If a private company owned 5% of California’s land, controlled 18,000 properties, and managed 34 million square feet of office space, it would be the talk of the real estate world. But that developer is the State of California, whose real estate activities get little publicity and are not well understood in the private sector or the planning profession.
To find out what the State’s real estate priorities will be in the coming years, The Planning Report interviewed Daniel A. Rosenfeld, the Deputy Director of the State’s Department of General Services and the head of its Real Estate and Building Division. Prior to joining the Department, Rosenfeld held similar positions in the private sector, serving as Executive Vice President of Development for Kilroy Industries and Senior Vice President with the Cadillac Fairview Corporation. Rosenfeld was also active in civic affairs in Los Angeles.
"I still would hope that firms would not ignore the state as a potential source of business just because we’re a little bigger, sometimes a little slower, and have specialized requirements."
As the new Director of the State’s Real Estate and Building Division, give us an overview of your responsibilities.
Although General Services does not have a glamorous cachet, it is responsible for a large portion of the state’s real estate efforts. Some other departments (such as the University system, Veterans Affairs and Corrections) administer their own real estate, but we handle virtually all office space and governmental buildings, as well as transactional real estate for all departments.
Ours is a larger operation than nearly anything in the private sector: the State of California owns about 5% of California’s land area. It controls 18,000 separate real property assets, administers 2,400 office leases and owns 58 major buildings.
Our division consists of four groups. The Office of Project Development and Management (OPDM) handles design and construction of large capital projects. It functions like a developer with $660 million in current work. The second major division is the Office of Real Estate and Design Services (OREDS). They are essentially a large space planning and brokerage operation which handles state agencies’ requests for lease space and for the acquisition and sale of land.
The third Division is the Office of Buildings and Grounds (OBG) where about 1200 staffers provide property management services in the 58 state office buildings. The fourth division is the Office of Energy Assessment (OEA), sort of an energy management special forces squad that does energy conserving refits of state buildings. In all, there’s about 34 million square feet of office space, about half leased and half owned, that our organization controls.
Having just inherited this huge responsibility, share with our readers your priorities.
I’m fortunate to have also inherited some outstanding planning. The Wilson administration, carrying over efforts from the Deukmeijian administration, has operated an Office of Asset Management, headed by John Salmon, to develop strategic thinking and progressive, intelligent, asset management for the state. I’m going to continue the development and implementation of their efforts.
I’d say there are five priorities. The first priority is to complete and maintain an inventory of what we have. Two years ago, as unbelievable as it may sound, the state did not have a list of its real estate assets. Today, we’re finishing a computer based statewide property inventory with critical information on our approximately 18,000 properties.
The second priority is to do strategic planning. This simply hasn’t been done in the past: when someone needed space, a leasing officer was sent out to find it without regard to whether the state already controlled properties in the area, or whether consolidations into a larger lease were possible. We’ve now divided the state into seven strategic planning areas and are preparing regional plans to forecast growth and control cost.
The third goal is consolidation. Of all the things we can do to save money and improve operations, the consolidation of leases represents the area of greatest potential impact. For example, the Los Angeles area consolidation study is underway, with a May 1st target date for completion. We’ve already found close to 100 small leases where consolidation appears economically advantageous.
The fourth goal is competition. We’re trying to change the culture of our organization to make it more competitive. We are also encouraging more competition between private sector organizations to improve the cost and quality of our facilities and services.
The fifth goal, an outgrowth of all the others, is to privatize, and work with the private sector. Government is most effective when it sets policy, provides funding, and evaluates performance. It is less effective in delivering services. Historically, we’ve had in-house architectural, engineering, construction, and property management services. Now we are experimenting with increased use of private sector expertise in each of these areas.
How are you coordinating your activities with local planning entities to assure that your efforts are in concert?
State government is “sovereign” which means that it is not legally required to comply with local zoning laws and building codes. However, it is our policy to work closely with local government even though we’re not required to do so. The Governor was once a Mayor and remains respectful of local governmental needs. Therefore, our policy is to comply with local codes even though we’re not required to do so.
The criticism by planners and architects of state real estate policies is often that they do not reinforce localities’ urban revitalization strategies — that the state typically builds fortress-like structures that suck life from the streets. How do you respond?
I suspect you are referring to the Reagan Building in downtown L.A.. This building was a response to a carefully thought-out city policy of about 10 years ago. It was created by a Joint Powers Authority representing the leadership of both the city and the state, and they tried very hard to create a positive new presence in an area of the city that people wanted to see revitalized. The building was placed on Spring St., bringing new construction, investment, and office activity to the area.
Today it’s an entirely different world in Los Angeles, with a tremendous supply of available, existing office space. In addition, a greater emphasis is placed on historic buildings rehabilitation than existed ten years ago. Consequently, our next building in Los Angeles may be very different.
To follow up, given these complicated considerations, how do you coordinate your decisions with the input of urban planners? Is there a process by which you can share agendas?
One must constantly balance the economic and social needs of the state. The optimizing economic solution isn’t always the one we select because we have to stir into the equation non-quantifiable social concerns.
In the Los Angeles area we must consider issues such as economic development, last spring’s uprising, the aerospace industry and manufacturing base, retail business, rail transit, and historic preservation. There’s no computer I know that can balance these ingredients without human judgment. And we want to open the process to local government and popular input — it makes the process slower and more complicated, but ultimately better.
Given that your department has a relatively low profile, what should the planning and development communities know about your department in order to better coordinate?
For real estate and related professionals, the sheer scale of the state should be taken seriously. We are one of the biggest potential customers left on the map for planning, design, construction, appraisal, property management and other services. I would hope that through our procurement policies, we would be seen as a desirable customer for those firms.
Private sector firms should be aware of state requirements, especially for minority-and womenowned business enterprises. I still would hope that firms would not ignore the state as a potential source of business just because we’re a little bigger, sometimes a little slower, and have specialized requirements.
What should the smaller cities around the L.A. basin be looking at from your department in the coming year?
In terms of facility location, we will become more organized in locating facilities around the L.A. area. We distinguish in our planning between facilities that serve the whole state and those that serve a region or local area. We’ll try to consolidate statewide-serving facilities into central locations, primarily those served by mass transit.
Those facilities that have local service areas will also be consolidated, but into specific neighborhoods. I could see, for example, a state “service center” in the San Fernando Valley, one in the San Gabriel Valley, one in South Central, one in the South Bay, and so on.
How can the entrepreneurial small city that seeks a state facility best position themselves to succeed?
We are moving more toward a regional model in our agency — the state is too large to manage only from Sacramento. As this takes place, each City Administrator should become familiar with the state strategic planner for their area. This planner needs to be made knowledgeable about the local market, especially about redevelopment areas and other reasons for considering a particular city.
Are you looking at any creative uses of state lands for social goals. For example, some cities are using municipal land and parking lots for affordable housing. Are there similar efforts coming from your department?
Yes. The first step was simply to get various governmental agencies to talk to each other. We’ve found in places like San Francisco that a good portion of our strategy involves land transactions between the state, city and other governmental agencies. As our inventory and planning capability develops, it makes sense to work with local governments and become aware of opportunities for the joint planning of each other’s properties.
In Sacramento, we have a Capital Area Development Authority (CADA) that creates housing, parking, retail, and office developments on state-owned lands with a Board of Directors half-owned by the city and half-owned by the state. That’s probably our best current example of inter-governmental land-use planning.
Creativity is the key word. Our objective is to manage the real estate of California as a strategic asset, not as a passive possession. I think you will see the state leading the effort in inter-governmental real estate planning and in the development of creative land use and financing strategies. Already on the boards are plans for land swaps, state/city housing projects and special programs to support transit. Also underway are efforts to identify surplus state property which can be offered to local governments for alternative use.
Our fundamental change is to undertake proactive asset management and our fundamental goal is to get the best use out of every single state property, or to get rid of it at the best possible price.
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