Federal Property Management Professor Andrew Baum September 19th 2014

Introduction How should government property assets be managed? Who owns the asset? Who manages and operates the asset? Models Owner occupied Leased Partnership operated

Ownership Capital availability Commitment to future liabilities Refurbishment costs

Management Office design and layout Building maintenance Facilities management

Model 1: owner-occupation Ownership provides control Fit for purpose facilities and management? Flexibility?

Model 2: leasehold Sale and leaseback can maximise capital receipts Shared control: who manages facilities?

Building 1 Private tenants Short leases Value: £900m psf

Building 2 Government tenant 20 year lease Value: £1,500 psf

Example: building 2 Government tenant, 20 year lease Rent £500,000, fixed Government bond yield: 7% Value?

Example: building 2 Government tenant, 20 year lease Rent £500,000, indexed to inflation Government indexed bond yield: 3% Value?

Model 3: partnership Operating partner owns asset Provides combination of space and facilities Flexible for occupier Expensive?

Summary How should government property assets be managed? Who owns the asset? Who manages and operates the asset? Models Owner occupied Leased Partnership operated What would a private business do? Is government different?