Federal Real Property:

Observations on GSA's Canceled Swap Exchange Involving Buildings in the Federal Triangle South Area

GAO-16-571R: Published: Jun 16, 2016. Publicly Released: Jun 23, 2016.

Additional Materials:


David J. Wise
(202) 512-2834


Office of Public Affairs
(202) 512-4800

What GAO Found

In 2012, the General Services Administration (GSA) began exploring a project, called a “swap exchange,” to exchange up to five office buildings located in the Federal Triangle South area of Washington, D.C., to finance construction services at GSA headquarters and other federal properties.  The purpose of the exchange was to dispose of excess federal property while providing over 11,000 federal employees with improved office spaces.  Informed by the responses from private real estate investors about their interests in this area, GSA subsequently focused the project on two buildings—the GSA’s Regional Office Building (ROB) and the Department of Agriculture’s Cotton Annex—in order to reduce some associated risks and facilitate a more manageable swap exchange.  For example, five of nine respondents to a request for information noted the complexities of exchanging all five buildings in one project and one respondent suggested that GSA divide the project into a series of smaller transactions.  

After evaluating proposals submitted in 2015 by three qualified investors, GSA canceled the project and concluded in its February 18, 2016 memorandum on the decision that private investors’ valuations for these two buildings fell short of the government’s estimated value. GAO independently analyzed the proposals and found that qualified investors’ proposed values for the GSA ROB and the Cotton Annex were significantly less than those contained in an independent appraisal that GSA had obtained.  These differences were due, in part, to the assumptions and methodologies used to make the GSA’s and investors’ valuations.  

According to GSA officials, their experience with the canceled project will help guide future efforts.  For example, GSA officials said that they plan to improve the appraisal process for buildings involved in swap exchanges by: (a) informing appraisers of the swap exchange’s goals, objectives, and processes; (b) allowing appraisers to consider a range of values for uncertainties related to zoning and other economic assumptions; and (c) encouraging appraisers, when appropriate, to develop methodologies that take into consideration the size and complexity of proposed swap exchanges.

Why GAO Did This Study

To help address challenges in federal real-property management, including the need to replace, maintain, and dispose of aging federal buildings, GSA has begun using various available legal authorities to exchange title to federally owned real property for other properties or construction services (a swap exchange).  GSA began pursuing, but later canceled, a large swap exchange project called the Federal Triangle South.  GAO was asked to review issues related to this exchange.  Taking the cancellation into account, this report addresses: (1) how GSA’s plans for the Federal Triangle South project changed from 2012 to 2015 and why these changes occurred, and (2) factors that contributed to GSA’s 2016 determination that the Federal Triangle South project was not financially viable and any lessons GSA learned from its experience with the canceled project.

GAO reviewed project plans since the inception of the project, including GSA’s solicitations for swap exchanges, appraisals of the GSA ROB and the Cotton Annex, and a 2016 memorandum discussing the reasons why GSA canceled the project. GAO conducted a comparative analysis between appraisals of the GSA ROB and the Cotton Annex prepared by certified appraisers for GSA in 2015 and valuations contained in the proposals submitted to GSA by private investors.  GAO also interviewed GSA officials about lessons learned from their experience with the canceled project.

For more information, contact David J. Wise at (202) 512-2834 or wised@gao.gov.

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