State of Missouri reaps rewards of far-reaching real estate strategy

Situation

It’s not often that a report request leads to a visionary reinvention of a State’s real estate portfolio. But the State of Missouri ‘makes no little plans,’ to paraphrase the great urban planner Daniel Burnham. When the State of Missouri requested a comprehensive portfolio report for oversight purposes, the Office of Administration (OA) embraced a larger vision. It embarked on an ambitious journey to create and execute a strategic plan for its portfolio of leased and owned space.

Over decades, the State of Missouri had amassed a real estate portfolio in excess of 12 million square feet. From farms and laboratories to parks and administration buildings, the State of Missouri’s portfolio includes many diverse properties across the state. To help its internal team tackle the daunting project, the Missouri OA partnered with JLL. Augmenting the State’s internal team, we helped assess portfolio properties and pursue opportunities to reduce costs, consolidate facilities where appropriate, dispose of excess properties and return unneeded buildings to the tax rolls.

Partnership

First, the OA’s project team met with the Governor’s Office and the Budget Office, as well as agency heads, to set goals and expectations for the portfolio assessment. In addition, the team helped each agency establish its objectives and parameters for potential relocation and consolidation.

Operating as extension of the OA office, the JLL team was able to quickly conduct more than 75 site reviews in a few short weeks, assessing critical factors like facility conditions, head count, space utilization and lease rates. Following these assessments, the OA was equipped to create its strategic plan, aimed at maximizing value and flexibility with a thoughtful balance of owned versus leased space.

The strategic plan identified 26 properties for dispositions, along with potential opportunities requiring deeper analysis. JLL has helped review requests from government agencies to move State facilities. For example, the City of Kansas requested that a correctional community release center be moved to another location. After a detailed review of the cost to relocate the facility to another location, the OA team concluded that the operations should remain in the current location.

On the dispositions front, the OA’s ongoing goal was to maximize revenues for the State. Through highly strategic marketing and technology tools, the State has been able to obtain at-market or above-market prices for its surplus properties.

In St. Louis, for instance, an unneeded school property was slated for disposition. Through sophisticated marketing, the OA was able to attract numerous bidders, ultimately selling the property for $7.3 million —significantly above its appraised value.

The State has also been positioned to make strategic acquisitions along the way. When a parcel of Federal land is up for the sale, for instance, the State will be able to negotiate a fair price and acquire the site to add to the state parklands.

Resolution

Following more than eight years of implementing its strategic real estate plan, the State of Missouri is positioned better than ever before to make smart real estate decisions. To date, the OA has captured $12 million in revenue, and $3 million in annual rent cost avoidance, while creating a more cost-effective and flexible portfolio for the State.

The State has been able to consolidate numerous facilities, not only reducing waste, but also improving productivity through thoughtful occupancy planning. It has reduced storage requirements by digitizing files along the way. Through well-informed lease negotiations, it has been able to obtain lease terms that protect taxpayers’ interests.

To keep the strategic plan goals on track, the OA team early on created key performance indicators that support oversight by the General Assembly. By regularly reporting on space utilization, lease competitiveness, owned versus leased square footage and property sales strategies, the OA demonstrates that it is serving its mission well and is an effective steward of taxpayer dollars.

Most rewarding? A group home in St. Louis that was closed and needed significant repair has been transformed into The Gables at Brady Circle. The facility is revolutionizing assisted care by removing the institutional setting and returning to an intimate, residential social model for seniors providing memory care.