User Departments and Banks on 31 May 2018. National Treasury and SIU made presentations on the day REMS further briefed user departments on the implementation plan on 12-14 June 2018 Provincial landlords are briefed about lease renewal and renegotiation 20 June – 6 August 2018 Landlords confirm submitted offers or resubmit lease renewal offers for renegotiation 1 July – 30 August 2018 Issuing of SCM forms to landlords to complete their negotiated offer for adjudication process (i.e. Schedules A to C of the lease agreement & DPW 08 and other forms) 01 July –31 October 2018 Adjudication process and conclusion of lease agreement 1 July – 30 November 2018

PROJECTED SAVINGS: 2018/19 ANNUAL TARGET IS R200 MILLION An analysis was performed on SAPS leases with high rates per square metre. A sample of 19 leases (175,778.65 square metres) was selected in Pretoria, Cape Town and Durban regions which had average rate per square metre of R200. Figure: The graph above illustrate the potential savings the Department can achieve for the 19 leases, over the different lease periods, if the rates are renegotiated to market related rates.

STATUS UPDATE ON LEASE RENEGOTIATIONS

GENERATING REVENUE THROUGH: DISPOSAL AND LETTING OUT

MANAGEMENT OF STATE OWNED PROPERTY: MANDATE In terms of GIAMA, the PMTE is: the custodian of National Government Immovable Assets Default custodian of unregistered and unsurveyed properties in South Africa. Mandated to provide quality, user specific, functional accommodation for client departments The Department is a Custodian of 29 322 registered and unregistered land parcels, with 93 943 improvements; Approximately 88 300 buildings are allocated and used by 51 user departments, The surplus state owned properties are estimated to be 5 720, made up of 5187 vacant land parcels and an estimated 500 Improvements

VACANT SURPLUS PROPERTY Vacant Land/Farms Office Residential Airstrip Bloemfontein 401 95 107 Durban 786 3 56 Cape Town 2103 7 47 Johannesburg 142 4 12 Kimberly 1233 16 Nelspruit 153 Port Elizabeth 289 9 105 1 Polokwane 8 23 Pretoria 52 10 Mmabatho 17 2 Umtata 21 TOTAL: 5187 387 GRAND TOTAL: 5720 NOTE: Verification of surplus properties remains a continuous exercise; The number of surplus properties might increase as verification unfolds; Reconciliation and migration of data between PMIS and Master database continues; REMS is instituting systems and measures to identify Bona Vacantia properties

AREAS OF CONCERN AND PLANNED INTERVENTIONS   PROBLEM STATEMENT INTERVENTION IMPACT Disposal and Letting OUT Occupied properties by User departments Disputed properties Introducing user occupation confirmation certificate (user to provide – annually) Electronic submission of confirmation certificates y clients - reduce number of disputed properties - enable finance to collect revenue conclusion of lease agreement between DPW and user departments - define responsibilities of users and custodians in terms of maintenance Inability to conduct physical verification Request the user to submit user experience of the building (condition assessment - annually) - updated property information - status quo of each property in terms of maintenance requirements - contribute towards updating of the asset register Conduct sample physical verification (Regions) Establishment of 21 satellite offices

AREAS OF CONCERN AND PLANNED INTERVENTIONS   PROBLEM STATEMENT INTERVENTION IMPACT Disposal and Letting OUT Surplus Properties Existing leases on letting out which are below market rental rates renegotiation of all existing leases - increase on revenue Poor marketing of surplus state owned properties regional planning meetings with: National and Provincial treasuries, Municipalities, provincial government, landlords, banks and other entities of government nine provincial investor conferences national investor conference publish requests for proposals on the letting out of surplus state owned properties - attraction of investment - increase revenue - decrease holding costs (rates and taxes, water and lights, security etc.) - decrease vandalism - decrease illegal occupation - decrease land grabs - create localised jobs - contribute towards economic growth - promote skills transfer - create opportunities for emerging business and contribute to the transformation of the property industry Partnerships with municipalities for the administration and management of state owned properties

PREPARATION FOR THE LETTING OUT OF STATE OWNED SURPLUS PROPERTIES The branch is conducting provincial workshops to prepare for the advertising of surplus property The advertising of properties will be kick-started by 9 provincial investor conferences and one national investor conference starting in October 2018 REGION DATE Johannesburg and Pretoria 15 – 16 August 2018 Cape Town 23 – 24 August 2018 Kimberley 30 – 31 August 2018 Mmabatho 05 – 06 September 2018 Polokwane 10 – 11 September 2018 Nelspruit 13 – 14 September 2018 Port Elizabeth and Mthatha 19 - 20 September 2018 Durban 27 - 28 September 2018 Bloemfontein 04 - 05 October 2018

MANAGING TENANTS THROUGH: PROPERTY PAYMENTS AND ADMINISTRATION

Illegal occupation of vacant state owned properties PROBLEM STATEMENT Disputed Municipal services payments and Shared services (Water and Energy Saving) by Client Departments Illegal occupation of vacant state owned properties Collection of rentals due from tenants

PROPERTY PAYMENTS FOR 2017/2018 FIN YEAR The total expenditure for 2017/2018 on property related payments is over R11.8 billion. This includes: Rates(R1.2 billion), Municipal services(R4.3 billion), Lease rental(R4.4 billion), Shared Savings (Water and Energy savings R321.1 million), Day to day maintenance(R1.2 billion), Cleaning & Gardening(R264.7 million); and Security services(R77.8 million). Municipal services, Lease Rental and Shared Savings are recoverable payments. A Task Team has been established to deal with the disputes (Finance HO and REMS)

INTERVENTIONS: MUNICIPAL ENGAGEMENTS: PROPERTY PAYMENTS Purpose: Coordinate communication with municipalities regarding property rates and taxes, water and electricity Reconcile municipal invoices with DPW payments Negotiate for the reduction of municipal invoices Discuss the management of state owned vacant properties: Securing Letting OUT Transfers, donations, administration and management Governance tool: MoU between DPW and individual municipalities

We have piloted this intervention with the following municipalities: Municipality Province Partnership initiatives ZF Mgawu District Municipality Northern Cape Management of DPW vacant properties Development – Capital investment – of DPW vacant properties Elundini Local Municipality Eastern Cape Development of a government precinct on DPW land Mandeni Local Municipality Kwa-Zulu Natal Availing of land for development – Capital investment Ray Nkonyeni Local Municipality Management and Development of DPW land Ndlambe Local Municipality Development on DPW land – Capital investment, skills development Namaqua District Municipality Joint identification of investment and development opportunities Management and protection of DPW properties

INTERVENTIONS: ILEGALLY OCCUPIED PROPERTIES: OPERATION BRING BACK REMS is working with the SIU to identify and investigate illegally occupied properties To date, 1300 properties have been identified as illegally occupied. REMS is in the process of: Investigating, with the SIU, all cases submitted/ reported Evicting the illegal occupants; and regularising the occupation status by conclusion of a lease agreement. Below: images of illegally occupied properties in Gauteng

BUSINESS PROCESS REVIEW

PMTE HIGH-LEVEL BUSINESS PROCESS

ACQUISITION OCCUPIED NOT OCCUPIED PROPERTY FINANCE REMS PROCESS LANDSCAPE STORY BOARD OUTRIGHT PURCHASE TITLE DEED DONATION IN LEASE RENEWAL LEASE IN LEASE AGREEMENT SERVICE LEVEL AGREEMENT OCCUPIED PROPERTY HAND BACK NOT OCCUPIED OCCUPANT (ANNUAL OCCUPANCY CONFIRMATION RETURN) DISPOSAL TEMPORARY (LETTING OUT) CUSTODIAN (PMTE PROPERTY) TENANT STEWARD (USER DEPARTMENT) PROPERTY HAND OVER OCCUPANCY AGREEMENT IAR VACANT PROPERTY ADMINISTRATION LETTING AGREEMENT FRAMEWORK / SERVICE LEVEL AGREEMENT DISPOSAL PERMANENT PROPERTY FINANCE COLLECT USER CHARGES / LEASE PAYMENTS PAY RENTAL, RATES AND UTILITIES

REMS TEMPORARY ACQUISITIONS (LEASING IN) STORY BOARD * Lease Acquisition through competitive bidding * Negotiated Strategy using emergency and sole supplier PROCUREMENT METHODOLOGY ACQUISITION PLAN Receive Investment Decision / PI (*Divisional Head: REMS) (* Senior General Manager) N BSC: PM (Client & Architect) (* Senior General Manager) SPACE NORMS MAINTENANCE PLAN Bid Administration (* Administration - PM and Head: Acquisitions) (* Advert - SCM ) (* Bid Receipt – SCM and PM) Site Evaluation Report R BEC: PM (Architect & QS) (Objective Report) REPAIRS AND UPGRADE COMMITMENT TENANT INSTALLATION Tenant Installation Reconfiguration and Refurbishment Occupation Administration and Finance R BAC: PM (Adjudication Criteria) (Recommendation) National Oversight Contracting and Document Management Monitor and Manage Contract STATISTICAL ANALYSIS

REMS TEMPORARY DISPOSALS (LETTING OUT) STORY BOARD Identify and Information Gathering Bid Specification Bid Administration (Advert) Evaluation Recommendation Final Approval Contracting and Document Management Monitor and Manage Contract Occupation Administration and Finance

INCREASING CAPACITY: SKILLS IMPROVEMENT PROGRAMME The REMS branch will under go in-house training aimed at skilling REMS staff Targeted timeframes: January – June 2019 Courses to be held: Introduction to Real Estate Management Property Law Property Finance Financial Accounting Public Sector Procurement Property Development Market analysis/ research

END National Department of Public Works (NDPW) Head Office: Public Works CGO Building Cnr Bosman and Madiba Pretoria Central Private Bag X65 Pretoria 0001 Website: http://www.publicworks.gov.za