The nearly 19,000-square-foot office building at 1058 Claussen Road in west Augusta has been vacant since April, but it still costs taxpayers $39,679 a month in rent and will probably keep doing so for the next seven years.
Documents obtained by The Augusta Chronicle show that a 15-year federal lease on the facility has locked taxpayers into paying annual rent of more than $476,000.
According to a copy of the rental agreement requested under the Freedom of Information Act, the government cannot terminate the lease in “whole or part” until after giving at least 120 days’ written notice on or after Jan. 1, 2021.
Federal watchdog groups say what’s happening at the commercial complex off River Watch Parkway and Interstate 20 is an example from a long list of problems the government has in mishandling property it leases and owns.
Since at least 2003, the General Services Administration, which brokers and manages much of the government’s property, has been flagged as “high-risk” for excess and underused real estate. In March, the Government Accountability Office reported that on many occasions the agency ends up spending more on renovations and rent over a long-term lease than it would if it bought the facility outright.
At the Claussen Road building, the government spent $644,851 to specially “upfit” it to house the Social Security Office of Disability Adjudication and Review.
Richmond County building permits show that service windows, separation walls, above-ceiling electrical and new plumbing were added to help the agency hold hearings, issue decisions and review appeals on benefits.
Those costs were added to the lease, and for the next seven years, the government must pay $92,866 annually above the cost of rent for the renovations.
“The taxpayers are on the hook for this,” said David Jordan, the principal broker of Federal Realty Advisors, a consulting firm in Washington that specializes in federal capital planning and commercial leasing.
The federal government’s troubles in west Augusta began in September 2012, when an inspection by the city planning department found a leaky roof had led to dampness and ceiling-tile water damage inside the disability review office.
The case was closed about a year later, on Aug. 26, 2013, after a second inspection found the leak was repaired and no mold was present. But a month later, Charles Wilkinson, an Augusta disability attorney whose business is next door,
said the Social Security agency began to move out employees.
Frank Viera, a spokesman for the Social Security Administration in Atlanta, said the 47 employees who worked in the office were reassigned.
He would not comment on why employees were moved out and referred the question to the General Services Administration, which referred the question back to him.
Saudia Muwwakkil, the regional public affairs officer for GSA office in Atlanta, said the Social Security agency ended its lease and vacated the office by the end of April because it had consolidated its workforce into other offices.
The disability review office also leases about 1,500 square feet of space in downtown Augusta’s SunTrust Bank building for $42,112 annually. That 10-year contract is up April 14, 2018.
Muwwakkil said the GSA is “revising Augusta’s lease portfolio” and that it is too early to say what it will do to meet its real estate needs.
Hafeez Chaudhry, who owns the Claussen Road building, said the Social Security agency told him early this year that its “mission and space requirements” had changed.
Chaudhry, who signed the lease Oct. 25, 2010, as president of Capital Commercial Holdings, a limited-liability corporation based in Martinez, said that the facility is ready and has working utilities and that he would welcome another federal agency.
Without knowing all the details behind the agency’s exit, he said it would be unfair to comment on whether he considers its short tenancy to be wasteful spending. He said he has not heard who might replace the Social Security agency as the facility’s tenant.
“I take it at this point neither positively or negatively,” he said. “I would love to have the building filled up and used every day, but I can certainly understand when missions change.”
Leslie Paige, the vice president of communications and policy for Citizens Against Government Waste, a national nonprofit, said the government’s reckless leasing practices are especially bad within the GSA, which she called the “poster child” for widespread mismanagement.
“There’s very little oversight on the ground level for federal leases. It’s a rampant problem,” she said of the agency. “Too often they’re entering into agreements not in the best interest of taxpayers.”
In March, the Government Accountability Office published a report that reviewed property management practices within the GSA, one of four agencies that rank in the top 10 in federal real estate holdings.
The report revealed that, as with the Claussen Road building, which has a taxable value of $468,699, the federal government often spends more money on renovations and multiyear leases than on outright property purchases.
For example, the report found that the GSA could have bought a State Department building in Washington for $100 million in 1992, but instead rented it for 20 years, renovated it and then purchased it in 2012 for $258 million.
Other examples of waste cited by the GAO since 2003 include a Commerce Department building in Alexandria, Va., that costs $60 million annually to rent and a Consumer Financial Protection Bureau facility in Washington where $95 million will be spent for renovations.
To stop the waste, Paige said, the government needs to cap federal lease payments, freeze all new acquisitions, create a more thorough inventory of its property and divvy up property management rights to individual agencies.
“Monthly leases look better on the budget than a large outlay of capital, but there does not seem to be any overarching thought given to shorter leases,” she said. “Property management is one of (the GSA’s) biggest weaknesses.”
Generally, experts say leasing properties rather than purchasing allows agencies the flexibility to hire employees, shrink staff or move locations entirely.
Jordan said that since most federal offices are retrofitted to the government’s standards, leases are usually designed to last at least 10 years, or five years with a five-year option to take advantage of more favorable economic rates.
A review of Augusta’s 13 active federal leases by The Chronicle supports that claim.
Among them, the Claussen Road office building has the second-highest annual rent, second-most rentable square feet (18,928) and second-longest required notice for termination.
The highest annual rent is $851,263 for the Federal Justice Center at 600 James Brown Blvd. The two-story building, which was donated by the city for $1, has no listed termination notice date.
Contract inflexibility there likely stems from the extensive renovations required by the government, based on Jordan’s assessment.
Alterations included a wrought-iron security fence, an access gate monitored by a pole-mounted camera, a white brick exterior, granite flooring, divided-light windows, overscaled light fixtures and a “monumental stair entranceway,” according to the lease.
By contrast, the government can terminate a lease it has on the seventh floor of the Augusta Riverfront Center, where restoration was waived, 150 days
after notice in writing, the longest termination notice citywide.
The office, which houses Federal Bureau of Investigation staff, is one of nine Augusta leases where there’s no deadline for the government to give notice that it wants to terminate.
In his 15 years in federal real estate, Jordan said, the government has kept the lease every time. He said the GSA could find a backfill tenant to buy out the lease but that such a maneuver rarely occurs.
The more likely bet, he said, is to encourage another federal agency to move into the building.