1. 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

2. 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

3. 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. 4

5. 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

6. 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

7. 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
Property ownership verification
REMS operations and manages an estimated R9 Billion in collections (receivable) and R7 Billion in payments

8. 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
June:
Regions, HO: REMS, UDM, Client Departments

9. ACHIEVING GOVERNMENT SAVINGS THROUGH: ACQUISITION AND LEASING IN

10. 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

11. 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

12. EXPEDITED LEASE RENEWAL AND RENEGOTIATION: PROJECT IMPLEMENTATION PLAN
Minister briefed Top 100 landlords, User Departments and Banks on 31 May National Treasury and SIU made presentations on the day
REMS further briefed user departments on the implementation plan on 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

13. 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, 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.

14. STATUS UPDATE ON LEASE RENEGOTIATIONS

15. GENERATING REVENUE THROUGH: DISPOSAL AND LETTING OUT

16. 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 registered and unregistered land parcels, with improvements;
Approximately 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

17. 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

18. 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

19. 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

20. 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
September 2018
Durban
September 2018
Bloemfontein
October 2018

21. MANAGING TENANTS THROUGH: PROPERTY PAYMENTS AND ADMINISTRATION

22. 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

23. 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)

24. 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

25. 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

26. 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

27. BUSINESS PROCESS REVIEW

28. PMTE HIGH-LEVEL BUSINESS PROCESS

29. 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

30. 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

31. 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

32. 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

33. END National Department of Public Works (NDPW)
Head Office: Public Works CGO Building Cnr Bosman and Madiba Pretoria Central Private Bag X65 Pretoria 0001
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