RD413 - Department of General Services Combined Real Estate Report - November 15, 2015

Executive Summary:

This report is provided in compliance with Section 4-8.01e of Chapter 665, 2015 Virginia 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: $5,933,600
Lease Administration Savings: $19,226
Surplus Real Estate Sales Revenue: $12,965,000
Surplus Real Estate Under Contract (receipt of revenue upon closing): $7,360,000
Surplus Properties Listed For Sale (Based on Appraised Value): $60,445,000
Total Savings/Income/Pending Income: $86,722,826

Lease savings throughout this report are divided between cost savings and cost avoidance. Cost savings is defined as the 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 cost of doing business for the agency.

Cost avoidance is typically 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 furnishings and equipment ordinarily paid by the tenant.

The combined report for 2015 follows.

1. Division of Real Estate Services (DRES) – Program Status

Virginia Code § 2.2-1131.1 requires an annual report on the 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.

• Lease Administration: DRES is currently responsible for administering 528 leases with combined annual rental obligations of approximately $62.7 Million. In addition to ensuring that rental payments are made on time and in the correct amounts, DRES identifies and corrects billing errors related to annual rent escalations and applicable operations and maintenance costs, saving agencies $19,226.23 during the past year. Exhibits A-1 and A-2 are a complete list of the current expense leases and the income leases administered by DRES.

• COVA Trax: Previously DRES reported that our former real estate records management software vendor, BricsNet, had closed its business in 2012. After a lengthy procurement and contract negotiation, we awarded the contract to Trimble Buildings – Manhattan Software to configure a new integrated workplace management system for the Commonwealth known as COVA Trax. We anticipate implementing a new system in the next 60 days that will enhance DRES’ management of real estate transactions and records and provide support to other agencies of the Commonwealth.

During the COVA Trax procurement, the General Assembly approved Item number 252 C.1 – C.3 2014 Special Session I Acts of the Virginia Assembly – Chapter 2, that requires the Secretary of Finance and the Secretary of Administration to convene a work group to consist of representatives from the Department of Accounts (DOA), the Department of General Services (DGS), and the Department of the Treasury (TRS) to evaluate options for improving the efficiency and accuracy of the Commonwealth’s current methods of collecting and maintaining state property data. DRES is currently working with the software vendor, DOA and TRS to determine if the COVA Trax system may be configured to meet their needs as well.

• Real Estate Records: To meet the requirements of Virginia Code § 2.2-1136, as amended by the 2011 Session of the General Assembly, DGS was to complete an inventory of all real property owned by state departments, agencies and institutions by January 1, 2012. We annually update the inventory to confirm that the information is current and correct. A current inventory of state owned real estate is posted on the DRES website ( http://www.dgs.virginia.gov/DivisionofRealEstateServices/StateOwnedRealEstate/tabid/1524/Default.aspx).

• DRES Strategic Planning: DRES manages the real estate of the Commonwealth as a portfolio reaching across agencies. Using information on the current cost and utilization of office facilities tracked with our records management system, including current staffing levels reported by agencies, DRES identifies potential collocation and other efficiency opportunities that may be obtained through long-range planning and occupant agency cooperation. Effective strategic planning is an on-going portfolio management task with the assistance of the Commonwealth’s commercial broker, Divaris Real Estate Inc.

• Space Utilization: DRES continues to advocate more prudent use of space. We contracted with Faithful+Gould to update and expand our space guidelines to meet agency needs and remain current with real estate trends, available technology and delivery of services. We are on schedule to complete the update by year end. While DRES has been successful in reducing the square feet per person metric for the Commonwealth, additional strategies are recommended to our client agencies. These strategies include increased teleworking and more creative use of space through hoteling, where workspace and equipment are shared among staff, or other workforce/workplace strategies.

Since these matters involve management styles and policies within the agencies, as well as HR policies, DRES is not in a position to do more toward this goal at this time. DRES can recommend and prepare to act if and when any agencies incorporate these strategies into their overall management strategies.