Earlier this month, Valbridge Property Advisors announced that it had been awarded a national contract to provide appraisal and due diligence services for the Postal Service's real estate holdings of 32,150 facilities, which total more than 290 million square feet of owned and leased space.
The contract originated in the US Postal Service's Office of Inspector General office, according to this December 2013 solicitation.
The contract calls for Valbridge's Columbia, MD-based office to perform commercial property valuations and market rents analysis to support the Postal Service's leasing, acquisition and disposition activities. It will also help with some strategic decision-making, such as, for example, analyzing lease versus purchase options for buildings in the USPS portfolio.
Valbridge's award of this contract follows a series of reports by the OIG this past year that have identified what the OIG perceives to be failures by the Postal Service to properly manage its real estate holdings.
Earlier this month, a report by the OIG determined that the Postal Service did not know how many vacant properties it owned or leased and did not effectively manage the vacant properties it did know about.
In another report [PDF], the OIG found that the Postal Service's process for relocating facilities was not "always transparent" and that the vice president of Facilities has "conflicting responsibilities for approving funding and adjudicating relocation appeals."
OIG, however, was perhaps its most critical in a report [PDF] it issued in April 2015 when it alleged the Postal Service was mismanaging its relationship with CBRE and was losing money as a result.
As part of the report, OIG analyzed the leases expiring between October 2012 and September 2016. It said that of 4,718 leases CBRE negotiated for the Postal Service, the average annual rent increase was $2,792 higher than the prior lease rate -- a rate that is more than three times higher than the Postal Service's average rent increase of $773 for the 11,075 leases that the Postal Service renegotiated without CBRE.
"As a result," the OIG wrote in its report, "the Postal Service could be overpaying an estimated $9.5 million per year for leases already negotiated by CBRE."
OIG also zeroed in perceived problems with property appraisals in 14 of the 21 sale transactions it reviewed.
While all of the properties were sold within the goal of 90% or greater of the appraised values, the OIG seemed uncomfortable that CBRE solicited the appraisals.
It noted that "there were also shortcomings in the appraisal methodology for seven of the 21 properties that could have affected the estimated market values."
The OIG recommended, among other measures, that the Postal Service "terminate and recompete the current real estate services contract."
CBRE, USPS Defend Practices
In prepared statements provided to media earlier this year when the report came out, a CBRE spokesperson said that the issues OIG singled out were accepted industry practices and it had been well-regulated as part of the contract.
"We are proud of our work in helping USPS to maximize the value of properties they deem to be surplus," the spokesperson said.
For its part, the Postal Service issued a detailed and point-by-point response [PDF] to the OIG report
It did concede certain points the OIG had made; for the most part, though, it defended its and CBRE's actions.
For example, one troubling aspect of the OIG report was its allegations that some lessors had been approached by CBRE agents to pay a commission and they were told to recover the fees from the Postal Services increased rents. In its rebuttal statement, the Postal Service said it is concerned about these reports of unauthorized negotiation practices.
In other parts of its statement, however, it explained and defended its practices. It noted, for example, that OIG's comparison of lease amounts negotiated by CBRE and the Postal Service was flawed as 85% of the deals CBRE negotiated had been new, while 72% of the Postal Service negotiated leases were renewals.
Regarding the appraisals, USPS "believes that the Postal Service obtained fair market value for the properties associated with this finding, [but] nevertheless agrees that it is important for the Postal Service to have confidence that all of the appraisals upon which we rely to determine the proper market rate are properly prepared and technically proficient."
Some of the issues OIG uncovered were referred to the Office of Investigations and USPS would not comment specifically on those.
The USPS also disagreed with the recommendation to terminate the agreement.
How Valbridge will negotiate this environment is unclear; not surprisingly the contract includes a non-disclosure agreement for Valbridge.
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