Leaders of a House oversight committee are targeting the 6,600-acre Beltsville Agricultural Research Center as they try to revive efforts to create a civilian BRAC-type program to sell off or develop excess federal government property.
John Mica (R-Fla.), the new chairman of the Government Operations Subcommittee of the House Committee on Oversight and Government Reform, and ranking member Gerry Connolly (D-Va.) said they would push to revive legislation that stalled in the last Congress to consolidate and dispose of civilian properties similar to how the Pentagon’s Base Closure and Realignment program works.
“We can take these assets that are costing taxpayers money and convert them into performing assets,” Mica said during a hearing Wednesday.
The hearing was prompted in part by the release last month of the Government Accountability Office’s latest High Risk report, which cited waste in federal property management. The study noted that agencies often lease space from private landlords in the same real estate market where they also own underutilized real property.
“From 2006 to 2011, the amount of space that the General Service Administration, the leasing agent for many federal agencies, leased from the private sector grew more than 12 percent, while also losing millions of dollars on these leased assets,” the report said. As a result, the “GSA has lost $200 million on leases since 2005, including $75 million in 2011 alone.”
But using large vacant space such as the Beltsville agriculture center poses problems when property managers must contend with local, state and federal environmental review, said David Wise, director of the GAO’s physical infrastructure team. He noted that it can cost $200,000 to knock down a small building.
But Mica said that federal managers should create a structured program to assess how to best use government property instead of making decisions on an ad hoc basis.
“This is some of the most valuable real estate in the United States of America,” he said.
Connolly agreed that the Beltsville site and other properties should be better utilized, but he cautioned that Congress should take care not to dispose of property in a manner contrary to the wishes of local officials.
“We don’t want to do harm in local communities in our zeal to divest ourselves of properties we no longer need,” he said.
Connolly, former chairman of the Fairfax County Board of Supervisors, recalled battling with federal officials over plans to close down military bases in some parts of Northern Virginia and shift jobs elsewhere, which left huge vacancies in the Crystal City office market and burdened already traffic-choked roads.
Dorothy Robyn, commissioner for the GSA’s Public Buildings Service, reiterated the Obama administration’s support for a civilian BRAC program.
“It’s a painful but critically important mechanism and we need it on the civilian side,” she said.
Robyn said federal agencies have too much excess property and too much reliance on leases. But she added that a lack of capital makes it difficult to consolidate and redevelop underused federal property.
As for the Beltsville agriculture center, she said it was a good candidate for sale, consolidation or redevelopment.
“We love to dispose of property,” Robyn said. “I don’t know why we have not reached out to [the Department of Agriculture] on something like this.”
She added that the GSA — which owns only about 10 percent of all federal property — expects to reduce its leasing in fiscal 2013 by 300,000 square feet, or 10 percent.
Robyn also noted that the GSA lent its real estate support last year to other agencies in the disposal of 79 properties that generated almost $38 million in sales.
Archstone sold a Gaithersburg apartment building for $31.3 million, according to Transwestern, which brokered the sale of the property that was left over after the seller unloaded about 7,400 units in the Greater Washington-Baltimore market.in November.
The buyer, an affiliate of Bernstein Management of Washington, D.C., acquired Oakwood Gaithersburg, a 136-unit complex that AvalonBay originally said it planned to buy last year.
“Avalon had the right of first refusal and I think they said [to Archstone], ‘Go ahead and sell it,’ so it was left open for sale,” said Fred Underwood, Bernstein’s director of acquisitions.
Transwestern marketed the 11-story property as “an extremely rare opportunity to acquire a core quality high-rise asset in an A-plus location offering superior value-add potential through moderate interior unit improvements and utility pass through.”
Underwood agreed that the building has strong potential for increased revenue but he said there are no immediate upgrading plans. The building, at 9890 Washingtonian Blvd., is across the street from the Washingtonian Center in the I-270 Tech Corridor.
The property was completed in 1989 and commands an average rent of $1,771 for units that average 841 square feet. The property is master-leased by Oakwood and is operated as a hybrid furnished/unfurnished rental community.
The building traded at $230,147 per unit.
AvalonBay of Arlington, Va., and Equity Residential of Chicago this week closed on their acquisition of the Archstone assets, valued at $6.5 billion after the assumption of $9.5 billion in debt. The deal involved a portfolio of about 23,000 units nationwide, including 23 apartment communities in the Greater Washington-Baltimore market.
Archstone, of Englewood, Colo., whose acquisition had figured prominently in the demise of Wall Street banking giant Lehman Brothers in 2008, was once the nation’s largest apartment building owner. Now Bloomberg News reports Lehman faces a lawsuit by former Archstone shareholders who complain that the portfolio sale “will leave Archstone an empty shell with no assets” to compensate them if they should prevail in a separate lawsuit challenging an earlier merger.
Equity Residential sold a 796-unit apartment complex in Glen Burnie for an undisclosed price to Morgan Properties of Baltimore and its equity partner, Dune Real Estate Partners of New York, according to broker HFF, which represented the seller.
The property, Chesapeake Glen, had an acquisition cost of about $58.3 million, less accumulated depreciation of $28.1 million, according to an Equity filing with the Securities and Exchange Commission. The garden apartment complex, which is northeast of the Interstate 97 interchange with Crain Highway, is in northern Anne Arundel County.
“Chesapeake Glen is a significant acquisition for our company,” Mitchell Morgan, founder and CEO of Morgan Properties, said in a news release. “We feel that Class B is the right place to invest now, since we have a captive audience and it generates significant yield.”
Built in phases in 1973 and 1977 by the Artery Group, Chesapeake Glen underwent two interior renovation phases in 2006-08 and 2010-11 by Equity Residential.
Morgan oversees a portfolio of 17 apartment communities and 6,400 units in the Baltimore-Washington corridor.
Transwestern announced it completed three leases totaling about 42,000 square feet at the Summit at Washingtonian in Gaithersburg.
The deals mark a reversal from last year, when the 193,199-square-foot building showed 59,000 square feet of negative absorption, the broker said.
“The fact that we were able to attract three high-profile tenants in a sluggish market points towards a flight to quality,” Phillip McCarthy, executive vice president at Transwestern, said in a news release. “Tenants are not only looking for better buildings, but they are increasingly focused on the strength of ownership.”
BusinesSuites, a leader in the workspace-as-a-service industry, signed an 11-year lease for 17,013 square feet; Steben & Co., a provider of managed futures funds, signed a 10-year lease for 12,368 square feet; and Medical Funding Services, a health care financial services and related electronic payment solutions company, signed an 11.5-year lease for 12,541 square feet.
The building, at 9711 Washingtonian Blvd., is owned by a partnership of Principal Real Estate Investors, the Davis Cos. and American Real Estate Partners.
St. John Properties announced that it has completed construction of a 75,000-square-foot office building in the Government and Technology Enterprise, a 416-acre business community inside Aberdeen Proving Ground.
The Harford County property, at 6190 Guardian Gateway, is a three-story Class A building that is 35 percent leased. The project is the 10th office or research and development St. John has completed within the past three-and-a-half years at the business park, totaling more than 625,000 square feet of space. Two additional buildings, comprising 47,000 square feet of space, are under construction by the Baltimore company.
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