Special Examination 11-33 January 2012 Georgia Department of Audits and Accounts Performance Audit Operations Russell Hinton, State Auditor Leslie McGuire, Director Why we did this review The Senate Appropriations Committee requested a special examination to review state policies related to state owned and leased space. The Committee posed the following questions: (1) What is the balance and cost of space for state owned and state occupied, state owned and unoccupied, state owned and nonstate occupied, and non-state owned and state occupied? (2) What are the state's policies for determining location and space? Are there opportunities for an agency to relocate to a lower cost space and continue to serve clients? (3) How does the state manage tenant improvements? Would the state realize savings in rent costs if it self-funded tenant improvements? Who we are The Performance Audit Operations Division was established in 1971 to conduct reviews of state programs. The purpose of these reviews is to determine if programs are meeting their goals and objectives; provide measurements of program results and effectiveness; identify other means of meeting goals; evaluate the efficiency of resource allocation; and assess compliance with laws and regulations. Website: www.audits.ga.gov Phone: 404-657-5220 Fax: 404-656-7535 State Properties Commission Requested Information on State Space Management Policies What We Found The State Properties Commission (SPC) is the state's real estate portfolio manager and is responsible for acquiring and disposing of real property, managing administrative space, and establishing/managing lease agreements for (non-exempt) state entities. SPC's expanded responsibilities resulted from recommendations made by the Commission for a New Georgia (CNG) in 2004 that the state create a central real estate authority and a central repository of real asset holdings. In response to recommendations made by CNG, SPC developed the Building, Land, and Lease Inventory of Property (BLLIP) as the state's first single source inventory of state owned and leased real property. BLLIP records (as of August 2011) indicate that the state owns 15,050 buildings1 and has 1,678 active leases for non-state owned space. The largest property use type is office space, with 13 million square feet of owned space and 9.3 million square feet of leased space. Inaccuracies and incompleteness in the BLLIP data significantly limited our ability to document the overall balance and cost of state owned and leased space and will continue to limit SPC's ability to fulfill its role as the state's real estate portfolio manager unless improvements are made. We found high error rates and missing values in data fields required to determine basic property attributes such as the primary use, the occupancy status, and the occupancy rate for a large percentage of state owned and leased space. Additionally, BLLIP contains no data to calculate operations and maintenance costs of state owned buildings. SPC indicated that no 1 In BLLIP, a "building" is a facility owned by the state and/or by state entities and may include property used for a variety of purposes, including offices, storage buildings, housing, classrooms, and security facilities. alternate single data source with operations and maintenance costs of state owned buildings exists. As a result, we were unable to identify or evaluate the cost to maintain and occupy state owned buildings. We were able to determine that state entities pay an average lease cost for office space of $15.52 per square foot (psf) to private property owners, $13.11 psf to other governments, (e.g., county, city, federal), and $11.73 psf to other state government entities. Regarding policies for identifying location and space, SPC has established some formal policies and procedures; however, significant space and lease management activities are not documented or maintained in sufficient detail within case files to permit an effective review of operations. For example, analytical activities not documented in case files include the review of state owned property inventory in BLLIP, the methodology used to identify appropriate private property, and the cost-benefit decisions related to selecting a property among multiple options. The lack of documentation limited our ability to determine whether SPC's policies and procedures were followed. Regarding opportunities for relocation to lower-cost space, we analyzed BLLIP lease cost data and identified cost outliers among properties managed by SPC and those managed by state entities exempt from leasing through SPC. We identified 39 leases/agreements managed by SPC and 29 leases managed by exempt state entities with a cost greater than $20 per square foot within the state. Within the metropolitan Atlanta area, we identified 40 leases managed by SPC and 24 properties managed by entities exempt from leasing through SPC that may be appropriate for renegotiation and reduced rents if above-market rates are not justifiable. Further data and analysis is necessary, however, to expand the analysis to other metropolitan areas and to determine whether or not the above-market rate is necessary to serve clients. Regarding potential to reduce costs by self-funding tenant improvements (TIs), legal restrictions prevent the state from self-funding TIs in most instances. The Georgia Constitution prohibits state entities from paying for "permanent improvements to private property" unless the improvements can be removed and prohibits SPC and most state entities from entering into multi-year lease agreements. As a result of these two prohibitions, state entities are not legally permitted to pay substantial up-front costs for leased property TIs because the improvement will not depreciate within one year and cannot be removed. Recommendations SPC should provide more comprehensive management oversight and control of BLLIP data to improve its usefulness for portfolio management. SPC should establish stronger policies and procedures necessary to provide more transparency of space and lease management decisions. SPC should conduct additional research related to leases that exceed average market rates to identify opportunities for cost savings. In its response to this report, SPC noted that this limited data analysis does not reflect all the professional activities associated with real estate portfolio management. SPC provided additional information and explanations for what it thought were the causes of several of the problems identified in this report. In addition, SPC noted many corrective actions that it had already started implementing to address recommendations in this report. Additional information from SPC's response is included in the body of the report following pertinent sections. State Space Management Policies i Table of Contents Purpose of this Special Examination 1 Background 1 History of State Space Management Policies 1 Organization of the State Property Commission 3 Financial Information 5 Requested Information What is the balance between state-occupied state owned spaces, unoccupied state 7 owned spaces, non-state occupied state owned spaces, and state-occupied non-state owned spaces? What is the cost associated with each? What polices does the state use in determining leased property location and space? 21 Please comment on any areas where an agency could relocate to a lower cost area and continue to serve clients. How does the state manage tenant improvements for the spaces it leases? Would the 30 state realize savings in rent costs if it self-funded tenant improvements? Appendix A: Objectives, Scope, and Methodology 33 Appendix B: Primary Use Categories 36 Appendix C: Primary Use Categories Identified as Blank, Vacant, Other Use, and Leased to 37 a Non-State Entity by Entity Appendix D: Occupancy Status By Entity 38 Appendix E: Occupancy Status of Office Space by Entity 39 Appendix F: Occupancy Status of Office Space by City 40 Appendix G: SPC Space Standards 41 Appendix H: SPC-Managed Office Leases with Costs >$20 Per Square Foot 42 Appendix I: Agency-Managed Office Leases with Costs >$20 Per Square Foot 43 Appendix J: Office Leases Above Market Rates (Metropolitan Atlanta) 44 State Space Management Policies ii State Space Management Policies 1 Purpose of this Special Examination Our review of state policies related to space management was conducted at the request of the Senate Appropriations Committee. Specifically, the committee asked for information related to the following questions: What is the balance between state-occupied state owned spaces, unoccupied state owned spaces, non-state occupied state owned spaces, and state-occupied non-state owned spaces? What is the cost associated with each? What polices does the state use in determining leased property location and space? Please comment on any areas where an agency could relocate to a lower cost area and continue to serve clients. How does the state manage tenant improvements for the spaces it leases? Would the state realize savings in rent costs if it self-funded tenant improvements? A more detailed description of the objectives, scope, and methodology used in this review is included in Appendix A on page 33. A draft of this report was provided to appropriate personnel within the State Properties Commission, and SPC's pertinent responses have been included throughout the report where appropriate. Background History of State Space Management Policies As shown in Exhibit 1 on the next page, in 2004 former-Governor Sonny Perdue's Commission for a New Georgia (CNG) released a report on the state's space management practices (www.newgeorgia.org/spacemgmt.html). CNG concluded that the state's space management was too decentralized among state entities and improved strategic evaluation and management of real assets was necessary. To improve portfolio management, the task force recommended the state create a central real estate authority (headed by a portfolio management executive) and a central repository of real asset holdings. In response to the recommendations put forth by CNG, the General Assembly passed legislation in 2005 that created a state property officer position and established the State Properties Commission (SPC) as the state's primary real estate portfolio manager. This legislation also separated SPC from the Department of Administrative Services (DOAS) and substantially reduced the number of state entities legally permitted to purchase and/or lease real property independently (i.e. "exempt entities"). In addition, the legislation expanded SPC's authority to manage the use of administrative space on behalf of state entities and charged SPC with helping non-exempt state entities find appropriate cost-effective space in either state owned or commercially owned property. SPC's stated mission is to advise, guide, and maximize Georgia's real estate portfolio by applying industry best practices in asset, space, and transaction management. In executing this mission for non-exempt state entities, SPC acquires and disposes of state owned real property, identifies appropriate space for entities to occupy, and executes their lease agreements. State Space Management Policies Exhibit 1 Significant Events Related to Property Management in Georgia Spring 2004 Commission for a New Georgia releases report on space management Summer 2007 SPC finances study of other state governments' leasing practices Winter 2008 DOAS' Risk Management Services transfers its database to BLLIP Spring 2010 SPC completes Capitol Hill utilization report (evaluates space utilization in 14 GBA- owned buildings) Spring 2011 External consultant completes report on strategic disposition (identifies 131 properties for possible disposition) 2004 2005 2006 2007 2008 2009 2010 2011 Spring 2005 Legislation passes, creating the state property officer position and making the State Properties Commission responsible for managing state-wide property, space, and asset management systems Fall 2006 Building and lease portions of a real property database BLLIP (Building, Land and Lease Inventory of Property) are completed Fall 2007 External consultant completes Savannah metro-plan Source: SPC Records Spring 2010 Governor issues Executive Order requiring state entities to complete all fields in BLLIP Summer 2011 Governor's Office issues memo requesting state entities complete BLLIP data 2 State Space Management Policies 3 In 2006, the State Properties Commission (in conjunction with the Carl Vinson Institute of Government) developed the state's first statewide data repository for property--the Building, Land and Lease Inventory of Property (BLLIP). BLLIP data is publicly available from the internet: www.realpropertiesgeorgia.org. In 2007, the State Properties Commission contracted with a consultant to conduct a survey of other state government leasing practices that identified Georgia's prohibition of multi-year lease terms as atypical. In addition, SPC contracted with a consultant to develop metropolitan strategic plans (metro-plans) for three cities to identify opportunities to consolidate space, renegotiate lease rates, and relocate state entities to more cost-effective locations. A metropolitan strategic plan of Savannah was completed; however, plans for additional cities were cancelled. SPC intends for in-house staff to conduct future metro-plans and will undertake a metro-plan for the city of Decatur during the fourth quarter of 2012. In 2008, data records for state assets were expanded in BLLIP by incorporating insurance-related data maintained by the DOAS Risk Management Unit on state assets. In 2010, an Executive Order was signed by the Governor requiring state entities to begin completion of all data fields in BLLIP records by July 1, 2010 to address problems with missing data in BLLIP. In addition, SPC conducted a physical verification of the occupancy status and vacancy rates of 14 GBAowned buildings. In 2011, a joint memorandum was issued by the Governor's Office, the Office of Planning and Budget, and the State Property Officer reminding state entities of their obligation to complete records in BLLIP for all state owned and leased property. In addition, SPC financed a consultant study that identified 131 properties for potential sale/disposition. Organization of the State Property Commission The State Properties Commission (SPC) has a governing board that is chaired by the governor. Other members of the governing board include the secretary of state, state treasurer, state accounting officer, and three citizen members appointed by the governor, lieutenant governor, and speaker of the house. SPC's governing board authorizes acquisitions of state property, grants license agreements for use of state property, and approves sale contracts for dispositions authorized by the General Assembly. The state property officer (SPO) is appointed by the governor and serves as the executive director of the State Properties Commission and the Georgia Building Authority (GBA). In addition, the SPO serves as the director of the construction division of the Georgia State Financing and Investment Commission (GSFIC). SPC currently has 12 full-time employees. While SPC's fiscal year 2009 budget recommended expanding SPC from 12 positions to 17 (adding five "portfolio management agents"), these positions were never funded, and in fiscal year 2012, SPC's official budgeted position count was reduced from 17 to 12. SPC has three divisions, as shown in Exhibit 2. State Space Management Policies 4 Exhibit 2 State Properties Commission AAss ooff NNoovveemmbbeerr 22001111 State Properties Commission Governing Board Georgia State Financing and Investment Commission Construction Division State Property Officer / SPC Executive Director 1 Deputy Executive Director Georgia Building Authority Administrative Assistant Asset Management Division (1 employee) Space Management Division (3 employees) Transaction Management Leasing Division Acquisition/Disposition (Land) Division (4 employees) (2 employees) 1 The state property officer serves as executive director of both SPC and GBA (which is attached to SPC for administrative purposes only) and as director of GSFIC's Construction Division. Source: SPC Records SPC's Asset Management Division is responsible for recommending strategic changes to improve the value of the state's property portfolio. Duties include establishing a value of state owned and leased real property assets, establishing core and non-core designation for each major asset in the portfolio, determining the total cost of occupancy, evaluating assets, and identifying properties for surplus. According to SPC, the asset management division will begin conducting agency-specific portfolio assessments in fiscal year 2012, with a portfolio plan of the Department of Public Health to be completed during the fourth quarter. In June 2011, a consultant completed a study to identify potential properties for sale/disposition. One-hundred thirty-one properties were initially identified for potential surplus. After consulting with appropriate state entities, SPC asset management division identified 38 properties that were valid sale candidates. SPC's Space Management Division has authority to manage administrative space for most state entities (O.C.G.A. 50-16-41). Notable exempted entities include the Board of Regents (BOR), the Department of Labor (DOL), and certain authorities and commissions that are legally permitted to initiate and manage their own leases. The Division receives space requests from entities, develops square footage requirements and floor plans, and determines the most appropriate location (state government or private property owner) given the requesting entity's business needs and geographic State Space Management Policies 5 requirements. In addition, the Division is also responsible for maintaining the state's central data repository of real property. The Building, Land, and Lease Inventory of Property (BLLIP) database was developed by SPC and the Carl Vinson Institute of Government's Office of Information Technology Outreach Services. In fiscal year 2011, the State Properties Commission received 1,072 space action requests (new lease requests, lease renewals, lease renegotiations, lease cancellations, etc.) from state entities. As of August 2011, BLLIP included 15,050 records of state owned buildings and 1,678 records of active leases of non-state owned spaces.2 SPC's Transaction Management Division provides oversight for the state's leased property portfolio and acquisition and disposition services for real property. Lease management involves renewing, renegotiating, or cancelling an existing lease agreement or locating and procuring new leased locations for requesting entities. Division personnel identify available properties that meet the client agency's business and geographic needs and present them to agency personnel. In addition, Division personnel negotiate tenant improvements and the final lease rate on behalf of the requesting entity. Among the 1,010 active leases managed by the State Properties Commission as of August 2011, a majority were for offices (68.2%). The active leases managed by SPC account for 7.9 million square feet and $117 million in annual rent, utilities, and janitorial expenses. The Land Management Division provides services to most state agencies to execute the purchase or sale of real property and/or real property rights. Notable exempted entities include the Board of Regents and the Department of Transportation. In fiscal year 2011, SPC obtained approval for 20 easements, 26 acquisitions, and 26 dispositions/conveyances. Acquisitions require SPC Board approval, dispositions require authorization from the General Assembly together with approval from SPC's Board, and revocable licenses require approval from the State Property Officer and/or the SPC board. Financial Information The State Properties Commission (SPC) revenues for fiscal year 2011 were $1.4 million, primarily coming from rents collected by the Georgia Building Authority (GBA) for GBA-owned properties in the Capitol Hill area. In addition, SPC received a one-time state appropriation of $180,000 to contract with a consultant to identify properties for potential disposition and approximately $39,000 from agency reimbursements related to property sales. SPC staff noted that its revenues typically are derived exclusively from GBA rents. The largest expense category for SPC was personal services, which accounted for 71% of expenditures. Exhibit 3 presents the State Properties Commission financial summary of revenues and expenditures for fiscal year 2011. 2 Lease count does not include 135 state leases of space in state owned buildings. BLLIP also contains records of state owned land and other insured assets (equipment), which were not included in this analysis. State Space Management Policies 6 Exhibit 3 State Property Commission Financial Information Fiscal Year 2011 Description Fund Sources State Appropriations1 Other Funds2 TOTAL Amount $ 180,000 1,232,913 $ 1,412,913 Expenditures Personal Services $ 1,006,158 Contracts 237,895 Real Estate Rentals 96,745 Regular Operating Expenses 29,096 Computer Charges 24,873 Telecommunications 11,286 Employee Travel 4,423 Other 2,437 TOTAL $ 1,412,913 1 SPC received a one-time state appropriation of $180,000 to contract with an outside consultant to identify properties for potential disposition. 2 The primary funding mechanism for SPC is a portion of GBA rents. In fiscal year 2011, GBA rents accounted for nearly $1.2 million of SPC funding. Source: SPC Accounting Records State Space Management Policies 7 What is the balance between state-occupied state owned spaces, unoccupied state owned spaces, non-state occupied state owned spaces, and state-occupied non-state owned spaces? What is the cost associated with each? Balance of State Owned and Leased Space The State Properties Commission (SPC) oversees the Building, Land, and Lease Inventory of Property (BLLIP) database. BLLIP is the state's central property data repository and is considered the most comprehensive data set of the state's real property. However, we found significant problems with the data in BLLIP, which limited our ability to fully answer this question. The problems with BLLIP data are discussed throughout this report, and specific recommendations to improve the data are presented on page 19. BLLIP records (as of August 2011) indicate that the state owns 15,050 buildings3 and has 1,678 active leases of non-state owned space. Expressed as a percentage, 90% of the records in BLLIP are state owned buildings and 10% are active leases of non-state owned space. (See Exhibit 4.) BLLIP records also indicate that among the 15,050 state owned buildings, 5,420 are occupied by state entities and 141 are occupied by non-state entities.4 Over half of the state owned building records in BLLIP indicate the building is unoccupied (8,626 of 15,050). However, in more than half of the records listed as unoccupied (56.6%), the occupancy categorization is irrelevant given the use of the facility (e.g., laundries, radio towers, and water treatment plants). (See Appendix B.) In other instances, the occupancy information is deficient. Our limited review of the state owned buildings found significant errors for properties listed as unoccupied. For example, several prominent and occupied Georgia Building Authority-owned buildings in the Capitol Hill area (such as the James H. "Sloppy" Floyd building and the Coverdell Legislative Office building) are listed as unoccupied in BLLIP records. In addition, 863 BLLIP records for state owned buildings had occupancy status values which we could not discern (i.e. occupied/unoccupied). We also noted that BLLIP data is largely self-reported by state entities. SPC is responsible for entering data for only a small percentage of properties in the BLLIP database (approximately 6%), those for which it is the leasing agent. SPC contends that the primary responsibility for the accuracy of BLLIP data is with the custodial entity. Finally, during the course of this examination, BLLIP database administrators discovered an issue that could result in a zero value in the "percent occupied" field if no data was entered in the other occupancy fields, which could impact the high number of buildings BLLIP shows as unoccupied. 3 A "building" is defined as a facility owned by the state and/or by state entities and may include property used for a variety of purposes, including offices, storage buildings, housing, classrooms, and security facilities. 4 92% of the state owned buildings occupied by non-state entities are held by the Department of Natural Resources; most of these buildings are located in Stone Mountain Park. State Space Management Policies 8 Exhibit 4 Distribution of State Space (As of August 2011) Non-State Owned State-Occupied (1,678 Leases) 10.0% .324 .10 32.4% State Occupied (5,420 Buildings) .008 0.8% Non-State Occupied (141 Buildings) .052 5.2% Unknown Occupancy (863 Buildings) 51.6% Indicates Building is Unoccupied1 (8,626 Buildings) State Owned (90% - 15,050 Buildings) .516 1At least one of two occupancy fields in BLLIP had a "0" entered. SOURCE: Building, Land, & Lease Inventory of Property, SPC Primary Use Categories of State Owned and Leased Space BLLIP records include a "primary use" field to identify the primary function of a space. Exhibit 5 presents the six most frequently recorded primary use types in state owned buildings and active leases of non-state owned space. (See Appendix B for a listing of all 44 reported primary use categories.) We found significant problems with the primary use data that limited our ability to analyze how state owned buildings and leased non-state properties are used. For example, no primary use value is entered for approximately 23% of the BLLIP records. A large majority of these blank primary use values exist in state owned building records (3,792 of 3,859), though some records for leases of nonstate owned space have blank values as well (67). Among state entities with blank primary use values, the Department of Natural Resources accounts for approximately half and the Board of Regents approximately one-quarter. (See Appendix C for a list of all entities with blank primary use values.) Among non-blank primary use categorizations, "office" is the most common with 1,715 total records (857 state owned buildings and 858 active leases of non-state owned space), "storage building warehouse" is the second largest category with 1,687 records, and "open sheds and pavilions" is the State Space Management Policies 9 third largest category with 1,197 records. The other primary use categories (which account for 6,864 records) include a wide range of primary uses, such as radio towers, dormitories, and laundry facilities. Exhibit 5 State Space By Primary Use Description (As of August 2011) 39 Other Use Types (6,225 Buildings/639 Leases) 41.0% 23.1% Blank (3,792 Buildings/67 Leases) .231 .103 10.3% Offices (857 Buildings/858 Leases) .409 .101 .072 .044 .04 SOURCE: Building, Land, & Lease Inventory of Property, SPC 10.1% Storage Building Warehouse (1,669 Buildings/18 Leases) 7.2% 4.4% 4.0% Open Sheds or Pavillons (1,197 Buildings) Residences (648 Buildings/96 Leases) Maintenance Shops (662 Buildings) State Entities Occupying State Owned and Leased Space BLLIP records identified 48 state entities that either have custody of a state owned building and/or have an active lease agreement for non-state owned space. Exhibit 6 presents the six entities with the highest number of state owned and leased non-state owned properties. (Appendix D provides details on the number and occupancy status of properties by state entity.) As shown in Exhibit 6, the Department of Natural Resources (DNR) holds the largest number of state properties: 4,997 buildings and 248 leases. The Board of Regents (BOR) holds the second largest number of state properties: 3,406 buildings and 333 leases. As previously noted, BOR is exempt from SPC's authority and may acquire, dispose, lease, and manage space independently from SPC oversight. The Department of Corrections (DOC) holds the third largest number of state properties: 2,137 buildings and 117 leases. In addition, the Georgia Building Authority (GBA) (not State Space Management Policies 10 shown in Exhibit 6) is the primary building owner and lease manager for property near Capitol Hill. According to BLLIP records, GBA owns 54 buildings and manages 7.5 million square feet. GBA leases space to state entities and manages these leases (via memorandums of understanding) independently from SPC.5 Exhibit 6 Owned and Leased State Space By Entity (As of August 2011) 42 Other Entities (2,206 Buildings/887 Leases) 18.5% 31.4% Department of Natural Resources (4,997 Buildings/248 Leases) .314 .224 22.4% State Board of Regents (3,406 Buildings/333 Leases) .184 .135 .07 .034 .039 SOURCE: Building, Land, & Lease Inventory of Property, SPC 13.5% Department of Corrections (2,137 Buildings/117 Leases) 7.0% 3.9% 3.4% Department of Transportation (1,165 Buildings/1 Lease) State Forestry Commission (637 Buildings/19 Leases) Technical College System (502 Buildings/73 Leases) Locations With State Owned and Leased Space State owned and leased properties are distributed throughout the state. Exhibit 7 presents the distribution of state owned buildings and active leases of non-state owned space by city and occupancy status. The state owns and/or leases property in all 159 counties and in 398 Georgia cities. In addition, the state owns or leases 61 properties outside of Georgia (e.g., Tokyo, Japan). 5 In most instances throughout this report, GBA-managed state owned space is reported with GBA as the entity with administrative custody, not the entity leasing the space. Exceptions are noted. State Space Management Policies 11 Among Georgia cities, Athens has the most properties overall, with 741. Atlanta has the largest number of leases, with 104. Exhibit 7 Owned and Leased State Space by City As of August 2011 State Owned Non-State Total Properties Owned City State Non-State Indicates is Unknown Buildings Occupied Occupied Unoccupied1 Occupancy Total Leases Number % Athens 589 0 93 5 687 Atlanta 274 2 151 11 438 Milledgeville 169 0 272 4 445 Savannah Reidsville 180 0 116 39 335 3 0 319 32 354 Tifton 254 0 63 18 335 Augusta 214 0 56 7 277 Eatonton 198 0 59 18 275 Valdosta 99 0 120 9 228 Waycross 47 0 177 11 235 Macon 79 0 121 9 209 Elberton 27 4 176 1 208 Columbus 84 0 67 16 167 Sapelo Island 50 0 147 0 197 Helen 102 0 77 7 186 Griffin 108 0 44 21 173 Rutledge 119 0 49 12 180 Rome 96 0 68 1 165 Cartersville 19 0 134 8 161 Brunswick 26 1 72 57 156 Statesboro 118 0 23 1 142 Cordele 19 0 137 6 162 Pine Mountain 6 0 161 0 167 Winder 6 1 150 0 157 Stone Mountain 3 119 34 2 158 Carrollton 86 0 44 14 144 Helena 14 0 119 12 145 Albany 88 1 25 2 116 Hardwick 0 0 135 9 144 Forsyth 13 0 124 1 138 Blairsville 78 0 50 2 130 Jackson 10 0 98 26 134 Dahlonega 56 0 38 12 106 Americus 76 0 24 8 108 Garden City 4 0 72 43 119 Warm Springs 13 0 24 79 116 Chatsworth 11 0 93 3 107 Dawsonville 12 0 95 0 107 Lavonia 5 0 96 0 101 Crawfordville All Others2 87 1,978 0 12 13 4,691 1 100 356 7,038 Grand Total 5,420 141 8,626 863 15,050 1At least one of two occupancy fields in BLLIP had a "0" entered. 2379 cities have less than 100 properties each; 21 of these cities are outside of Georgia. Source: Building, Land, & Lease Inventory of Property, SPC 54 104 34 44 8 21 24 10 29 13 37 11 38 1 1 9 0 13 16 19 31 10 0 9 5 18 0 28 0 5 12 5 19 15 0 2 10 5 2 1 1,015 1,678 741 542 479 379 362 356 301 285 257 248 246 219 205 198 187 182 180 178 177 175 173 172 167 166 163 162 145 144 144 143 142 139 125 123 119 118 117 112 103 101 8,053 16,728 4% 3% 3% 2% 2% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 48% 100% State Space Management Policies 12 Additional Information on State Owned and Leased Office Space Office space represents the space use category with the most potential for cost savings. Office space is the primary use category with the largest number of BLLIP records, and office space is the largest primary use category for leased property by number, square footage, and total cost. In addition, office space is readily available in the private marketplace when compared to other property categories that have specialized use (e.g., dormitories, laboratories) or location (e.g., located within a state prison or within a state park). According to BLLIP records, 22.3 million square feet are designated as office space for state entities. Thirteen million square feet are located in state owned buildings, and 9.3 million square feet are located in non-state owned leased property. Expressed as a percentage, 58% of the space with a primary use of office is located in state owned buildings and 42% is located in non-state owned leased property. (See Exhibit 8.) Non-state owned office space accounts for approximately $138.5 million in lease costs annually. Exhibit 8 Distribution of State Office Space (As of August 2011) Non-State Owned State-Occupied (9,271,857 Leased Square Feet) 41.6% State Owned (58.4% - 13,021,114 Square Feet) .324 32.4% State Occupied (7,217,218 Square Feet) .0111.1% Unknown Occupancy (237,545 Square Feet) .415 Indicates Building is .25 25.0% Unoccupied1 (5,566,351 Square Feet) 1At least one of two occupancy fields in BLLIP had a "0" entered. SOURCE: Building, Land, & Lease Inventory of Property, SPC State Space Management Policies 13 Significant deficiencies with BLLIP occupancy data (such as inaccurate or missing values for occupancy status, total occupant number, and total capacity) prevented us from conducting a comprehensive analysis of key cost and efficiency performance indicators for state office space such as occupancy rates, square footage per occupant, and cost per occupant. BLLIP records indicated that approximately 43% of state owned office buildings (by square footage) were unoccupied. However, our limited review of state owned buildings reported on BLLIP as unoccupied identified several prominent buildings that were actually occupied. For example, BLLIP data for the James H. "Sloppy" Floyd building and the Judicial building on Capitol Hill indicated that the buildings were unoccupied; however, a 2010 SPC utilization report for the buildings cited an occupancy rate of approximately 80% for the Floyd building and 90% for the Judicial building. In all, we identified 13 office buildings in the Capitol Hill area (encompassing 3.2 million square feet) that were leased to state entities but had BLLIP records indicating they were unoccupied. In addition, nearly all (821 of 858) of the BLLIP records of non-state owned leased office property had no value indicating the number of occupants in the space (a figure necessary to analyze occupancy rates, square feet per occupant, and cost per occupant). In instances when SPC was the leasing agent, BLLIP records had no value indicating the number of occupants for 655 of 689 leases. BLLIP records identified 45 state entities that have administrative custody of state owned office buildings and/or have office lease agreements with non-state entities. Exhibit 9 shows the six entities with the most office space by square footage. (See Appendix E for a list of all entities and details on the occupancy status and square footage of office property.) As shown in Exhibit 9, the Board of Regents (BOR) accounts for nearly one-third of the state's square footage used for office space. (As previously noted, BOR is exempt from SPC's authority and may acquire, dispose, lease, and manage space independently of SPC oversight.) The Georgia Building Authority (GBA) accounts for 17.1% of the state's square footage used for office space, which is comprised of 20 GBA-owned buildings in the Capitol Hill area. The Department of Human Services (which is required by state law to maintain an office in every county) accounts for 13.7% of the state's square footage used for office space. State Space Management Policies 14 State owned office buildings and/or non-state owned leased offices are located in all 159 Georgia counties and in 264 Georgia cities. In addition, BLLIP identified 12 leases for office space located outside of Georgia. The six cities with the highest office square footage are shown in Exhibit 10. (See Appendix F for occupancy status and square footage by city). As shown in Exhibit 10, BLLIP records indicate that Atlanta has the largest amount of office space by square footage (40.8%). Athens has the second largest amount of state office space (7.2%); these are largely properties associated with the University of Georgia. State Space Management Policies 15 Exhibit 10 Owned and Leased State Office Space By City 269 Other Cities (9,192,356 Square Feet) (As of August 2011) 41.2% .408 .412 .072 .033 .029 .023 .023 SOURCE: Building, Land, & Lease Inventory of Property, SPC 40.8% Atlanta (9,095,888 Square Feet) 7.2% Athens (1,611,375 Square Feet) 3.3% 2.9% 2.3% 2.3% Augusta (740,340 Square Feet) Milledgeville (639,339 Square Feet) Savannah (509,847 Square Feet) Decatur (503,826 Square Feet) Cost of State Owned and Leased Space State Owned Space Costs BLLIP records do not contain sufficient data to calculate the cost of state owned space. As a result, SPC is unable to track total cost of occupancy for state owned buildings. Consequently, the examination team was unable to identify or evaluate costs for state owned buildings. Total Cost of Occupancy (TCO) analysis is a method used to establish and track the cost to occupy a property. TCO analysis requires data such as general operating expenses, utilities, and financing costs for a building or facility. The benefits of compiling and calculating TCO data are numerous. According to a recent study conducted by the Wisconsin Building Commission, TCO analysis provides the necessary data framework for "occupancy cost accounting, performance measurement, cost comparison, and benchmarking for strategic and facilities planning processes." SPC staff report that they have made inquiries with the State Accounting Office and the Governor's Office of Planning and Budget to determine whether data required for TCO analysis is available electronically and by State Space Management Policies 16 facility. According to SPC, electronic data necessary to calculate TCO are not currently available at the facility level from a single data source, such as the state's accounting system. Leased Space Costs A standard method of calculating and comparing lease costs is by converting them into a comparable metric of "cost per square foot" (psf). BLLIP records contain annual cost data for leased property in a form sufficient for analysis; however, users should consider the landlord type when evaluating lease costs since lease costs may not reflect true market rates when the landlord is a government (state, federal, or local). For example, the Georgia Department of Public Safety rents 10 state owned office buildings to the Department of Driver Services for $1. Exhibit 11 presents the per square foot lease costs for state entities with at least 10 leased office properties. The data is divided into three categories based on landlord type: another state government entity,6 a non-state government entity, or a private landlord. As shown in Exhibit 11, the average statewide rental cost psf by landlord type is $11.73 to state government landlords, $13.11 to other public sector landlords, and $15.52 to private landlords. This analysis includes exempt state entities such as the Board of Regents and the Department of Labor. Exhibit 11 Office Space Rental Charges by Entity1,2 As of August 2011 State Owned Non-State Owned State Owned and Leased to State Entity Leased from Public Sector3 Leased from Private Sector Entity Name Square Number Feet Total Rent Total4,5 Rent Per Square Foot6 Square Number Feet Total Rent Total5 Rent Per Square Number Square Foot6 Feet Total Rent Total5 Rent Per Square Foot6 Corrections, Department of 1 89,791 $ 1,116,105 $ 12.43 35 67,878 $ 362,089 $ 5.33 68 333,708 $ 4,464,476 $ 13.38 Defense, Department of 13 36,941 $ 609,487 $ 16.50 Driver Services, Department of 14 29,554 $ 86,776 $ 2.94 32 149,616 $ 623,573 $ 4.17 9 127,861 $ 2,055,212 $ 16.07 Governor, Office of the 10 104,907 $ 1,334,026 $ 12.72 2 7,143 $ 153,186 $ 21.457 Human Services, Department of 3 325,354 $ 4,149,251 $ 12.75 88 1,693,783 $ 25,268,354 $ 14.92 146 1,371,068 $ 19,180,957 $ 13.99 Judicial Branch of Georgia 11 128,307 $ 1,655,382 $ 12.90 2 1,365 $ 12,554 $ 9.20 4 28,188 $ 502,208 $ 17.82 Juvenile Justice, Department of 1 13,206 $ 1$ 0.00 23 45,006 $ 318,296 $ 7.07 80 363,349 $ 5,426,326 $ 14.93 Labor, Department of 3 15,942 $ 235,484 $ 14.77 80 773,973 $ 13,293,637 $ 17.18 Natural Resources, Department of 5 121,769 $ 1,497,726 $ 12.30 8 167,555 $ 3,174,940 $ 18.95 Pardons and Paroles, State Board of 5 56,106 $ 606,303 $ 10.81 1 3,621 $ 53,715 $ 14.83 39 167,669 $ 2,105,665 $ 12.56 Public Health, Department of 6 34,133 $ 464,394 $ 13.61 4 37,452 $ 499,338 $ 13.33 Public Safety, Department of 29 87,434 $ 281,715 $ 3.22 9 67,512 $ 134,051 $ 1.99 2 4,058 $ 71,564 $ 17.64 Regents, State Board of 5 91,936 $ 1,234,042 $ 13.42 1 2,221 $ 11,771 $ 5.30 68 2,247,710 $ 36,036,988 $ 16.03 Revenue, Department of 2 106,076 $ 1,318,530 $ 12.43 12 507,743 $ 7,979,454 $ 15.72 Veterans Service, Department of 1 11,425 $ 142,008 $ 12.43 37 23,079 $ 23,357 $ 1.01 8 6,571 $ 68,342 $ 10.40 All Others8 38 1,633,098 $ 19,401,249 $ 11.88 13 119,020 $ 1,645,895 $ 13.83 61 867,692 $ 13,754,925 $ 15.85 Grand Total 125 2,798,964 $ 32,823,112 $ 11.73 250 2,223,176 $ 29,153,533 $ 13.11 604 7,048,681 $ 109,376,704 $ 15.52 1One lease in owned property (Secretary of State) and 4 leases in non-state owned properties (Labor, Regents (2), and Veterans Service) do not include square footage and were not included in this table. 2Both SPC-administered and exempt agency-administered leases are included in this table. 3Includes the U.S. government and local governments. 4Rent in this category represents what the entity "pays" for rent and is not necessarily representative of the cost of the building. The rent (including utilities and janitorial) is $1 for approximately 20% of these records. 5Rent shown includes the fields Rent Amount, Utilities, and Custodial. 6Rent Per Square Foot is Rent Total divided by Square Feet Total. 7The average for the Office of the Governor is somewhat skewed by OPB's lease in Washington, DC. 834 entities have less than 10 offices in these categories. Source: Building, Land, & Lease Inventory of Property, SPC 6 State entity leases of state owned office space are included in this section for comparison purposes. However, the lease records are excluded elsewhere in the report, since the buildings are captured separately under the "state owned" category totals. State Space Management Policies 17 Exhibit 12 presents the per square foot lease costs for cities with at least 10 leased office properties. Atlanta has the largest amount of state owned office space leased to state entities. This space is primarily GBA-owned space in the Capitol Hill area. In fiscal year 2011, GBA charged state entities $12.43 per square foot for standard office space and $14.23 for premier office space. Premier office spaces, such as the Health Building and the Trinity Washington Building, are few in number and have undergone major renovation more recently than standard office space. The private sector leases provide an indication of what the state pays private landlords in various cities. However, these rates may not equal average market rates because the leases may not be representative of the overall market, due to the location and quality of state space and the small number of leases in some cities. Exhibit 12 Office Space Rental Charges by City1,2 As of August 2011 State Owned Non-State Owned City State Owned and Leased to State Entity Number Square Feet Total Rent Total4,5 Rent Per Square Foot6 Leased from Public Sector3 Number Square Feet Total Rent Total5 Rent Per Square Foot6 Number Leased from Private Sector Square Feet Total Rent Total5 Rent Per Square Foot6 Americus 8 50,720 $ 368,481 $ 7.27 3 16,000 $ 142,084 $ 8.88 Albany 3 111,871 $ 1,937,294 $ 17.32 8 52,470 $ 614,277 $ 11.71 Atlanta 69 2,606,726 $ 32,606,448 $ 12.51 4 192,900 $ 1,891,834 $ 9.81 52 2,724,698 $ 44,713,200 $ 16.41 Athens 2 5,547 $ 19,436 $ 3.50 1 34,840 $ 246,433 $ 7.07 26 297,071 $ 4,976,996 $ 16.75 Augusta 1 1,478 $ 1$ 0.00 4 85,257 $ 1,217,554 $ 14.28 12 82,891 $ 1,030,740 $ 12.43 Brunswick 1 1,876 $ 5,155 $ 2.75 2 1,215 $ 2 $ 0.00 10 71,402 $ 929,786 $ 13.02 Cartersville 1 980 $ 1$ 0.00 2 1,481 $ 8,305 $ 5.61 8 54,900 $ 838,398 $ 15.27 Columbus Dalton 1 5,578 $ 43,300 $ 7.76 1 5,040 $ 10,816 $ 2.15 19 185,989 $ 2,596,490 $ 13.96 11 73,491 $ 970,758 $ 13.21 Decatur 5 137,578 $ 2,726,280 $ 19.82 9 173,935 $ 3,255,686 $ 18.72 Dublin 4 12,992 $ 127,106 $ 9.78 9 58,479 $ 714,623 $ 12.22 Forsyth 11 28,310 $ 7,051 $ 0.25 2 7,314 $ 104,788 $ 14.33 Gainesville 1 2,858 $ 574 $ 0.20 2 16,696 $ 298,369 $ 17.87 11 79,151 $ 1,281,906 $ 16.20 Macon 2 980 $ 2$ 0.00 6 206,059 $ 3,065,890 $ 14.88 16 120,210 $ 1,529,244 $ 12.72 Marietta 1 4,215 $ 6,746 $ 1.60 12 136,477 $ 2,325,688 $ 17.04 Moultrie 4 50,957 $ 829,097 $ 16.27 6 11,038 $ 119,000 $ 10.78 Newnan 1 2,384 $ 36,235 $ 15.20 5 24,899 $ 128,909 $ 5.18 4 35,648 $ 464,698 $ 13.04 Savannah 1 90,000 $ 1$ 0.00 4 11,805 $ 48,234 $ 4.09 9 272,648 $ 5,563,070 $ 20.40 Statesboro 1 1,800 $ 1$ 0.00 4 20,082 $ 408,371 $ 20.34 8 32,285 $ 321,773 $ 9.97 Tifton 1 3,200 $ 12,000 $ 3.75 6 37,862 $ 343,066 $ 9.06 8 38,856 $ 481,845 $ 12.40 Valdosta All Others7 3 4,253 $ 4,083 $ 0.96 29 42,994 $ 88,824 $ 2.07 2 27,000 $ 318,601 $ 182 1,189,707 $15,172,147 $ 11.80 12.75 8 62,778 $ 768,530 $ 353 2,460,950 $ 35,633,126 $ 12.24 14.48 Grand Total 125 2,798,964 $ 32,823,112 $ 11.73 250 2,223,176 $29,153,533 $ 13.11 604 7,048,681 $ 109,376,704 $ 1One lease in owned property (Atlanta) and 4 leases in non-state owned properties (Athens, Macon, Millen, Sandersville) do not include square footage and were not included in this table. 2Both SPC-administered and exempt agency-administered leases are included in this table. 3Includes the U.S. government and local governments. 15.52 4Rent in this category represents what the entity "pays" for rent and is not necessarily representative of the cost of the building. The rent (including utilities and janitorial) is $1 for approximately 20% of these records. 5Rent shown includes the fields Rent Amount, Utilities, and Custodial. 6Rent Per Square Foot is Rent Total divided by Square Feet Total 7196 cities have less than 10 offices each in these categories. Of the 564 office leases in these cities, approximately 1/4 (159) are local DFCS offices. Source: Building, Land, & Lease Inventory of Property, SPC Problems with BLLIP Data Improvements to the completeness and accuracy of BLLIP data are necessary to enable the State Properties Commission to fulfill its function as the state's real estate portfolio manager. Missing and incorrect values for key fields in BLLIP limit SPC's (and the examination team's) ability to determine the primary use of many properties, whether or not the property is occupied, the percentage of usable space that is/is not utilized or occupied, and the cost of the space. State Space Management Policies 18 SPC needs to provide more comprehensive management oversight and control of BLLIP data. While SPC is responsible for maintaining the BLLIP database, primary responsibility for the accuracy and completeness of BLLIP inventory records remains with the state entities that hold state buildings and entities that manage leases independently of SPC. Of the 15,050 state owned buildings and 1,678 leases of non-state owned space in BLLIP, SPC is responsible for maintaining data for 1,010 leases (6% of BLLIP records). As of June 2011, approximately 775 employees from more than 50 state entities have permission to enter data into BLLIP. SPC has not established quality control guidelines for entities that enter data into BLLIP to reduce varying data entry procedures and varied interpretations among users. SPC manages the BLLIP data repository by issuing access privileges (i.e. name and password) to employees of state entities, providing training to state entities and users who request it, and working with the Carl Vinson Institute to maintain the data system and resolve technical issues. Entities submit edited records to SPC personnel, who "approve" them in the system. However, the approval process does not include detailed reviews or verification of the data. SPC does not conduct periodic data quality reviews to identify obvious errors and gaps in the data. To address holes and gaps in BLLIP data, an Executive Order and other communications have been issued to direct state entities to complete and update BLLIP data. In March 2010, an Executive Order required all state entities to begin completion of all fields in BLLIP by July 2010 (with particular attention to occupancy fields). In April 2010, SPC sent a memo to all state agency heads requesting agency BLLIP records be completed and updated to allow SPC "to identify surplus and underutilized properties, and to provide more cost efficient use of existing work space." Entity compliance was poor, and in August 2011, the Office of the Governor, together with the Office of Planning and Budget and the State Property Officer, issued another memo requesting record completion. This memo emphasized the importance of utilization and condition data "in developing the annual budget, recommending capital expenditures or outlays, and anticipating revenues to the State Treasury." SPC has not specifically targeted the handful of agencies that represent the majority of missing and inaccurate data. The inadequate controls and management oversight have resulted in significant problems with BLLIP data. Specific problems with BLLIP data fields identified during this examination are summarized below: Problems with Occupancy Data For 5.7% of buildings and 95.8% of leases in BLLIP, information was not available to accurately identify if the facility was vacant or occupied because there was no value in the applicable occupancy fields. In addition, 57.3% of buildings and 1.4% of leases in BLLIP data indicated facilities were unoccupied; however, many of those had facility categories (primary use categories) for which occupancy was not an appropriate factor. Examples include radio towers, storage sheds, boating facilities, rest stations, and water treatment plants. (See Appendix B for a complete list of primary use categories.) Problems with Primary Use Data For 25.2% of buildings and 4% of leases in BLLIP, information was not available to identify the type of facility because the "primary use" field had no value entered. In addition, two primary use options comprising another 2% of the buildings in BLLIP had a primary use designation that was not a type of use State Space Management Policies 19 ("vacant" and "leased to a non-state entity"). Finally, our review of the 3.7% of buildings and 1.1% of leases classified as "other use" identified that this classification was used more often than necessary. A sample of 10% of properties classified as "other use" identified that 14% did not have a written use specified as required and 50% appeared to fit into one of the existing categories. Problems with Occupancy Rate Data For Office Space For 66.9% of the office buildings and 100% of office leases in BLLIP, information was not available to identify the occupancy rate of the facility because one or more of the required fields were blank. Problems with State Owned Buildings Cost Data There is no information on building cost for any of the 15,050 state owned buildings in BLLIP. Therefore, SPC cannot analyze the economy of these facilities in comparison to each other and to properties leased from non-state entities. Recommendations For Improvement In order to effectively manage the state's real estate portfolio, SPC needs to improve the accuracy and completeness of the BLLIP database. SPC should: o establish quality control guidelines and review procedures for BLLIP data entry to reduce varying procedures and field interpretations among the various users and entities with permission to edit BLLIP records. o strengthen information system controls for critical fields in BLLIP to prevent entry of erroneous values and make certain fields mandatory for record submission, particularly those related to use, occupancy, cost, and square footage. o conduct periodic data quality reviews to detect obvious errors and blank values in the data. o work directly with the state entities that represent the majority of missing and inaccurate data to improve data completeness and accuracy. o add a field to identify unused (vacant) versus used space and limit the use of occupancy rate fields to the primary use categories for which occupancy rate calculations are relevant (i.e. offices and not radio towers, storage buildings, etc.). o determine the most efficient and effective way to collect and maintain data necessary to calculate costs associated with state owned buildings. Agency response: SPC noted that to improve quality control and to reduce field interpretations related to data entry in BLLIP, it has reviewed the BLLIP user list and provided data entry training on numerous occasions. It also noted that it will develop more detailed written guidance that will be effective in July 2012 and that training will continue to be offered annually. It also indicated that it would review information system controls to reduce error rates in BLLIP data and identify mandatory fields for record submissions. Technical upgrades to BLLIP to implement these improvements will be made by July 2012. SPC noted that the occupancy fields in BLLIP were added in 2010 and that information on the number of occupants for SPC-managed leases is available in original lease request information contained in its lease files. While updates on occupancy figures were not previously required, SPC noted that it will start requiring annual occupancy updates effective January State Space Management Policies 20 2012. In addition, SPC noted that it has added information on primary use for the leases it manages that did not have primary use information in BLLIP. SPC reported that it has contacted agencies with missing BLLIP data and is meeting with the eight agencies that have most of the missing data. SPC also reported that it is working on developing a new field in BLLIP to identify unused (vacant) space. Finally, SPC noted that it has been working on identifying building costs for two years and will continue to seek a TCO solution. It specifically noted that information on costs is not available in BLLIP because it is a data warehouse/inventory tool and not an asset management application. It also noted that it is working with GEFA to obtain data on total utility costs statewide and the number of utility meters the state owns to determine if additional investment in meters is needed. In addition, SPC noted that accurate TCO information will require an investment in metering, amending accounting systems, and changing how agencies categorize operating costs. State Space Management Policies 21 What polices does the state use in determining leased property location and space? Please comment on any areas where an agency could relocate to a lower cost area and continue to serve clients. Lease Policies Impacting Costs Policies related to facility location, facility quality, space standards, and methods for lease cost data review can all impact total lease costs. The two primary factors impacting lease costs are the property's cost per square foot and the amount of spaced leased by an entity. The lease cost per square foot of a facility is, in turn, influenced by both the location of the facility and the quality (or class) of the facility. For SPC-controlled leases, the area leased is determined by the space needed for an entity's employees and the space needed for other activities performed at a facility. In addition, systematic review of lease cost data can help identify potential opportunities for cost savings; SPC's policies related to these factors that may impact state lease costs are described below. State Property Commission's Authority: SPC has the authority to provide leasing assistance to non-exempt state entities that request administrative space. It should be noted that exempt entities (including the Board of Regents, the Department of Labor, and various authorities and commissions) execute leases independently of SPC and this review did not examine the policies of exempt entities. Non-exempt state entities submit a request for "space actions" (e.g., new space, lease renewal, lease cancellation, or lease renegotiation) to SPC's Space Management Division. The Space Management Division establishes the space needs of the requesting entity by analyzing information in the space utilization questionnaire, reviewing the inventory of state owned properties, and concluding whether appropriate space is available in state owned property. If the space management unit determines that state owned property is not available or not appropriate given the requesting entity's geographic or core-business needs, the request is forwarded to SPC's Transaction Management Leasing Division and a private lease is sought. As discussed on page 27, we found that exempted state entities had a higher proportion of higher-cost leases. Property Location Policies Preference for State Owned Space: It is typically more cost effective to utilize existing state owned space than to lease property from private owners. SPC has established a written policy requiring that vacancies in state owned buildings should be given priority over privately owned space when locating state entities. Specifically, the policy requires that SPC will (a) review the inventory of state owned space as part of the space assignment process and (b) assign an entity to state owned space before leasing additional property in the private market if the state owned space satisfies both the "programming needs" and "geographic requirements" of the entity. SPC has not, however, established procedures detailing the methods staff should use to conduct a review of state owned properties to identify potential vacancies or back-fill opportunities. SPC space management staff indicated that they first review records within the BLLIP inventory database and then conduct follow-up communications (as necessary) with state entities to determine whether or not state space is appropriate and available for State Space Management Policies 22 locating the requesting entity.7 As noted in the previous finding, the poor data quality of primary use and occupancy status/rate for BLLIP records of state owned buildings significantly limits BLLIP's value for evaluation of the state owned space inventory. After a review of BLLIP data is conducted, staff indicate that they communicate with state entities with property in the general geographic area to determine whether opportunities exist to backfill under-utilized space. Due to a lack of documentation maintained in the lease files, we were unable to confirm whether staff executed the methodologies reported. We reviewed all requests submitted to SPC for new space during fiscal year 2011 that resulted in locating an entity into a space. We found no consistent documentation of the analytical methods staff report that they conduct in inventorying existing state owned space. We did not find evidence of SPC backfilling state owned property. We did find evidence of SPC directing a requesting entity to GBAowned buildings. We also found instances when SPC co-located requesting entities into a single leased location. We were unable to determine the procedures or methodology used to make any of these decisions, however, due to a lack of documentation in the lease files. Property Location Policies Requested Geographic Area: SPC has a written space demand policy that states that it will consider the programming needs and "any geographic requirements" necessary for the entity requesting space to provide services. SPC personnel indicate that they communicate with the requesting entity early in the search process to understand the entity's core business and geographic requirements. A requesting entity's geographic requirements could include things such as close proximity to Capitol Hill, an interstate highway, or other state offices. SPC has not established formal policies or procedures to evaluate the merits of the requesting entity's stated geographic requirements. In addition, SPC staff indicated that no informal evaluation of the merits of a state entity's stated geographic requirements is conducted either. As such, the general geographic area within which SPC begins a search for space is determined by the self-reported geographic requirements of the requesting entity. Property Location Policies Offering Multiple Alternatives: SPC has established a goal to provide a requesting entity with at least three potential properties to consider when available. However, SPC has not established a policy or procedure detailing the resources or the methods leasing staff should use to conduct a search for property. SPC leasing staff indicated that they use publicly-available real estate databases to initiate a search for property and may rely on prior knowledge of the geographic area under consideration. In addition, staff report that they may communicate with knowledgeable real estate persons in the area under review. SPC leasing staff indicated that they may visit the potential sites with the state entity requesting space to help make determinations about the appropriateness of the space. However, leasing staff are not required to maintain documentation of their methods or to justify why the lowest cost property was not selected. We reviewed all requests submitted to SPC for new space during fiscal year 2011 that resulted in locating an entity into a space. We found no consistent documentation of the analytical methods staff report for identifying available properties in the geographic area of 7 If the space under consideration is managed by the Georgia Building Authority, SPC does not rely on BLLIP records but instead relies on vacancy reports maintained by the GBA. State Space Management Policies 23 interest, the criteria used to select properties offered to the requesting entity, or justifications if the lowest cost property was not selected. Property Quality (or Building Class) Policies: According to SPC staff, as a general rule, state agencies should not be leasing "premium" quality office space due to the high cost typically associated with it. However, SPC has not established formal, written policies restricting state agencies' location in premium space or outlining the steps necessary to justify exceptions to this policy. "Premium" space includes buildings located in prestigious areas and/or using above-standard materials, workmanship, and finishes that typically result in higher lease payments. Neither BLLIP records nor SPC lease files contain data identifying the relative quality or class of space leased by state entities. As a result, we could not specifically identify state entities that may be located in premium class space or evaluate if the premium class space was justified. Property Space Standards Policies: SPC has established written space standards for state owned or leased office workspace that define the square footage appropriate for various position categories (e.g., manager, professional staff). (Appendix G provides the SPC space standards.) As part of the request for space action, state entities report the number and position category of current (and projected future) employees, as well as any client or ancillary space needs (e.g., bathrooms, storage rooms, conference rooms, break rooms). SPC uses this data to tabulate an approximate total square footage space requirement for the requesting entity. State law gives SPC the authority to manage the use of administrative space, which includes the ability to establish and enforce space standards and assign space based on these space standards. However, SPC does not have a written policy that requires staff to document whether or not all applicable space standards were met when locating a state entity, and due to data access limitations, we were unable to determine the degree to which SPC adheres to its space standards. We attempted to analyze whether SPC complies with its space standards in all applicable instances. However, the data necessary to analyze space standard compliance (including square footage used for administrative space and position categories) is not available as an electronic data set, and the time required to manually review and extract the data for the 689 office space leases that SPC currently manages prevented us from compiling a complete data set. As a result of this data access constraint, we conducted a limited review of SPC's compliance with space standards for 10 requests submitted to SPC for new space during fiscal year 2011 that resulted in locating an entity into a space. To determine whether SPC complied with its space standards, we assessed whether the state entity was placed in a space that was no greater than 10% larger than the space identified from the space management unit's space standard report. Our review of the 10 files identified that seven were in compliance with space standards and three were not in compliance with the standards. The three files that were not in compliance did not have any justification for deviating from the standards. Policies for Periodic Reviews of Lease Costs in Geographic Areas: A metropolitan strategic plan (also known as metro-plan) is a systematic study of the state's inventory of state owned and leased property within a limited geographic area (i.e. a city or county). The overall goal of a metro-plan is to evaluate local real estate markets to identify opportunities to consolidate space, renegotiate lease rates, or relocate state entities to more cost-effective locations. Metro-plans are labor intensive; however, they are an effective State Space Management Policies 24 means to conduct a thorough and comprehensive analysis of an entire metropolitan area. Metro-plans require a real estate expert to conduct a physical inspection of properties and analyze local market lease rates. While SPC has no policies for implementing metro-plans, in the Commission for a New Georgia's 2010 Implementation Progress Reports 2004 2010, SPC indicated intentions to conduct a pilot metro-plan and noted the benefits of doing so: SPC will conduct a pilot metro-plan to evaluate all state owned and leased space for state agencies in a defined geographical area. The purpose of such a plan is to assess the space needs of agencies and to determine the most cost efficient method to provide the space. Often, the results of such an analysis lead to the consolidations of leases, colocation of state agencies sharing program requirements and the recommendation to dispose of surplus and/or underutilized real property. The primary goal is to improve asset management and to increase utilization by reducing costs to the state. We found that SPC has made use of a metro-plan in the past. In 2007, the State Properties Commission contracted with a private real estate consultant to conduct a metro-plan of Savannah for a cost of approximately $60,000. The report took approximately five months to complete and identified the following potential cost savings and facility upgrade opportunities. o Consolidations The consultant identified an opportunity to consolidate a state entity from three separate suites into a single suite and estimated a potential savings of $21,700 per year in rent costs. o Relocations The consultant identified opportunities to relocate two state entity offices to improve space from sub-standard facilities and reduce total office space from approximately 28,000 square feet to 18,000 square feet. The consultant estimated that moving costs and tenant improvement costs would break even after 13 years, but that the move would result in a significant qualitative improvement for the entities from substandard office space. o Renegotiations The consultant identified two rental rates that were greater than 10% higher than market rental rates and suggested that SPC review the cost effectiveness of these leases before renewing them. The consultant estimated an annual savings of approximately $500,000 per year from these renegotiations. SPC implemented recommendations from the study, including consolidating office space and relocating state entities to improve work environments from sub-standard office space. SPC staff indicated that they intend to complete metro-plans in the future, with one for the City of Decatur planned for the fourth quarter of fiscal year 2012. It is not clear whether additional staff are necessary to execute this policy goal. It should be noted that SPC staff did conduct a physical inspection of GBA-owned buildings in 2010 to evaluate opportunities to consolidate space. Policies for Periodic Analysis of BLLIP Data: SPC does not have formal policies for periodically evaluating existing leases to identify potential cost savings. For example, SPC does not periodically collect local market lease State Space Management Policies 25 rates and compare them in aggregate to existing lease costs to identify high-cost property (by geographic region, state entity, or some other attribute). In the next section of this report, for example, we present the results of an analysis of high-cost lease records we identified with current BLLIP data. Policies for Annual Lease Renewals: SPC has not created any policies or procedures for reevaluating lease costs when the lease comes up for renewal. A state entity may choose to have its lease renegotiated when it submits a space action form for annual renewals. In addition, SPC leasing agents indicated that they may also consider whether a lease cost seems too costly, but SPC has not created any policies or procedures to standardize the cost review process. Policies for Multi-Year Leases: SPC is not permitted to enter into multi-year lease agreements due to restrictions imposed by the state Constitution (Article VII, Section IV, Paragraph VIII). However, SPC has indicated that multi-year lease agreements may offer opportunities to reduce rents by extending the term during which costs (such as tenant improvement costs) can be amortized and making the state a more attractive tenant for landlords. Recommendations For Improvement The State Properties Commission needs to develop stronger policies and procedures related to the factors that impact the state's lease costs. Specifically, SPC needs to: Consider requesting more statutory authority over leases negotiated by exempt entities. For example, SPC could provide independent oversight over high-cost leases that exceed defined limits and could work with agencies to establish parameters for reviewing costs. Improve its analysis of backfill opportunities in state owned space before leasing private space. SPC should (a) establish policies and procedures to define staff requirements for assessing state owned property inventory and (b) require documentation of the analysis to be maintained as part of the lease file. Write procedures explaining the goals and standards related to leasing. Specifically, SPC should establish procedures detailing the data collection and analysis techniques that staff should execute to identify private property for state entities to lease. Adopt criteria to evaluate the merits of a requesting entity's stated geographic location requirements and adopt procedures to formally document SPC staff considerations of general geographic area (and the associated cost implications) as part of the lease file. Obtain information on market lease rates for geographic areas throughout the state and establish procedures for evaluating market rates and including market rate evaluations in lease files. Establish working definitions to classify the quality of space occupied by state entities. SPC should also require that state entities provide written justification for leases of "premium" class space and consider requiring formal SPC approval for leases of premium space. Require that lease files include justification when space standards are exceeded by 10% or more. State Space Management Policies 26 Develop a strategy for performing metro-plans in the future. The strategy should prioritize locations with the greatest potential for cost savings. Establish policies and procedures for conducting periodic, systematic analysis of BLLIP data records to identify areas for potential cost savings. Develop a strategy for reevaluating lease costs when leases come up for renewal. The strategy should prioritize leases with the greatest potential for cost savings. Determine cost savings that might result from executing multi-year lease agreements, including the tenant improvement costs that will be amortized over the term of a multi-year agreement. Agency response: SPC noted that it would modify its internal tracking system to include two check boxes to document staff consideration of vacancies in state owned space and other back-fill opportunities, which will be effective in January 2012. It also reported that it would develop new policies related to presenting multiple possible locations to agencies that will be published in January 2012. The new policies will provide that leasing staff will make a recommendation regarding location and the agency must provide justification in writing if the recommendation is not accepted. Regarding geographic location, SPC noted that it relies on the agency to determine the best location that will serve its program requirements. It also noted that it would continue to capture market rate data on an annual basis and that its Asset Management Division will use this benchmark to highlight leases for potential renegotiation. It was also noted that SPC reviewed the three leases that exceeded space standards and the variances were justified, and that the two leases that identified by the Savannah Metro Plan that were more than 10% greater than market rates could not be renegotiated. SPC also noted that it was working with a number of agencies to correct key fields in BLLIP and that written procedures for periodic review of BLLIP data will be in place and published in January 2012. New leasing procedures published in January 2012 will also clarify polices for reevaluating leases when they come up for renewal. Finally, SPC estimated that the state could save $37 million over a 10-year period if SPC had the ability to use multiyear leases (however, this estimate does not include potential savings related to exceptional tenant improvements). Areas Where Lease Costs Could Be Lowered To identify leases where costs could be lowered, we analyzed BLLIP data records to identify "highcost" office leases which had higher than $20 per square foot costs. In addition, we identified higher than average costs in specific geographic areas by comparing available information on market lease rates (as provided by a private real estate firm through SPC) with current state rates for office leases from private property owners. The results of these reviews are presented below. Highest Cost Per Square Foot Leases: Of the 940 office leases in BLLIP,8 we identified 68 leases of property that were for more than $20 per square foot (see Appendix H and Appendix I for listings of leases for more than $20 per square foot). Information is not typically maintained in lease files to justify relatively high lease rates, and SPC is not required to specifically approve higher than typical lease rates. We requested information from the leasing agencies with higher cost leases and received the comments provided in Exhibit 13 below. While these comments provide insight regarding justification for some of the higher lease rates, more detailed independent review and analysis of the factors impacting the individual lease costs are needed to adequately evaluate the justifications for the higher lease costs. We also noted that only 5.1% 8 Includes only offices in Georgia. Includes subleases that were excluded elsewhere in the report. State Space Management Policies 27 (39 of 761) of the leases executed by SPC had a cost greater than $20 psf, while 16.2% (29 of 179) of the leases executed by entities other than SPC had a cost greater than $20 psf. The significantly higher percentage of higher than $20 psf leases for which SPC is not the leasing agent may suggest that more independent oversight and review of leases could help to control lease costs at exempt entities. However, additional analysis of the specific justifications for the higher lease costs at these entities is needed. Exhibit 13 Statements on Leases with >$20 PSF Costs Department of Human Services Ten of 16 high-cost DHS leases are "maintenance-in-lieu-of-rent" agreements that were-- according to SPC leasing agents--executed without SPC's oversight. Specifically, multiple high-cost leased properties now occupied by DHS were initially established as build-to-suit properties financed by the local county governments and occupied by DHS under maintenance-in-lieu-of-rent (MIL) agreements. For these properties, the state is not able to renegotiate lease costs until the bond issued to construct the property is satisfied. SPC officials currently have a list of DHS MIL properties with dates when the bond will be satisfied. SPC leasing agents indicate that once the bonds are paid, they intend to renegotiate rates. According to SPC, some are currently being renegotiated. Non-Exempt Agencies Department of Defense According to SPC leasing agents, the DoD has a "geographic need" to be located near high-traffic retail locations to conduct recruiting. In addition, some of these properties were classified as "small offices," which were noted as a contributing factor for high-cost leases. Department of Driver Services SPC leasing agents indicated that the cost per square foot is artificially inflated because the land lot is likely included in the price. (Land lots are used for conducting driving tests.) Department of Economic Development According to SPC leasing agents, these properties host meetings for investment and tourism and represent the image of Georgia for the world. SPC leasing agents indicated agreement with the idea that the business needs of this entity justify higher-end expenditures for the properties. Exempt Agencies Board of Regents BOR reported that many of the high-cost BOR leases either are private-public ventures, function as special purpose facilities (i.e. research facility), or have high-cost business needs (e.g., UGA's Executive MBA Center in Buckhead). Department of Labor Source: Survey of State Entities Agency did not verify the accuracy of lease component costs (e.g., utility or janitorial costs). Therefore, the examination team could not conduct analysis of trends and patterns in the cost per square foot for DOL leases. Higher Than Average Costs In Specific Geographic Areas: We also performed a geographic analysis to identify relatively high-cost office leases in comparison with market rates specific to individual cities. Although SPC does not currently subscribe to any real estate data provider to collect city-specific market data, SPC did receive some information on current metro Atlanta area market rates from a private real estate firm during the examination. The results of the comparison are shown in Exhibit 14. (See Appendix J for details on the leases with above-market rates.) Leases managed by exempt entities had a higher proportion of above-market rates than SPCmanaged leases. One-third of SPC leases analyzed (40 of 121) were above the market rate, while 46% of agency-managed leases (24 of 52) were above average market rates. This trend could signal that independent oversight by SPC contributes to lower rates. However, more analysis is needed since characteristics of office space held by these exempt entities (Board of Regents and Department of Labor) may justify higher lease rates. State Space Management Policies 28 Exhibit 14 Comparison of State Lease Rates to Market Rates in Metro Atlanta As of September 2011 Market Rate1 City (Cost Per Leases2 % of Leases Range of Lease Costs Above Above Market Rate Square Foot) Below Above Total Market Rate From To SPC-Managed Leases 81 40 121 33% Atlanta $ 20.22 23 6 29 21% $ 20.87 $ 29.28 Canton $ 23.40 1 1 0% Cartersville $ 21.50 7 7 0% College Park $ 13.84 2 2 100% $ 16.07 $ 16.63 Conyers $ 15.25 1 4 5 80% $ 15.74 $ 23.07 Covington $ 13.32 4 4 0% Cumming $ 16.98 2 1 3 33% $ 17.74 $ 17.74 Dallas $ 7.28 3 3 100% $ 12.37 $ 13.16 Dawsonville $ 18.88 1 1 0% Decatur $ 19.29 6 1 7 14% $ 22.28 $ 22.28 Douglasville $ 16.59 1 1 0% East Point $ 16.31 2 2 0% Fayetteville $ 16.64 3 1 4 25% $ 19.52 $ 19.52 Gainesville $ 18.50 5 3 8 38% $ 19.79 $ 21.37 Hapeville $ 11.50 1 1 2 50% $ 19.19 $ 19.19 Jonesboro $ 13.82 3 1 4 25% $ 20.60 $ 20.60 Lawrenceville $ 19.11 4 1 5 20% $ 22.76 $ 22.76 Lithonia $ 19.01 1 1 100% $ 24.37 $ 24.37 Marietta $ 14.33 2 7 9 78% $ 16.05 $ 28.99 McDonough $ 17.52 3 3 0% Morrow $ 18.59 2 2 0% Newnan $ 17.76 2 2 0% Norcross $ 13.77 1 1 2 50% $ 24.37 $ 24.37 Roswell $ 15.66 1 1 100% $ 23.28 $ 23.28 Stockbridge $ 15.65 2 2 100% $ 23.50 $ 68.75 Tucker $ 16.63 1 2 3 67% $ 18.50 $ 18.57 Villa Rica $ 16.00 1 1 100% $ 17.30 $ 17.30 Winder $ 21.00 6 6 0% Woodstock $ 16.67 1 1 100% $ 16.69 $ 16.69 Agency-Managed Leases3 28 24 52 46% Atlanta $ 20.22 11 12 23 52% $ 20.25 $ 32.62 Canton $ 23.40 1 1 0% Cartersville $ 21.50 1 1 0% College Park $ 13.84 1 1 100% $ 18.52 $ 18.52 Conyers $ 15.25 1 1 0% Covington $ 13.32 1 1 100% $ 14.80 $ 14.80 Cumming $ 16.98 1 1 100% $ 18.60 $ 18.60 Dallas $ 7.28 1 1 100% $ 14.00 $ 14.00 Decatur $ 19.29 1 1 2 50% $ 21.75 $ 21.75 Douglasville $ 16.59 1 1 0% Gainesville $ 18.50 3 3 0% Jonesboro $ 13.82 1 1 100% $ 21.86 $ 21.86 Kennesaw $ 17.17 4 4 0% Lawrenceville $ 19.11 1 1 100% $ 21.66 $ 21.66 Marietta $ 14.33 3 3 100% $ 16.16 $ 19.84 Newnan $ 17.76 2 2 0% Norcross $ 13.77 1 1 100% $ 22.51 $ 22.51 Peachtree City $ 17.34 1 1 100% $ 22.57 $ 22.57 Tucker $ 16.63 3 3 0% Grand Total 109 64 173 37% 1Market rates for metro Atlanta were provided to SPC by a national real estate firm. We were unable to verify the accuracy of these rates or determine if the averages consist of properties similar to the state's office properties in location and quality. 2Only leases for office space with private sector landlords are included here. 3Agency-managed leases are executed by an entity other than SPC. Some state entities (e.g.,Department of Labor and Board of Regents) have a statutory exemption to SPC leasing authority. Source: SPC and Building, Land, & Lease Inventory of Property (BLLIP data as of August 2011) State Space Management Policies 29 Recommendations For Improvement The leases over $20 per square foot and the leases that exceed average market rates represent possible opportunities for cost savings. Further research is needed to determine which lease agreements have a cost that is above market rates and is not justified in order to provide services for clients. Although the methodologies adopted to conduct these analyses are relatively simple, they should be systematically incorporated into SPC's standard operating procedures to identify the potential for cost savings. To ensure that the state is not paying higher than necessary lease rates for properties, SPC should periodically collect market rate data for cities and compare those figures to the cost per square foot figures for existing leases. To ensure that higher than average lease costs are reviewed and justified, SPC should establish a policy and procedure for permitting and documenting the decision to execute a lease at rates that are higher than the established market norm. To facilitate this process, SPC should periodically review BLLIP data for material cost outliers and ensure that those leases have been reviewed. Agency response: SPC reported that it has reviewed the list of SPC-managed leases with greater than $20 per square foot costs compiled by the examination team and determined that 12 of the 39 leases are candidates for renegotiation. SPC will attempt to renegotiate these leases as they come up for renewal. SPC also indicated that a written leasing procedure will be in place and published by January 2012. It will periodically review leases to ensure high cost leases have been justified per the written procedure. SPC also noted that it has no authority over exempt agency leases that are high-cost. State Space Management Policies 30 How does the state manage tenant improvements for the spaces it leases? Would the state realize savings in rent costs if it self-funded tenant improvements? Tenant improvements (TIs) are changes made to a property to accommodate the needs of a tenant. TIs may include things such as floor and wall coverings, ceilings, partitions, telecommunication wiring, air conditioning, and access control. As discussed below, tenant improvements are included in negotiated lease costs and cannot be self-funded by the tenant due to legal restrictions. Tenant Improvement Policies, Procedures, and Management Tenant improvement costs are included in the negotiated lease cost of buildings. Landlords typically set lease rates to cover a standard level of finish for build-out of office walls, paint, carpet, etc. included in SPC's specifications and guidelines. SPC provides prospective landlords with a seven-page "Specifications and Guidelines" document which defines minimal space and building requirements for factors such as the quality of mechanical and finish materials. SPC noted that requiring multiple bids provides a constraint on landlord charges for tenant improvements and its "specifications" help ensure that leasing agents are comparing "apples to apples" when evaluating bids. However, our review of 10 lease projects processed in fiscal year 2011 identified that five had records of only one bid, two had records of two bids, and two had records of three or more bids.9 SPC estimates that approximately 95% of its leases involve typical tenant improvements that are made by landlords each time they bring in a new tenant or to maintain space occupied by longtime tenants. The remaining 5% involve higher-cost improvements related to the special needs of the tenant, such as a laboratory building requiring specialized wiring and plumbing. SPC does not have any written policies or procedures for handling the estimated 5% of leases that may involve above-standard TI costs. Currently, landlords incorporate the additional extraordinary TI costs into their lease charges. According to SPC leasing agents, the exact cost of non-standard TIs is not typically maintained separately from the overall lease cost. The Georgia Constitution has two provisions that restrict the possibility of self-funding tenant improvements of the majority of state entities that lease property. First, SPC and most state entities are legally restricted to 1-year lease agreements and are prohibited from entering into multi-year lease agreements. The basis for this prohibition is Article VII, Section IV, Paragraph VIII of the Georgia Constitution, which prohibits the pledging of the state's credit. The Attorney General (AG) has interpreted this clause as preventing multi-year leases, since appropriations of future fiscal years would be committed to such lease agreements. Second, state entities are prohibited by the Georgia Constitution (Article III, Section VI, Paragraph VI) from paying for "permanent improvements to private property," unless the improvements can be removed. When applied to lease agreements, this effectively prohibits the state from self-funding material tenant improvements to private property unless the improvements can be removed upon termination of the lease. Taken together, these legal restrictions effectively prevent state entities that are not 9 One lease was excluded that involved expansion into an adjacent building. State Space Management Policies 31 exempt from the single-year lease restriction from even considering self-funding tenant improvements. A limited number of state entities (such as the Georgia Building Authority) have enabling legislation that permits them to enter into multi-year leases. Because of this, GBA may lease a space from the landlord and subsequently sublease it to a state agency. In fiscal year 2011, GBA held 11 multi-year lease agreements on behalf of state entities, but this practice is limited. The identification of all state entities eligible to enter multi-year lease agreements or the relative cost impact that these legal permissions on tenant improvements was not included in this review. However, SPC has indicated that multi-year lease agreements may offer opportunities to reduce rents by extending the term during which costs (such as tenant improvement costs) can be amortized, making the state a more attractive tenant for landlords. Hypothetical Savings By Self-Funding Non-Standard Tenant Improvements As previously discussed, legal restrictions effectively prohibit most state entities from considering self-funding tenant improvements. However, it is worth noting the theoretical costs and benefits of having the landlord finance or the state self-fund above-standard tenant improvements. Below are three hypothetical scenarios in which the relationship between rental costs, multi-year lease options, and tenant improvements are presented over a 10-year period (see Exhibit 15). In these simplified scenarios, we assume an annual base rental cost of $100,000 ($10 per square foot) and an up-front tenant improvement expenditure of $100,000. The TI charges include construction management charges of 15% (or $15,000) financed over five years at 10% (total interest cost of about $31,600), resulting in total TI costs of about $146,600 (rounded to $150,000). Three ways of handling above-standard TI costs include: (1) costs are incorporated under renewable 1-year lease agreements (current policy), (2) costs are amortized under a 5-year lease agreement (multi-year lease option), and (3) costs are self-funded by the state. It should be noted that this is a simplified example (not based on actual or average costs) and does not incorporate the time cost of money. It is presented only to illustrate the theoretical impact of different ways of handling tenant improvement costs. o Scenario 1 (Current Policy): The landlord incurs the cost of tenant improvements, and the state does not have the ability to enter into multi-year lease agreements. The landlord has additional risk because a multi-year lease is not allowed and seeks to amortize TI costs over five years. The lease rate is set at $13 per square foot or $130,000 annually, and the rate is not reduced when the TI costs are recovered after five years. o Scenario 2 (5-Year Lease Policy): The landlord incurs the cost of tenant improvements, but the state has the ability to enter into a 5-year lease agreement. The lease agreement specifically identifies that the cost of tenant improvements are amortized during the term of the first lease ($130,000 per year for five years). The annual cost when the lease is renewed is reduced as the tenant improvement cost is eliminated to $100,000 per year for the second five years. o Scenario 3 (Self-Funded Tenant Improvement Policy): The state incurs the cost of tenant improvements ($100,000) and the annual rental costs only reflect the base lease cost ($100,000 per year). The state does not have to pay the landlord for construction management or interest costs; however, it has to utilize personnel to manage the State Space Management Policies 32 construction project and has to fund the entire cost of exceptional TI construction in the first year. Exhibit 15 Comparison of Different Ways of Handling Tenant Improvement Costs Scenario 1 Scenario 2 Scenario 3 Year Annual Annual Tenant Improvement Total Annual Tenant Improvement Total Rent Rent Cost Payment Rent Cost Payment 1 $130,000 $100,000 $30,000 $130,000 $100,000 $100,000 $200,000 2 $130,000 $100,000 $30,000 $130,000 $100,000 $100,000 3 $130,000 $100,000 $30,000 $130,000 $100,000 $100,000 4 $130,000 $100,000 $30,000 $130,000 $100,000 $100,000 5 $130,000 $100,000 $30,000 $130,000 $100,000 $100,000 6 $130,000 $100,000 $100,000 $100,000 $100,000 7 $130,000 $100,000 $100,000 $100,000 $100,000 8 $130,000 $100,000 $100,000 $100,000 $100,000 9 $130,000 $100,000 $100,000 $100,000 $100,000 10 $130,000 $100,000 $100,000 $100,000 $100,000 TOTAL $1,300,000 $1,000,000 $150,000 $1,150,000 $1,000,000 $100,000 $1,100,000 Note: Presentation includes hypothetical figures presented for illustration purposes only. Cost figures for risk premiums and tenant improvements were not available for analysis. Source: Department of Audits and Accounts As previously noted, data on above-standard tenant improvement costs was not available to determine if actual savings are possible under these theoretical scenarios. In theory, the state could potentially reduce the cost of TIs by specifically identifying TI costs in leases and amortizing the costs over the period of a multi-year lease or by self-funding TIs. However, as previously discussed, multi-year leases are not available to most state entities, and self-funding TIs that involve permanent improvements to private property are not constitutionally allowed. Recommendations For Improvement SPC should ensure that it uses (and documents) multiple bids to constrain TI costs. It should also develop specific policies for handling and documenting above-standard TI costs. Based on better tracking of exceptional TI costs, SPC could identify if significant TI cost savings might result from the ability to use multi-year leases or from self-funding TIs. This information could then be presented to the General Assembly so it could decide if the potential savings justify the financial risks associated with multi-year leases and self-funded improvements to leased property. In addition, separately documenting above-standard TI costs funded by the landlord could facilitate renegotiation of lease costs once improvements have been paid off. Agency Response: SPC noted that uniqueness of TIs make them difficult to separate from lease rates but that the cost of some non-standard TI's are maintained in lease files. It also noted that it has re-introduced legislation to authorize SPC to enter into multi-year lease agreements on behalf of state entities. Finally, SPC noted that self-funded tenant improvements are not an industry best practice. Tenants very rarely fund improvements for office space and landlords rarely break-out TI cost from the rental rate. There is little merit to self-funding tenant improvements and self-funding tenant improvements is unconstitutional. State Space Management Policies 33 Appendix A Objectives, Scope, and Methodology The Senate Appropriations Committee requested this special examination of the state policies related to space management. The specific questions that we addressed are discussed below along with the methodology for our analyses. We conducted this project in accordance Performance Audit Division policies and procedures for non-GAGAS engagements. These policies and procedures require that we plan and perform the engagement to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our project objectives. General Scope and Methodologies The Building, Land and Lease Inventory of Property (BLLIP) and State Properties Commission (SPC) lease files provided the primary data sources for this examination. We reviewed applicable SPC policies and procedures, interviewed appropriate SPC personnel and personnel from exempted agencies such as the Board of Regents, Department of Labor, and the Department of Transportation. We also reviewed the Georgia Constitution, state law, attorney general opinions, and executive orders. We reviewed relevant management studies and industry best practices related to leasing, tenant improvements, and asset management. Special Examination Questions What is the balance between state-occupied state owned spaces, unoccupied state owned spaces, non-state occupied state owned spaces, and state-occupied non-state owned spaces? What is the cost associated with each? We received a data extraction of the BLLIP data set on August 18, 2011 from SPC personnel who received it from administrators at the Carl Vinson Institute of Government Information Technology Outreach Services (ITOS). Our review examined only the building and lease subsets of BLLIP. Some leases were for fiscal year 2011, and some were for fiscal year 2012. BLLIP is considered the most comprehensive single data source for state properties. However, the data (as noted throughout this report) contains significant errors and missing data in fields required to fully answer the research objectives established by the Senate Appropriations Committee. We conducted data reliability testing to ensure that the set was complete. However, we conducted only a limited data accuracy testing which focused mostly on the extreme data outliers. Individual agencies (such as the Board of Regents and the Georgia Building Authority) may have additional data sets for properties in their custody; however, these sources were not collected or incorporated into the analysis due to time constraints. BLLIP Data Set Cleaning: The BLLIP data set included 15,079 buildings and 1,867 leases. To ensure that each record represented a unique space in the appropriate ownership category (state owned and non-state owned), we excluded records that represented a duplication of space. In consultation with SPC, we determined that 29 records in the state owned buildings data set were duplicate records or required deletion (because the property had been sold or demolished). In the lease data set, 135 records represented state entity intergovernmental agreements (leases) of state owned space, such as GBA-owned space on Capitol Hill. These intergovernmental agreements were not included in our inventory count of space, but were included in cost analyses. In addition, 41 subleases were excluded that would have resulted in double counting of rent and square footage, and 13 leases were excluded because the lease was invalid or no longer active. In total, 189 leases were identified as invalid or duplicate. After excluding these records, the count of unique spaces was 15,050 state owned buildings and 1,678 leases of non-state owned space. This data set was used for the majority of analysis of BLLIP inventory. State Space Management Policies 34 Occupancy Categorization: BLLIP data contains three fields related to occupancy: "total capacity," "total occupancy," and "percent occupied." A significant number of these fields contained blank values, a value of 0, and/or inconsistent logic between values (for example, one record showed 1,446 for total capacity, 95 for total occupancy, and 100% for percent occupied). To categorize property as either occupied, unoccupied, or of an unknown occupancy status, we adopted the following methodology. o Records categorized as "occupied" are records with a nonzero value for either "total occupancy" or "percent occupied" fields, regardless of whether the values were consistent. For example, if a record had a value of 0 in "total occupancy" and a value of 100% in "percent occupied," the property was categorized as occupied. o Records categorized as "indicates unoccupied" are records where either the "total occupancy" and the "percent occupied" fields both contain a value of 0, or one field has a value of 0 and the other is blank. o Records categorized as "unknown occupancy" are records where both "total occupancy" and "percent occupied" have no values inputted. o Records categorized as "non-state-occupied" are records where the "primary use" field indicates a state owned building is "leased to a non-state entity." In these instances, occupancy fields were not considered. What policies does the state use in determining leased property location and space? Please comment on any areas where an agency could relocate to a lower cost area and continue to serve clients. We reviewed all written State Properties Commission policies and procedures related to space management and lease management. We conducted a review of internal controls related to activities to establish a requesting entity's lease location and space assignment. We conducted a file review of all properties for which a space request for new space was initiated and an entity was located during fiscal year 2011. We identified the leases from within BLLIP inventory records with a primary use of "offices" with a cost per square foot that was greater than $20 psf. We selected a $20 psf threshold because it represented properties that were approximately 33% above private market lease rate averages for SPC and non-SPC managed leases. We solicited comment from the leasing entity (e.g., the State Properties Commission, the Board of Regents, the Department of Labor) to confirm the accuracy of the reported data in BLLIP and to comment on the reasons why the high cost property was justified. We received from SPC a schedule of current market lease rates for cities within the metropolitan Atlanta region. The market averages were provided to SPC by a national real estate firm. We were unable to confirm the methodology used to collect this benchmark schedule. We compared current lease costs in BLLIP to the stated market averages to identify leases that were higher than the stated averages for metropolitan Atlanta cities. (The example provided in this report is an illustration of the type of normative standards and methods that SPC should adopt to periodically review the costeffectiveness of lease agreements and should not be considered a definitive benchmark of current market rates.) We attempted to evaluate cost-saving opportunities by reviewing the SPC lease files but found that the files did not contain sufficient data for us to assess whether occupied properties were the lowestcost options that satisfied both geographic and business needs of the requesting state entity. We concluded that, due to time limitations and requisite real estate expertise, we could not conduct numerous comprehensive metropolitan strategic plan(s) to identify cost saving opportunities for a region (such as collocation, renegotiation, and relocation actions). State Space Management Policies 35 How does the state manage tenant improvements for the spaces it leases? Would the state realize savings in rent costs if it self-funded tenant improvements? To review current SPC policies and procedures for managing TIs, we requested policies, interviewed leasing staff, and reviewed files for all the requests submitted to SPC for new space during fiscal year 2011 that resulted in locating an entity into a space. We limited our review of tenant improvement procedures to those of the State Properties Commission for leased properties; we did not examine tenant improvement procedures for state entities exempt from using SPC services to secure a lease (e.g., the Board of Regents, the Department of Labor). We found that SPC does not have any written policies or procedures to define the objectives of TI management, nor does SPC have any written procedures establishing the tasks that leasing staff should execute in identifying necessary TIs on behalf of the requesting entity, negotiating the cost of TIs, or conducting site visits to ensure the TIs are completed. Therefore, we relied on staff to explain the tenant improvement procedures typically executed. In addition, we conducted a review of state law as it relates to the potential to self-fund tenant improvements. Specifically, we reviewed sections of the Georgia Constitution, state law, and attorney general opinions related to the "gratuities clause" and the "credit clause." The figures used to illustrate the concept of tenant improvement costs under various funding scenarios (including the estimation of a risk premium) are hypothetical and are not based on empirical data. State Space Management Policies 36 Appendix B Primary Use Categories As of August 2011 Primary Use Category Occupancy Relevant? (blank) Offices Yes Storage building warehouse Open sheds or pavillions for work, storage, display, sales, recreation Residences, house apartments Yes Maintenance and custodial operations, shops Other use (specify) Classrooms with faculty offices, etc. Yes Animal care facilities, kennels, pig parlors, stables, veterinary facilities Security facilities, fire stations, patrol posts, fire towers, guard posts Yes Detention housing support (offices, food service, instructions, security,etc.) Laboratories Yes Boating facilities Detention housing Yes Hotels, motels, short-term occupancy housing Athletic facilities Dormitories Yes Comfort stations and rest stations Water/sewage treatment plants, other utilities Radio Antenna/Towers Land/acreage Garages or repair shops Vacant Armories Museums, historic sights, monuments Leased to a non-state entity Hospitals, medical centers, nursing homes, medical examiner autopsy facilities Yes Greenhouses Parking facilities Student unions, recreation, or entertainment buildings Yes Special training facilities Yes Boiler, chiller plants or generating plants Auditorium conferences facilities Non-structure, metered energy using system; i.e., security lights, camp sites Libraries Instructional shops Laundries Cafeterias, restaurants, dining halls Broadcasting facilities State Occupied 1,158 557 399 175 228 338 116 340 391 29 113 334 14 58 102 194 138 53 13 3 46 10 123 24 94 88 33 54 7 49 42 2 37 12 11 12 State Owned Non-State Owned Total Properties Non-State Indicates Unknown Buildings Occupied Unoccupied1 Occupancy Total Leases2 Number % 2,239 279 1,185 395 3,792 21 857 85 1,669 67 3,859 858 1,715 18 1,687 23.1% 10.3% 10.1% 997 25 1,197 1,197 7.2% 405 15 648 96 744 4.4% 293 31 662 662 4.0% 384 59 559 19 578 3.5% 45 3 388 101 489 2.9% 80 9 480 480 2.9% 296 76 401 7 408 2.4% 242 15 291 231 189 74 111 202 209 43 1 120 142 27 114 141 22 377 349 305 17 306 3 294 4 272 249 4 259 20 242 1 47 1 2 168 7 159 150 8 146 141 377 2.3% 10 359 2.1% 23 328 2.0% 6 312 1.9% 1 295 1.8% 10 282 1.7% 26 275 1.6% 259 1.5% 242 1.4% 146 193 1.2% 186 187 1.1% 168 1.0% 2 161 1.0% 150 0.9% 1 147 0.9% 141 0.8% 20 3 117 5 122 0.7% 31 119 119 0.7% 40 73 37 110 0.7% 26 3 83 26 109 0.7% 73 2 82 82 0.5% 22 5 76 1 77 0.5% 19 1 62 1 63 0.4% 39 12 53 53 0.3% 4 41 41 0.2% 17 2 31 10 41 0.2% 27 1 39 39 0.2% 22 34 4 38 0.2% 11 19 30 2 32 0.2% Golf shop, cart maintenence or club house facilities 7 Manufacturing plants Retail stores 4 Food processing plants, canneries, abbatoirs, dairies, etc. Aircraft facilities, hangars, passenger buildings 5 Computer operations 7 Grand Total 5,420 141 1At least one of two occupancy fields in BLLIP had a "0" entered. 2Subleases of state owned or leased properties were excluded from the list of leases. Source: Building, Land, & Lease Inventory of Property, SPC 17 17 9 14 4 8,626 1 25 4 21 13 3 17 9 7 863 15,050 25 21 8 21 5 2 1,678 17 14 9 16,728 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 100.0% State Space Management Policies 37 Appendix C Primary Use Categories Identified as Blank, Vacant, Other use, and Leased to a non-state entity by Entity As of August 2011 Primary Use Category and State Entity Name Number of Buildings (blank) Natural Resources, Department of Regents, State Board of Technical College System of Georgia Labor, Department of Defense, Department of Agriculture, Department of Forestry Commission, State Human Services Ports Authority, Georgia Public Safety, Department of Corrections, Department of Administrative Services, Department of Juvenile Justice, Department of Community Affairs, Department of Herty Foundation Transportation, Department of Veterans Service, Department of Workers' Compensation, State Board of Building Authority, Georgia Behavioral Health and Developmental Disabilities, Department of Education, Department of Georgia Public Defender Standards Council Public Health, Department of Investigation, Georgia Bureau of Driver Services, Department of Road and Tollway Authority, State Soil & Water Conservation Commission, State Total Blank Other use (specify) 1,959 1,049 409 80 77 59 49 19 17 13 12 10 3 7 6 6 5 2 3 3 2 1 1 3,792 Natural Resources, Department of 395 Ports Authority, Georgia 66 Forestry Commission, State 38 Regents, State Board of 12 Behavioral Health and Developmental Disabilities, Department of 20 Agriculture, Department of 7 Corrections, Department of 7 Transportation, Department of 6 Public Safety, Department of 5 Economic Development, Georgia Department of 1 Technical College System of Georgia 1 Veterans Service, Department of 1 Total Other use 559 Vacant Juvenile Justice, Department of 51 Behavioral Health and Developmental Disabilities, Department of 45 Natural Resources, Department of 23 Transportation, Department of 23 Regents, State Board of 5 Building Authority, Georgia 4 Corrections, Department of 4 Labor, Department of 2 Public Safety, Department of 2 Total Vacant 159 Leased to a non-state entity Natural Resources, Department of 130 Transportation, Department of 5 Building Authority, Georgia 2 Forestry Commission, State 2 Labor, Department of 2 Number of Leases 1 11 7 31 1 5 6 1 3 1 67 19 19 2 2 Total Properties 1,960 1,060 416 80 77 59 49 31 19 17 14 12 10 8 7 6 6 6 5 3 3 3 3 2 1 1 1 3,859 395 66 38 31 20 7 7 6 5 1 1 1 578 51 45 23 23 7 4 4 2 2 161 130 5 2 2 2 Total Leased to a non-state entity Grand Total 1123 DNR properties in this category are at Stone Mountain Park. Source: Building, Land, & Lease Inventory of Property, SPC 141 4,651 141 88 4,739 State Space Management Policies 38 Appendix D Occupancy Status by Entity As of August 2011 State Owned State Entity State Non-State Indicates Unknown Buildings Occupied Occupied Unoccupied1 Occupancy Total Natural Resources, Department of 834 130 3,895 138 4,997 Regents, State Board of 2,847 336 223 3,406 Corrections, Department of 12 1,894 231 2,137 Transportation, Department of 428 5 720 12 1,165 Forestry Commission, State 44 2 591 637 Technical College System of Georgia 366 136 502 Behavioral Health and Developmental Disabilities, Department of 209 306 3 518 Juvenile Justice, Department of 282 60 342 Defense, Department of 268 60 328 Human Services, Department of Labor, Department of 14 2 34 83 133 Ports Authority, Georgia 1 59 140 200 Agriculture, Department of 170 28 198 Public Safety, Department of 9 108 3 120 Education, Department of 130 130 Community Affairs, Department of 34 8 42 Administrative Services, Department of 13 15 28 Veterans Service, Department of 1 12 1 14 Investigation, Georgia Bureau of 32 6 38 Building Authority, Georgia 2 2 50 54 Driver Services, Department of 7 3 10 Pardons and Paroles, State Board of Public Health, Department of 7 2 9 Revenue, Department of Economic Development, Georgia Department of 5 5 World Congress Center Authority, Georgia 12 12 Herty Foundation 9 1 10 Lottery Corporation, Georgia Audits & Accounts, Department of Georgia Public Defender Standards Council Workers' Compensation, State Board of Governor, Office Of The 3 2 5 Secretary of State, Office of the 1 1 Soil & Water Conservation Commission, State 2 2 Judicial Branch of Georgia Banking & Finance, Department of Correctional Industries Administration, Georgia 2 2 Superior Court Clerks' Cooperative Authority, Georgia Community Health, Department of Georgia Firefighters' Pension Fund 1 1 Georgia Peanut Commission 1 1 Insurance, Department of Law, Department of Road and Tollway Authority, State 1 1 Sheriffs' Retirement Fund of Georgia Student Finance Commission, Georgia 1 1 Subsequent Injury Trust Fund Teacher's Retirement System of Georgia 1 1 Grand Total 5,420 141 1At least one of two occupancy fields in BLLIP had a "0" entered. 2Subleases of state owned or leased properties were excluded from the list of leases. 8,626 863 15,050 Source: Building, Land, & Lease Inventory of Property, SPC Non-State Owned Leases2 248 333 117 1 19 73 48 106 15 265 86 1 64 4 24 33 46 17 43 40 10 13 7 10 8 8 8 2 6 5 6 5 2 1 1 1 1 1 1,678 Total Properties Number % 5,245 3,739 2,254 1,166 656 575 566 448 343 265 219 200 199 184 134 66 61 60 55 54 53 40 19 13 12 12 10 10 8 8 8 7 7 7 6 5 2 2 1 1 1 1 1 1 1 1 1 1 16,728 31.4% 22.4% 13.5% 7.0% 3.9% 3.4% 3.4% 2.7% 2.1% 1.6% 1.3% 1.2% 1.2% 1.1% 0.8% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% State Space Management Policies Appendix E Occupancy Status of Office Space by Entity As of August 2011 State Owned Non-State Owned Total Properties State Entity Occupied Number Square Feet Indicates Unoccupied1 Unknown Occupancy Buildings Buildings Square Feet Number Square Number Square Total Total2 Feet Feet Leases Number Square Feet2 Properties Square Feet % of Total Total2 Square Feet Regents, State Board of 269 4,667,477 3 81,146 Building Authority, Georgia 2 134,252 18 3,669,844 Human Services, Department of Transportation, Department of 120 763,860 24 423,740 Labor, Department of 14 174,672 5 276,457 Corrections, Department of 16 209,798 Behavioral Health and Developmental Disabilities, Department of 25 560,122 2 20,122 Revenue, Department of Natural Resources, Department of 57 256,040 35 76,453 Forestry Commission, State 32 74,424 126 394,844 Juvenile Justice, Department of 6 18,305 1 15,367 Driver Services, Department of 6 23,000 3 11,187 Ports Authority, Georgia 19 169,047 Public Safety, Department of 1 2,500 3 112,176 Pardons and Paroles, State Board of Investigation, Georgia Bureau of 13 118,235 Community Affairs, Department of 1 77,050 Public Health, Department of 2 62,052 Technical College System of Georgia 1 9,446 Secretary of State, Office of the Teacher's Retirement System of Georgia 1 110,293 Governor, Office of the 3 99,806 Lottery Corporation, Georgia Economic Development, Georgia Department of 1 3,150 Student Finance Commission, Georgia 1 46,486 Georgia Public Defender Standards Council Defense, Department of Agriculture, Department of 15 34,911 Correctional Industries Administration, Georgia 2 34,160 Veterans Service, Department of 1 2,044 Judicial Branch of Georgia Banking & Finance, Department of Administrative Services, Department of 2 6,900 Audits & Accounts, Department of Soil & Water Conservation Commission, State 2 10,696 Superior Court Clerks Cooperative Authority, Georgia Law, Department of Education, Department of 1 7,862 Georgia Firefighters' Pension Fund Subsequent Injury Trust Fund 1 10,300 World Congress Center Authority, Georgia 1 7,697 Georgia Peanut Commission 1 7,648 Community Health, Department of Workers' Compensation, State Board of Sheriffs' Retirement Fund of Georgia Grand Total 557 7,217,218 279 5,566,351 1At least one of two occupancy fields in BLLIP had a "0" entered. 22 buildings (Transportation) and 4 leases (Labor, Regents (2), and Veterans Service) do not include square footage. Source: Building, Land, & Lease Inventory of Property, SPC 5 168,637 3 19,397 1 160 12 49,351 21 237,545 277 4,917,260 20 3,804,096 144 1,187,600 22 470,526 17 209,958 27 580,244 92 332,493 158 469,268 7 33,672 9 34,187 31 218,398 4 114,676 13 118,235 1 77,050 2 62,052 1 9,446 1 110,293 3 99,806 1 3,150 1 46,486 15 34,911 2 34,160 1 2,044 2 6,900 2 10,696 1 7,862 1 10,300 1 7,697 1 7,648 857 13,021,114 71 2,249,931 234 3,064,851 1 282,347 84 789,915 103 401,586 6 25,704 12 507,743 8 167,555 103 408,355 41 277,477 11 71,570 40 171,290 6 44,074 6 68,742 10 71,585 5 114,477 5 110,528 2 7,143 5 111,879 6 55,331 5 38,911 13 36,941 1 250 46 29,650 6 29,553 5 27,198 1 17,834 8 23,415 4 9,389 2 16,581 1 14,888 3 6,602 1 9,374 1 7,100 1 1,800 1 288 858 9,271,857 348 20 234 145 106 120 33 12 100 158 110 50 31 15 40 19 7 12 6 5 1 5 5 7 1 5 13 16 2 47 6 5 3 8 6 2 1 4 1 1 1 1 1 1 1 1,715 7,167,191 3,804,096 3,064,851 1,469,947 1,260,441 611,544 605,948 507,743 500,048 469,268 442,027 311,664 218,398 186,246 171,290 162,309 145,792 133,637 123,923 110,528 110,293 106,949 111,879 58,481 46,486 38,911 36,941 35,161 34,160 31,694 29,553 27,198 24,734 23,415 20,085 16,581 14,888 14,464 10,300 9,374 7,697 7,648 7,100 1,800 288 22,292,971 32.2% 17.1% 13.7% 6.6% 5.7% 2.7% 2.7% 2.3% 2.2% 2.1% 2.0% 1.4% 1.0% 0.8% 0.8% 0.7% 0.7% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 39 State Space Management Policies 40 Appendix F Occupancy Status of Office Space by City As of August 2011 State Owned Non-State Owned Total Properties City Occupied Number Square Feet Indicates Unoccupied1 Number Square Feet Unknown Occupancy Number Square Feet Buildings Buildings Square Total Feet Total2 Leases Number Square Feet2 Properties Square Total Feet Total2 % of Square Feet Atlanta 46 1,620,590 26 4,402,978 1 154,722 73 6,178,290 56 2,917,598 129 9,095,888 40.8% Athens 66 1,277,664 1 1,800 67 1,279,464 28 331,911 95 1,611,375 7.2% Augusta 32 476,861 6 95,331 38 572,192 16 168,148 54 740,340 3.3% Milledgeville 32 597,872 3 15,201 1 4,842 36 617,915 5 21,424 41 639,339 2.9% Savannah 21 189,397 4 21,416 5 14,581 30 225,394 13 284,453 43 509,847 2.3% Decatur 10 157,603 2 34,710 12 192,313 14 311,513 26 503,826 2.3% Albany 14 287,577 4 6,348 18 293,925 11 164,341 29 458,266 2.1% Macon 6 58,747 3 6,468 1 160 10 65,375 23 326,269 33 391,644 1.8% Tifton 18 301,543 2 5,572 20 307,115 14 76,718 34 383,833 1.7% Columbus 11 152,892 4 9,006 15 161,898 19 185,989 34 347,887 1.6% Statesboro 22 286,216 1 325 23 286,541 12 52,367 35 338,908 1.5% Brunswick 5 89,800 6 15,603 5 36,918 16 142,321 12 72,617 28 214,938 1.0% Forsyth 3 7,244 13 193,882 16 201,126 2 7,314 18 208,440 0.9% Marietta 3 29,446 2 11,913 5 41,359 13 140,692 18 182,051 0.8% Lawrenceville 1 13,400 1 7,400 2 20,800 8 151,731 10 172,531 0.8% College Park 1 7,439 1 7,439 4 157,430 5 164,869 0.7% Thomasville 5 93,614 3 3,024 8 96,638 7 65,269 15 161,907 0.7% Covington 2 7,614 1 4,605 3 12,219 6 148,045 9 160,264 0.7% Kennesaw 4 158,073 4 158,073 0.7% Gainesville 6 49,555 1 10,327 7 59,882 13 95,847 20 155,729 0.7% Garden City 11 135,890 4 3,125 15 139,015 15 139,015 0.6% Americus 8 66,951 2 3,252 10 70,203 11 66,720 21 136,923 0.6% Rome 8 54,590 1 12,042 9 66,632 5 66,495 14 133,127 0.6% Conyers 2 14,300 1 600 3 14,900 9 111,830 12 126,730 0.6% Stone Mountain 2 6,368 2 6,368 2 118,743 4 125,111 0.6% East Point 2 121,149 2 121,149 0.5% Waycross 5 59,583 2 4,125 7 63,708 7 56,516 14 120,224 0.5% Tucker 1 46,486 1 46,486 6 72,557 7 119,043 0.5% Thomaston 6 83,387 2 4,512 8 87,899 6 20,278 14 108,177 0.5% Dalton 4 28,278 1 1,039 5 29,317 12 78,531 17 107,848 0.5% Jonesboro 6 103,766 6 103,766 0.5% Valdosta 3 5,186 4 5,917 7 11,103 10 89,778 17 100,881 0.5% Cartersville 5 29,750 1 10,513 6 40,263 10 56,381 16 96,644 0.4% Fort Valley 8 80,921 1 2,384 9 83,305 3 17,942 12 101,247 0.5% Cochran 8 85,737 3 5,457 11 91,194 1 4,880 12 96,074 0.4% Jesup 9 48,680 2 8,853 11 57,533 7 35,550 18 93,083 0.4% Douglas 3 38,086 1 900 1 4,000 5 42,986 9 47,238 14 90,224 0.4% Dublin 3 16,909 3 16,909 13 71,471 16 88,380 0.4% Moultrie 1 4,596 2 20,313 3 24,909 10 61,995 13 86,904 0.4% Clarkston All Others3 3 74,710 176 773,994 1 7,862 160 500,928 2 8,684 4 82,572 338 1,283,606 449 2,232,288 4 82,572 787 3,515,894 0.4% 15.8% Grand Total 557 7,217,218 279 5,566,351 21 237,545 857 13,021,114 858 1At least one of two occupancy fields in BLLIP had a "0" entered. 22 buildings (Atlanta, Douglasville) and 4 leases (Athens, Macon, Millen, Sandersville) do not include square footage. 3The 235 remaining cities each have less than 75,000 square feet of office space. 9,271,857 1,715 22,292,971 100.0% Source: Building, Land, & Lease Inventory of Property, SPC State Space Management Policies 41 Appendix G SPC Space Standards Position Category Types Constitutional Officers, Commissioners, University/College Presidents Open (O) or Closed (C) C Executive Directors/Directors, Deputy Commissioners, C University/College Vice-Presidents, Chief Operating or Finance Officers Division Directors, Deputy Directors, C Regional Managers, University/College Directors Managers, County Managers C Supervisors, Special Function Professionals, C/O Faculty/Instructors Caseworkers Team Leaders, Administrative Staff O Professional Staff, Administrative Staff O Hoteling/Visitor Workspace O Source: State Properties Commission, Space Standards and Guidelines Allocated Square Footage 300 250 175 150 120 96 84 36 State Space Management Policies SPC LEASING AGENT Lease # Entity Name 7702 Corrections, Department of Address 1 8 Southern Oaks Court Appendix H SPC-Managed Office Leases with Costs >$20 Per Square Foot (As of August 2011) City Savannah Original Figures Updated Figures Cost Per Sq Ft Cost Per Sq Ft Additional Comments $ 23.18 $ 23.18 See #7208. Savannah Metro Plan recommendation, Co-location of two agencises into one space - Savings to the State by both agencies sharing common and ancillary spaces (lobby, restroom, drug testing lab, breakroom, conference rooms, et cetera.) 6202 6431 6747 6005 6708 6746 Defense, Department of Defense, Department of Defense, Department of Defense, Department of Defense, Department of Defense, Department of 2505 Chastain Meadows Parkway 5244 North Henry Boulevard 875 Mansell Road 1820 Ga. Hwy. 20 905 Parkside Walk Lane 3010 Washington Road Ma ri etta $ Stockbri dge $ Ros wel l $ Conyers $ La wrencevi l l e $ Augus ta $ 28.99 $ 23.50 $ 23.28 $ 23.07 $ 22.76 $ 21.13 $ 6745 7315 6043 5937 5936 6009 6422 6126 7279 6091 5454 6035 5262 5366 5414 5356 5834 5260 3534 4829 5688 4001 5174 5253 6001 6067 5784 7271 Defense, Department of Defense, Department of Driver Services, Department of Driver Services, Department of Driver Services, Department of Driver Services, Department of Economic Development, Georgia Department of Economic Development, Georgia Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Human Services, Department of Investigation, Georgia Bureau of Judicial Branch of Georgia Juvenile Justice, Department of Juvenile Justice, Department of 1075 Whitlock Avenue 6201 Veterans Parkway 149 Riverview Park Road 2800 Canton Road 8040 Rockbridge Road 2211 Beaver Ruin Road 75 Fifth Street, N.W. 75 Fifth Street, N.W. 92 Cohen Walker Drive 446 W. Crogan St., One Justice Square 975 Taylor Street, S.W. 761 Wheaton Street 41 Pulaski Highway 1220 South First Street 92 Cohen Walker Drive 17234 Roosevelt Highway 5710 Stonewall Tell Road 178 Ernest Biles Drive 311 Green Street, N.W. 465 E. E. Butler Parkway 1287 Spur Ga. Hwy. 138 178 Sams Street 100 County Loop Road 201 South Barnes Street Confi denti a l 104 Marietta Street, N.W. 3408 Covington Highway 3588 Riverside Drive Ma ri etta $ Col umbus $ Ja c ks on $ Ma ri etta $ Li thoni a $ Nor c r os s $ Atl a nta $ Atl a nta $ Warner Robins $ La wrencevi l l e $ Conyers $ Savannah $ Sta tes bor o $ Jes up $ Warner Robins $ Greenvi l l e $ College Park $ Ja c ks on $ Ga i nes vi l l e $ Ga i nes vi l l e $ Jones bor o $ Decatur $ Cedartown $ Qui tma n $ Atl a nta $ Atl a nta $ Decatur $ Macon $ 21.00 $ 20.50 $ 25.35 $ 24.49 $ 24.37 $ 24.37 $ 28.71 $ 20.87 $ 168.00 $ 25.58 $ 24.62 $ 24.15 $ 23.33 $ 23.15 $ 22.98 $ 22.25 $ 22.06 $ 22.05 $ 21.37 $ 21.01 $ 20.60 $ 20.58 $ 20.51 $ 20.44 $ 21.52 $ 20.10 $ 22.28 $ 23.22 $ 4426 7314 7208 Natural Resources, Department of Natural Resources, Department of Pardons and Paroles, State Board of 4244 International Parkway, Atl. Tradeport Atlanta Int. Center 400 Martin Palmer Drive Bruns wi ck 8 Southern Oaks Court Savannah $ 21.34 $ $ 20.05 $ $ 23.18 $ 28.99 Small office(1550 s.f.)in high traffic retail location(utilities put rate over $20) SPC got reduced significantly in FY 11 and FY 12. 23.50 Small office(1600 s.f.)in high traffic retail location. 23.28 Used for recruiting. Geographic needs of business dictated location near shops. Premises is in a retail strip center. Rent is based on retail rental rates, not office rental rates in the area. 23.07 Small office(1183 s.f.)in high traffic retail location(utilities put rate over $20) 22.76 Relatively small office(2200 s.f.)in high traffic retail location. SPC renegotiated for slight reduction in FY 12. 21.13 Small office(1500 s.f.)in high traffic retail location. Premises is in a retail strip center. Rent is based on retail rental rates, not office rental rates in the area. Center is located at Washington Road at Interstate 20. 21.00 20.50 25.35 24.49 Small office(1375 s.f.)in high traffic retail location(utilities put rate over $20). Agreement terminated as of 1/1/12. Small office(1200 s.f.)in high traffic retail location(utilities put rate over $20) 6 acres of land included in rent(utilities put rate over $20) Lease likely includes acreage for testing. Premises is in a retail strip center. Rent is based on retail rental rates, not office rental rates in the area. 24.37 24.37 29.28 20.87 Lease likely includes acreage for testing Lease likely includes acreage for testing- Landlord likely put in a good bit of TI Full service lease in Class A space-Midtown Atlanta - LL did significant TI. Additional office space needed by Economic Development for other groups to aid in the promotion of Georgia. Corporate headquarters for Econ. Development. "Crown jewel" of state property used to promote Georgia to the investment/tourism to the world. 257.60 MOU between Aging and DHS for workstations in DFCS office - $4200 per work station. DHS-DFCS is subleasing space to a sister division DHS-Aging. 25.58 24.62 24.15 23.33 23.15 22.98 22.25 22.06 22.05 21.37 21.01 20.60 20.58 20.51 20.44 21.52 14.30 22.28 17.86 Lease with County - includes some furniture - SPC currently working on relocating. MIL done without SPC involvment. Build-to-suit project with participation from County. Led to the creation of the Build to Suit manual at SPC. OPB had budget for the building, SPC oversaw construction. SPC did not oversee construction, just the drafting of the agreement. Build-to-suit. MIL done without SPC involvment. Build-to-suit project with participation from County. MIL done without SPC involvment. Build-to-suit project with participation from County. MIL done without SPC involvment. Build-to-suit project with participation from County. MIL done without SPC involvment. Build-to-suit project with participation from County. MIL done without SPC involvment. Renegotiation to a significantly lower rate for FY 13 has begun. MIL done without SPC involvment. Build-to-suit project with participation from County. Extremely small office(666 s.f.)in Gainesville - (utilities put rate over $20) Fairly nice office space in downtown Gainesville (utilities put rate over $20). Agency is moving to new location in first quarter of Fiscal Year 2013. High traffic retail area - SPC currently working on relocating to cheaper space(utilities put rate over $20) MIL done without SPC involvment. Build-to-suit project with participation from County. MIL done without SPC involvment-currently renegotiating to a standard lease with a lower rate. SPC renegotiating to lower rate for FY 13. MIL done without SPC involvment-currently renegotiating to a standard lease with a lower rate. SPC renegotiating to lower rate for FY 13. Full service lease - SPC got reduced from $27 to $21 for FY 12. Likely extensive build-out paid for by landlord. Full Service lease - SPCcurrently working on getting reduced from $20 to $14.30 for FY 12. Reduced from $20.00 to $14.30. Build to suit unit. DJJ executed without going through SPC. Agency Headquarters, Build-to-suit project with participation from local Development Authori ty. Heavy tenant improvement required to make usable for office work. Recently renegotiated. Property should be removed from list, typographical error in the Utilities paid caused this property to be on your list. Error has been corrected. 21.34 Laboratory space. 20.05 23.18 Build to suit. Flex space 1/2 office, 1/2 warehouse. Full service lease. 95% office space. Model of collocating two entities. Smaller space, but higher per square foot than two leases. Full service lease. Savannah Metro Plan recommendation, Co-location of two agencises into one space - Savings to the State by both agencies sharing common and ancillary spaces (lobby, restroom, drug testing lab, breakroom, conference rooms, et cetera.) 42 6999 Sheriffs' Retirement Fund of Georgia 3000 Ga. Hwy. 42 North Stockbri dge $ 68.75 $ 68.75 Done without SPC Involvment - Sherrifs Retirement Fund pays $1350 for small of in Ga Sherrifs HQ. Extremely small space thus high rate per sq. ft. Extremely small space thus high rate per sq. ft. 7274 Subsequent Injury Trust Fund 285 Peachtree Center Avenue, N.E. Atl a nta $ 21.03 $ 21.03 Entity is located to workers compensation office for business needs. Commissioner-level office space. Agency Headquarters, Build-to-suit project with participation from local Development Authority. 6165 Technical College System of Georgia 75 Fifth Street, N.W. Atl a nta $ 25.46 $ 25.46 Quick start program works with the Econ. Development program (See #6126). Entity wants to work next to Econ. Development HQ. Notes: Original figures were taken from data extracted from BLLIP data set on 8/18/2011. Updated figures are derived from efforts by DOAA staff to confirm the accuracy of square footage and cost from the leasing entity. State Space Management Policies NON-SPC LEASING AGENT Lease # Entity Name Address 1 Appendix I Agency-Managed Office Leases with Costs >$20 Per Square Foot (As of August 2011) Original Figures Updated Figures City Cost Per Sq Ft Cost Per Sq Ft Additional Comments 8389 6636 6544 6633 6634 7393 6572 6545 6565 6606 7036 7293 Driver Services, Department of Labor, Department of Labor, Department of Labor, Department of Labor, Department of Labor, Department of Labor, Department of Labor, Department of Labor, Department of Labor, Department of Lottery Corporation, Georgia Regents, State Board of 6670 7499 7539 Regents, State Board of Regents, State Board of Regents, State Board of 7900 6166 5964 7472 Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of 6049 Regents, State Board of 7390 5819 5957 7506 6015 Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of 400 Aquatic Circle 1551 Juliette Road 1700 Century Circle 450 Mall Boulevard 450 Mall Boulevard 150 Evelyn C. Neely Drive 2211 Beaver Ruin Road 151 Ellis Street, CARE Building 2450 Mt. Zion Parkway 755 Commerce Drive 250 Williams Street, American Cancer Society Center 3100 Gentian Boulevard 75 Fifth Street, N.W. 75 Fifth Street, N.W. PPV - Research - Yamacraw 75 5th Street 3475 Lenox Rd., N.E. PPV - Office - Technology Square/EDI 1200 Commerce Drive 75 Fifth Street, N.W. 2350 Sever Road 1095 College Station Road PPV - Office - Tech Square-College of Management 1454 Greene Street 34 Peachtree Street, N.W. Cummi ng $ 20.65 $ Stone Mountain $ 23.34 Atl a nta $ 23.01 Savannah $ 23.00 Savannah $ 23.00 Athens $ 22.69 Norc ros s $ 22.51 Atl a nta $ 22.50 Jones bor o $ 21.86 Decatur $ 21.75 Atl a nta $ 2,182.66 $ Col umbus $ 54.00 $ Atl a nta $ Atl a nta $ Atl a nta $ Atl a nta $ Atl a nta $ Atl a nta $ Peachtree City $ 32.62 $ 29.46 $ 28.91 $ 27.58 $ 23.97 $ 22.65 $ 22.57 $ Atl a nta $ 22.30 $ La wrencevi l l e $ Athens $ Atl a nta $ Augus ta $ Atl a nta $ 30.81 $ 21.34 $ 21.27 $ 21.17 $ 22.98 $ 17.65 DDS couldn't verify the utilities and janitorial component of costs from BLLIP. Noted that cost includes asphalt needed for parking, a motorcycle training course, the driver's license testing course, and a 400x400 pad on which we conduct commercial driver's license exams. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. N/A DOL was unable to confirm overall cost figures due to uncertainty of the source for the portion of costs attributable to utilities. 17.18 Original figure incorrect. 54.00 Single office GIT is leasing as part of larger suite. Rate includes full service reception and support services. SF does not include access to conference, work, and break rooms, and reception. 32.62 No comment provided. 29.46 UGA subleases three rooms from EDA at existing EDA rate. 28.91 High-end research and technical facility in Midtown Atlanta. Rent includes parking not reflected in sf. 27.58 No comment provided. 25.72 UGA's Executive MBA Center in Buckhead; Need for Class A space. 22.65 Public Private Venture 22.57 This lease was terminated on August 31, 2011. Operation moved to 100 World Dr., Peachtree City (lease # 8352) at $19.75 PSF 22.30 This is accurate. GATV and EII administrative offices. Need to be situated close to these functions on floors 1 4 of this building. 21.66 Tenant improvement allowance included in prior numbers has been fully paid. 21.34 This is accurate. Limited alternatives close to campus that are less expensive. 21.27 Public Private Venture 21.17 This is accurate. Small business development office 21.09 Lease will expire and not be renewed as of 6/30/2013. Operations moving to Sun Trust Building at 25 Park Place. 7477 6060 7924 6784 6785 7495 5520 Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of Regents, State Board of 5 Public Square 255 E. Hancock Avenue 1150 South Milledge Avenue 1800 Century Place, N.E. 1800 Century Place, N.E. 1100 Brampton Avenue 111 East Liberty Street Ca rters vi l l e Athens Athens Atl a nta Atl a nta Sta tes boro Savannah $ 20.65 $ $ 20.55 $ $ 20.49 $ $ 20.25 $ $ 20.25 $ $ 20.14 $ $ 20.01 $ 20.65 This is accurate. Lease of two offices which includes use of shared conference and break room not part of the leased SF. 20.55 This is accurate. Plan to terminate when Health Science Campus can accommodate. 20.49 This is accurate. Limited alternatives close to campus that are less expensive. 16.30 Square footage was incorrect in original BLLIP data record. 20.25 This space has been vacated 20.14 This is accurate. Small space for a small business development office 20.01 This is accurate. Lease of small suite which includes use of shared conference and break room not part of the leased SF. 5994 6669 Regents, State Board of Regents, State Board of 501 Glouchester Street 3391 Town Point Drive Bruns wi ck Kennes a w $ 25.22 $ 15.09 Updated figure $ 51.38 $ 13.00 Prior entry was calculated on a 92,998 SF office building. KSU taking down space as it becomes available; square footage indicated is original take- down, but rent assumes entire building. Pay $13 PSF for occupied space. Notes: Original figures were taken from data extracted from BLLIP data set on 8/18/2011. Updated figures are derived from efforts by DOAA staff to confirm the accuracy of square footage and cost from the leasing entity. N/A = Updated figure not reported in time for publication. 43 State Space Management Policies 44 Appendix J Office Leases Above Market Rates (Metropolitan Atlanta) September 2011 City Atlanta Atlanta Atlanta Atlanta Atlanta Atlanta College Park College Park Conyers Conyers Conyers Conyers Cumming Dallas Dallas Dallas Decatur Fayetteville Gainesville Gainesville Gainesville Hapeville Jonesboro Lawrenceville Lithonia Marietta Marietta Marietta Marietta Marietta Marietta Marietta Norcross Roswell Stockbridge SPC-Managed Leases Entity Name Economic Development, Georgia Department of Economic Development, Georgia Department of Investigation, Georgia Bureau of Address 75 Fifth Street, N.W. 75 Fifth Street, N.W. Confidential Lease Number 6422 Rentable Square Footage 4,304 6126 6001 32,599 7,303 Natural Resources, Department of Subsequent Injury Trust Fund 4244 International Parkway, Atl. Tradeport Int. Center 285 Peachtree Center Avenue, N.E. 4426 7274 77,292 9,374 Technical College System of Georgia 75 Fifth Street, N.W. 6165 22,846 Defense, Department of 510 Plaza Drive 4868 2,483 Pardons and Paroles, State Board of 4830 Old National Highway 6758 8,208 Corrections, Department of 365 Salem Gate Drive, S.E. 6710 4,763 Defense, Department of 1820 Ga. Hwy. 20 6005 1,183 Human Services, Department of 997 Commerce Drive 5409 3,378 Pardons and Paroles, State Board of 997 Commerce Drive 5421 2,891 Juvenile Justice, Department of 104 Pilgrim Village Drive 5803 2,500 Corrections, Department of 250 Butler Industrial Drive 7272 4,699 Human Services, Department of 101 Bainbridge Way 6707 3,995 Juvenile Justice, Department of 101 Bainbridge Way 7169 5,252 Juvenile Justice, Department of 3408 Covington Highway 5784 98,220 Human Services, Department of 385 North Glynn Street 4684 2,400 Human Services, Department of 311 Green Street, N.W. 3534 666 Human Services, Department of 465 E. E. Butler Parkway 4829 5,620 Human Services, Department of Revenue, Department of 447 EE Butler Parkway, Gainestown 5848 Office Park 4245 International Parkway, Highwoods 5913 Ctr. III at Tradeport 3,700 43,414 Human Services, Department of 1287 Spur Ga. Hwy. 138 5688 6,400 Defense, Department of 905 Parkside Walk Lane 6708 2,200 Driver Services, Department of 8040 Rockbridge Road 5936 11,320 Corrections, Department of 590 Commerce Park Drive, S.E. 7160 7,500 Corrections, Department of 2275 Northwest Parkway 5272 6,720 Defense, Department of 2505 Chastain Meadows Parkway 6202 1,550 Defense, Department of 1075 Whitlock Avenue 6745 1,375 Driver Services, Department of 2800 Canton Road 5937 9,630 Human Services, Department of 325 Fairground Street 3223 49,000 Human Services, Department of 590 Commerce Park Drive, S.E. 5638 9,818 Driver Services, Department of 2211 Beaver Ruin Road 6009 14,861 Defense, Department of 875 Mansell Road 6747 1,500 Defense, Department of 5244 North Henry Boulevard 6431 1,600 Total Rent $ 123,551 $ 680,487 $ 157,161 $ 1,649,740 $ 197,135 $ 581,691 $ 39,900 $ 136,514 $ 75,235 $ 27,292 $ 56,176 $ 45,490 $ 44,338 $ 61,849 $ 49,415 $ 69,081 $ 2,188,176 $ 46,848 $ 14,234 $ 118,067 $ 73,210 $ 833,115 $ 131,848 $ 50,074 $ 275,913 $ 139,350 $ 122,640 $ 44,940 $ 28,875 $ 235,844 $ 788,136 $ 157,572 $ 362,215 $ 34,918 $ 37,600 Cost Per Square Foot $ 29.28 $ 20.87 $ 21.52 $ 21.34 $ 21.03 $ 25.46 $ 16.07 $ 16.63 $ 15.80 $ 23.07 $ 16.63 $ 15.74 $ 17.74 $ 13.16 $ 12.37 $ 13.15 $ 22.28 $ 19.52 $ 21.37 $ 21.01 $ 19.79 $ 19.19 $ 20.60 $ 22.76 $ 24.37 $ 18.58 $ 18.25 $ 28.99 $ 21.00 $ 24.49 $ 16.08 $ 16.05 $ 24.37 $ 23.28 $ 23.50 Market % Above Rate1 Market $ Above Market $ 20.22 45% $ 38,994 $ 20.22 $ 20.22 $ 20.22 $ 20.22 $ 20.22 $ 13.84 $ 13.84 $ 15.25 $ 15.25 $ 15.25 $ 15.25 $ 16.98 $ 7.28 $ 7.28 $ 7.28 $ 19.29 $ 16.64 $ 18.50 $ 18.50 $ 18.50 3% $ 6% $ 6% $ 4% $ 26% $ 16% $ 20% $ 4% $ 51% $ 9% $ 3% $ 4% $ 81% $ 70% $ 81% $ 15% $ 17% $ 16% $ 14% $ 7% $ 21,335 9,494 86,896 7,593 119,744 5,535 22,915 2,599 9,252 4,662 1,402 1,888 27,640 20,331 30,847 293,513 6,912 1,913 14,097 4,760 $ 11.50 $ 13.82 $ 19.11 $ 19.01 $ 14.33 $ 14.33 $ 14.33 $ 14.33 $ 14.33 $ 14.33 $ 14.33 $ 13.77 $ 15.66 $ 15.65 67% $ 49% $ 19% $ 28% $ 30% $ 27% $ 102% $ 47% $ 71% $ 12% $ 12% $ 77% $ 49% $ 50% $ 333,854 43,400 8,032 60,720 31,875 26,342 22,729 9,171 97,846 85,966 16,880 157,579 11,428 12,560 Stockbridge Sheriffs' Retirement Fund of Georgia 3000 Ga. Hwy. 42 North 6999 288 $ 19,800 $ 68.75 $ 15.65 339% $ 15,293 Tucker Tucker Behavioral Health and Developmental 100 Crescent Centre Parkway Disabilities, Department of Law, Department Of 2100 East Exchange Place 6069 4960 10,452 $ 14,888 $ 194,094 $ 275,428 $ 18.57 $ 16.63 18.50 $ 16.63 12% $ 11% $ 20,277 27,841 Villa Rica Audits & Accounts, Department of 150 Stone Street 7481 1,448 $ 25,046 $ 17.30 $ 16.00 8% $ 1,878 Woodstock City Atlanta Banking & Finance, Department of Entity Name Labor, Department of 645 Molly Lane 5390 3,131 Agency-Managed Leases Address Lease Number Rentable Square Footage 1700 Century Circle 6544 26,553 $ 52,267 Total Rent $ 610,985 $ 16.69 Cost Per Square Foot $ 23.01 $ 16.67 0% $ 73 Market % Above Rate1 Market $ Above Market $ 20.22 14% $ 74,083 Atlanta Labor, Department of 151 Ellis Street, CARE Building 6545 10,472 $ 235,620 $ 22.50 $ 20.22 11% $ 23,876 Atlanta Regents, State Board of 75 Fifth Street, N.W. 6670 48,790 $ 1,591,530 $ 32.62 $ 20.22 61% $ 604,996 Atlanta Regents, State Board of 75 Fifth Street, N.W. 7499 500 $ 14,730 $ 29.46 $ 20.22 46% $ 4,620 Atlanta Regents, State Board of PPV - Research - Yamacraw 7539 200,459 $ 5,795,550 $ 28.91 $ 20.22 43% $ 1,742,269 Atlanta Regents, State Board of 75 5th Street 7900 2,555 $ 70,476 $ 27.58 $ 20.22 36% $ 18,814 Atlanta Regents, State Board of 3475 Lenox Rd., N.E. 6166 33,385 $ 800,184 $ 25.72 $ 20.22 27% $ 183,618 Atlanta Regents, State Board of PPV - Office - Technology Square/EDI 5964 36,429 $ 825,000 $ 22.65 $ 20.22 12% $ 88,406 Atlanta Atlanta Atlanta Regents, State Board of Regents, State Board of Regents, State Board of 75 Fifth Street, N.W. PPV - Office - Tech Square-College of Management 34 Peachtree Street, N.W. 6049 5957 6015 32,740 $ 730,086 $ 188,872 $ 4,018,000 $ 80,207 $ 1,843,348 $ 22.30 $ 20.22 21.27 $ 20.22 21.09 $ 20.22 10% $ 5% $ 4% $ 68,083 199,008 69,780 Atlanta Regents, State Board of 1800 Century Place, N.E. 6785 2,591 $ 52,468 $ 20.25 $ 20.22 0% $ 78 College Park Labor, Department of 1630 Phoenix Boulevard 6553 48,539 $ 898,942 $ 18.52 $ 13.84 34% $ 227,162 Covington Regents, State Board of PPV - Office Space - Newton Campus 6766 105,000 $ 1,553,753 $ 14.80 $ 13.32 11% $ 155,153 Cumming Labor, Department of 100 Colony Park Drive 6602 3,376 $ 62,794 $ 18.60 $ 16.98 10% $ 5,469 Dallas Labor, Department of 101 Bainbridge Way 6604 3,939 $ 55,146 $ 14.00 $ 7.28 92% $ 26,470 Decatur Labor, Department of 755 Commerce Drive 6606 4,148 $ 90,219 $ 21.75 $ 19.29 13% $ 10,204 Jonesboro Labor, Department of 2450 Mt. Zion Parkway 6565 32,544 $ 711,412 $ 21.86 $ 13.82 58% $ 261,654 Lawrenceville Regents, State Board of 2350 Sever Road 7390 60,000 $ 1,848,681 $ 21.66 $ 19.11 13% $ 153,000 Marietta Labor, Department of 465 Big Shanty Road 6568 27,000 $ 535,680 $ 19.84 $ 14.33 38% $ 148,770 Marietta Labor, Department of 877 Franklin Road 7461 7,875 $ 127,260 $ 16.16 $ 14.33 13% $ 14,411 Marietta Regents, State Board of 1640 Powers Ferr Road, N.W. 7520 1,920 $ 32,676 $ 17.02 $ 14.33 19% $ 5,162 Norcross Labor, Department of 2211 Beaver Ruin Road 6572 37,040 $ 833,763 $ 22.51 $ 13.77 63% $ 323,722 Peachtree City Regents, State Board of 1200 Commerce Drive 7472 10,567 $ 238,486 $ 22.57 $ 17.34 30% $ 55,255 1Market rates for metro Atlanta were provided to SPC by a private real estate firm. We were unable to verify the accuracy of these rates or determine if the averages consist of properties similar to the state's office properties in location and quality. Source: SPC and Building, Land, & Lease Inventory of Property (BLLIP data as of August 2011) For additional copies of this report, call 404-657-5220 or visit www.audits.ga.gov/rsaAudits