In 2015, A&M was retained by the Kansas state legislature to identify cost savings within its budget to mitigate growing budget deficits. Part of the focus of the exercise was to examine the state’s real estate and lease portfolio to identify and correct inefficiencies.
A&M examined both portfolios to identify excess land and burdensome leases that could be eliminated to achieve additional revenue and cost savings. Our team prioritized real estate holdings by market, size and criticality to each state agency’s mission. We then down selected a list of potential candidates for disposition that would generate the most revenue from a list of 1,100 properties. A&M proposed a program management office to handle the property disposition, as well as a change to the current law prescribing that proceeds from property dispositions be directed to the state’s pension fund.
With regard to the state’s portfolio of more than 300 leases, A&M identified consolidation opportunities and developed a list of upcoming lease turns that were ripe for negotiation given changes in the local real estate market. A&M also recommended that leasing operations be consolidated within KDOA to promote more effective and unbiased management.
Finally, for several sites, A&M recommended capitalized ground lease structures to promote revenue generation and economic development opportunities. An added benefit of these public–private partnership (P3) structures would be enhanced property tax revenue for the life of the projects.
KDOA is proceeding with the dispositions and has recommended to the state legislature that leasing operations be consolidated within its office.