RD333 - Department of General Services Combined Real Estate Report - November 15, 2011


Executive Summary:
This report is provided in compliance with Section 4-8.01e of Chapter 890, 2011 Acts of the General Assembly, which provides:

"e. Utilization of State Owned and Leased Real Property:

1. By November 15 of each year, the Department of General Services (DGS) shall consolidate the reporting requirements of § 2.2-1131.1 and § 2.2-1153 of the Code of Virginia into a single report eliminating the individual reports required by § 2.2-1131.1 and § 2.2-1153 of the Code of Virginia. This report shall be submitted to the Governor and the General Assembly and include (i) information on the implementation and effectiveness of the program established pursuant to subsection A of § 2.2-1131.1, (ii) a listing of real property leases that are in effect for the current year, the agency executing the lease, the amount of space leased, the population of each leased facility, and the annual cost of the lease; and, (iii) a report on DGS’s findings and recommendations under the provisions of § 2.2-1153, and recommendations for any actions that may be required by the Governor and the General Assembly to identify and dispose of property not being efficiently and effectively utilized."

Summary of Savings and Income during the Period

Lease Savings: $20,486,800
Lease Administration Savings: $133,714
Surplus Real Estate Sales: $5,020,000
Surplus Real Estate Under Contract: $4,409,100
Surplus Real Estate Contracts Pending: $14,703,000
Income from Easements: $47,727

Total Savings/Revenue: $44,800,341.00

Lease figures throughout this report are divided between cost savings and cost avoidance. Cost savings is defined as reduced occupancy costs typically attributable to renegotiation of existing rents, reconfiguration of space to reduce rented areas, collocation efficiencies, and relocating from leased to owned properties when that is the most economical choice. These are savings which reduce the real time cost of doing business for the agency.

Cost avoidance is most often attributable to improved economic terms through value added in negotiations. Examples of cost avoidance include the landlord’s agreement to pay a larger share of the cost of tenant improvements or the landlord’s agreement to pay for furnishing and equipment ordinarily paid by the tenant.

The combined report for 2011 (*1) follows:

1. Division of Real Estate Services – Program Status

Virginia Code § 2.2-1131.1 requires an annual report on progress of DGS’ efforts to establish performance standards for the acquisition, lease and disposition of real property and for the management and utilization of such property at the individual agency and statewide levels to maximize the use of the Commonwealth’s inventory of properties.

• Space Standards: The target average square feet per person in leased facilities remains at an average of 198 square feet. The number of square feet per person is a key measure under Virginia Performs. The first and second quarter reports for FY12 averaged 167.5 square feet per person for properties leased during the period.

• Lease Administration: In 2008, DRES began administering leases rather than having each agency administering their own leases. We have assumed responsibility for 530 leases with a combined annual rental obligation of over $53.2 Million. In addition to ensuring that rental payments are made on time and for the correct amounts, this process allows DRES to identify and correct billing errors related to annual rent escalations and applicable operations and maintenance cost, saving agencies some $133,714 during the past year.

• Integrated Real Estate Management System (IREMS): We have purchased, installed and are currently using an integrated property management system. The system has the ability to track and document progress of active transactions. (*2) It provides the database for property inventories and data, and the system ties into DGS’ fiscal office to initiate lease payments and billings.

Since April of 2011, we have focused resources on collecting, reviewing and uploading data in order to meet the requirements of Virginia Code § 2.2-1136 as amended by the 2011 Session of the General Assembly. The amendment requires DGS to complete an inventory of all real property owned by state departments, agencies and institutions by January 1, 2012.

There are three separate reporting mechanisms currently in IREMS for state-owned properties: title records, tract data describing land at each facility (a tract can be a single parcel with one or more buildings or multiple parcels that make up an entire campus), and building data.

For many years, DGS has maintained a collection of title records (deeds, easements, grants, etc.) for state-owned properties, along with a register of the records. The title records roll up to form the basis for the tract files, providing accurate acreages. The tract records also provide additional data regarding the land. The deed records have been validated by DRES and they have been provided to the agencies for comparison with their records. Most of the agencies have completed their validation. We are currently updating the records in IREMS, and are in the process of scanning and uploading electronic copies of paper records for storage in IREMS. Once completed, agencies and institutions will be able to view and download their deeds and other records from IREMS via the internet, thus eliminating the need for separate systems.

With respect to state-owned buildings, we are merging and validating data from the Department of Treasury’s VAPS system and the Department of General Services’ FICAS and former PLATS systems, along with other available data. We anticipate that the initial building inventory will be completed by the end of the year as required. However, because of the volume of data (up to 13,000 buildings), we expect to complete validation of the building data with the agencies and the institutions of higher education early Fall of 2012.

• Agency Strategic Leasing Plans: In 2008, DRES required certain large agencies to prepare Agency Strategic Leasing Plans. These plans focus on projected space needs to meet anticipated operational requirements. These plans provide significant detail in terms of anticipated staffing, location requirements, required facility attributes, and expected duration. The plans help agencies proactively focus on their needs, and provide critical information to enable DRES to develop of strategic solutions to meet the needs of multiple agencies. The plans are due for a comprehensive review by DRES and the affected agencies during the next fiscal year.

• DRES Strategic Planning: Using the Agency Strategic Leasing Plans and information on the current cost and utilization of office facilities, including current staffing levels, DRES is able to apply the new space standards to determine where excess space may exist, determine where rental rates appear to exceed current market and then focus on those situations with most opportunity for savings. The plan forecasts lease activities several years out and identifies potential collocations and other opportunities that require longer range planning to realize. The strategic plan was updated in June of 2011.

• Hidden Savings: DRES believes there are a few agencies still carrying staff dedicated to real estate activities. We believe those positions should be reviewed to determine if they are required.

• Funding: The Division became funded through an internal service fund, approved by JLARC, in 2008. The fees were revised in 2010 to effect a 10 percent reduction in fees to the agencies. At the same time, an hourly rate was established in order to allow DRES to charge for service which up to that time had not been reimbursed. We continue to monitor our performance and costs.
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(*1) Unless otherwise stated, the time-frames for the reports extend from October 1, 2010 to September 30, 2011.
(*2) This feature currently is not being used pending modifications.