REPORT TO THE CITY COUNCIL December 11, 2014 FROM: BRUCE RUDD, City Manager City Manager's Office SUBJECT ..Title Authorize the City Manager or designee to execute a contract with CBRE to provide real estate management services ..Body RECOMMENDATION Authorize the City Manager or designee to execute a contract with CBRE for $60,000 to provide real estate management services for City owned and leased properties. EXECUTIVE SUMMARY On March 6, 2014, the Fresno City Council adopted the Asset Management Act, which was authorized by Councilmember Brand. The "Act", included a provision that called for the issuance of a Request for Proposals (RFP) in which the City would seek proposals from qualified real estate professionals who could assist the City in developing a comprehensive listing of properties owned and leased by the City. The selected firm would subsequently analyze this information in order to prepare a strategic plan regarding the future use City owned or leased properties. On September 26, 2014, a RFP was issued seeking proposals for real estate management services for properties owned or leased by the City of Fresno. On October 28, 2014, the City received a proposal from CBRE, in partnership with Cushamn & Wakefield/Pacific Commercial Realty Advisors, to provide various real estate and asset management services, including the creation of a detailed listing of all properties owned and/or leased by the City of Fresno as well as a Strategic Real Estate Plan. The plan will be used to identify opportunities to increase revenues or reduce expenses by identifying the number and type of properties owned or leased by the City, evaluating the overall condition and lease terms of these properties, determine if there are opportunities to reduce and renegotiate leases based on market conditions, and whether additional revenue could be generated through the sale, lease or auction of underutilized or surplus property. BACKGROUND On September 26, 2014, a Request for Proposal (RFP) was issued in which the City sought proposals for asset real estate management services for properties owned or leased by the City of Fresno. The scope of work contained in the RFP, which was consistent with the Asset Management Act, is intended to assist in the development of an overall real estate strategy for the City. The work would include identifying and cataloging the number and type of properties owned or leased by the City, evaluating the overall condition and lease terms of these properties, determine if there are opportunities to reduce and renegotiate leases based on market demand, and the amount of revenue that might be generated through the sale, lease or auction of surplus property. On October 28, 2014, the City received one proposal from CBRE, Inc., in partnership with Cushman & Wakefield/Pacific Commercial Realty Associates (PACCRA). CBRE has provided a similar analysis and subsequent recommendations to other cities, including but not limited to, Sacramento, Stockton, Freemont, Roseville, as well as the State of California and the City of Reno. Based on the proposal CBRE/PACCRA will assist the City in developing and implementing a Strategic Real Estate Plan that is intended to identify opportunities in which to reduce expenses and/or maximize revenues as well as identify future space requirements for various departments. The scope of work includes: * Develop a comprehensive listing of all City owned or leased properties * Evaluate underutilized and/or surplus properties and recommend best approach (e.g., sale, lease, auction) * Analyze leases for City owned assets and determine operating costs, deferred maintenance, etc., compared to current market demand and prices * Provide sales values and/or lease revenue assessments for underutilized City owned assets * Provide marketing recommendations for selected properties * Represent the City during sales or lease transactions, renegotiations, etc. * Identify future space demands for City departments CBRE/PACCRA proposes a fixed fee of $60,000 to produce listing of properties and a Strategic Real Estate Plan of which $30,000 will be refundable through commission rebates after commissions exceed $100,000 in aggregate. Once this occurs, CBRE/PACCRA will refund 25% on every commission earned until the $30,000 rebate is satisfied. It should be noted that CBRE/PACCRA has also offered to provide a computerized asset inventory of all City owned and leased properties at an additional cost. The cost of this additional work is dependent upon the number of properties contained and the level of software functionality that the City desires. In either case, the additional work could be funded using the $30,000 in rebates. ENVIRONMENTAL FINDINGS N/A LOCAL PREFERENCE N/A FISCAL IMPACT Funding for the initial $60,000 will be provided from the General Fund.