You Can Develop on Formerly Federal-Owned Land. Maybe.
- Feb 18, 2020
Your next project could be on land that was once part of a federal job corps center. Or you might want to consider converting 17 low-rise buildings that once belonged to the United States Geological Survey into apartments and condos.
That won’t happen, though, until Uncle Sam, the nation’s largest holder of real estate, gets its real estate act together. Right now, it’s flailing.
It’s been repeatedly documented by Congress, the Government Accountability Office and many others that the government has not managed its portfolio–nearly 900 million square feet of buildings alone–very efficiently, and it continues to waste taxpayer dollars operating and maintaining property no longer needed–and in some cases, sitting totally empty.
Just the other day, in yet another damning report, the GAO, the investigative arm of Congress, found, among other things, that the General Services Administration’s database of structures and land misidentified water towers as leased office space in two Maryland spots, Laurel and Bowie.
The publicly available database of federal real estate can be accessed by anyone for any reason, such as finding property to be used for a cell tower. But the GSA found numerous issues with the inventory, including the fact that 67 percent of the addresses were either incomplete or incorrectly formatted.
That’s unfortunate because developers throughout the country would love to get their hands on property the feds no longer need. Not only will the sale of such property help cut government spending and bring millions into the Treasury, it could open up opportunity for, say, more affordable apartments, office space or mixed-used developments.
Take the aforementioned jobs corps center and USGS office park. The center is on an expansive 170-acre campus in Sacramento. But 80 acres or so are vacant, offering a prime opportunity for sale and redevelopment. And the office park in Menlo Park, Calif., is being vacated, so it, too, is ripe for redevelopment.
For an idea of what could become of these properties, look at what MIT plans to do with a 14-acre parcel that once served as a federally owned national transportation systems center adjacent to its campus.
The Cambridge, Mass., university is purchasing the mostly undeveloped property, which is contiguous to its campus, with the intention of turning it into a mixed-use innovation hub with a mix of affordable, moderate and market-rate units; new commercial office and laboratory space, including space for startups, small companies and individuals; ground-floor retail; and new open spaces for public gatherings and recreation.
But these kinds of projects won’t ever be more than pipe dreams until the GSA and other federal agencies come together to determine what real estate they have and what is expendable.
While whether that can happen is anybody’s guess, enter the Public Buildings Reform Board, a five-member panel created under the Federal Assets Sale and Transfer Act of 2016 to manage property sales, consolidations and redevelopment.
The board’s primary mission is to identify federal properties for disposal. And in its first report, it has recommended 12 “high-value assets” for sale that could fetch upwards of $750 million each. Better yet, the Office of Management and Budget has approved those recommendations and directed GSA to get the ball rolling.
“GSA should make disposition of these properties a priority and document its progress in periodic written reports,” OMB Acting Director Russell Voight told the board late last month.
Besides the two properties mentioned earlier, the list includes a free-standing 38,000 square-foot office building in Idaho Falls once used as a research center by the Department of Energy, the old 4.2-acre Department of Commerce Fisheries Center in Pacific Grove, Calif., and 5 acres of excess land at the Edison Jobs Corps Center in Edison, N.J.
Also, 8 acres and 530,000 vacant square feet in a number of buildings at the VA Medical Center in Denver, the 251,000-square-foot Ronald Reagan Federal Building and Courthouse in Harrisburg, Pa., 129 acres and eight warehouses totaling more than 1.7 million square feet in Auburn, Wash. and the obsolete Chet Holifield Federal Office Building on 92 acres in Laguna Nigel, Calif.
The other three are a nearly 14-acre Nike site in Gaithersburg, Md., a 12-acre “well-landscaped” site that includes a two-story office building in Los Alamitos, Calif., and the 10-acre, 187,750-square-foot Federal Archives and Record Center complex in Seattle.
Once private enterprise gets their hands on these properties, each of them could be redeveloped into housing, office space and retail shops, all with plenty of open space for everyone to enjoy. They could, Margaret Weichert, No. 2 at the OMB, said at a recent conference in Washington, D.C., “become a real stabilizing force in their communities.”
Take the Fisheries Science Center in Pacific Grove, for example. It is on a public golf course with “incredible ocean views” on a site that is surrounded by high-end residential and hospitality properties. Several multifamily developments are within a couple of miles.
The New Jersey Job Corps Center in just a short drive from Newark and close to one of three regional campuses operated by Rutgers University. And the Denver VA property is near several sites being developed as urban neighborhoods with a mix of uses to combat a severe housing shortage.
But the reform board doesn’t intend to stop with these high-value assets. It plans to make a broader set of recommendations regarding sales, consolidations, lease reductions and operational efficiencies in two more rounds. It “strongly believes there are significant additional opportunities to identify underutilized properties.”
It also has identified another “equally important mission” for itself: “To reform federal real property management and disposal tactics.”
And the OMB seems to be going along, at least for now. Vought says proceeds from the first round of sales will be used to fund further recommendations down the road and avoid forcing various government entities to use appropriations to sell their underutilized realty holdings.
Syndicated columnist Lew Sichelman has been covering the housing and mortgage sectors for 51 years. His work appears in major newspapers throughout the country. He also has been the real estate editor of two major Washington, D.C., dailies and spent 30 years on the staff of National Mortgage News, formerly National Thrift News.