ROMANIA Reimbursable Advisory Services Agreement on the Bucharest Urban Development Program (P169577) Component 3. Enhancing Local Economic Development Component Output 10. Strategic plan for management of the city’s real property portfolio March 2019 This report is a product of the International Bank for Reconstruction and Development/the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. This report does not necessarily represent the position of the European Union or the Romanian Government. The material in this publication is copyrighted. Copying and/or transmitting portions of this work without permission may be a violation of applicable laws. For permission to photocopy or reprint any part of this work, please send a request with the complete information to either: (i) Bucharest City Hall (Bulevardul Regina Elisabeta 47, Bucharest, Romania); or (ii) The World Bank Group Romania (Vasile Lascăr Street, No 31, Et 6, Sector 2, Bucharest, Romania). This report was delivered in March 2020 under the Reimbursable Advisory Services Agreement on the Bucharest Urban Development Program, signed between the Municipality of Bucharest and the International Bank for Reconstruction and Development on March 4, 2019. It corresponds to Output 10 under the above- mentioned agreement - Strategic plan for management of the city’s real property portfolio., which pertains to Component 3 on the Enhancing Local Economic Development Functions and Outcomes Component This report is delivered according to the Reimbursable Advisory Services Agreement on the Bucharest City Urban Development Program and has been developed under the guidance and supervision of David N. Sislen (Practice Manager, Social, Urban, Rural and Resilience, Europe and Central Asia) and Tatiana Proskuryakova (Country Manager, Romania and Hungary). The report has been prepared by a team coordinated by Valerie- Joy Santos (Senior Urban Specialist) and consisting of Marcel Ionescu-Heroiu (Senior Urban Development Specialist), Gary Goliath (Urban Specialist), Liviu Ureche (Urban Specialist), George Moldoveanu (Information Assistant) and Silviana Petre (Senior Real Estate Expert) and her team at the Bucharest office of Jones Lang LaSalle. The team wishes to express its gratitude for the excellent cooperation, guidance, and feedback received from the representatives of the Municipality of Bucharest, especially Mayor Gabriela Firea, Mr. Sorin Chiriță, Ms. Adriana Duțu and many other local partners who have contributed to the development of this report. AFI Administration of the Real Estate Fund ANOFM National Employment Agency ASSMB Administration of Hospitals and Medical Services Bucharest BCH Bucharest City Hall CAPEX Capital Expenditures CET Central heating plant CGMB General Council of Bucharest Municipality CLLD Community-Led Local Development COP Competitiveness Operational Programme DC District of Columbia DGPLCMB General Direction of the Local Police and Control of the Municipality of Bucharest EC European Commission EIU Economist Intelligence Unit EU European Union FTE Full-Time Equivalent FUA Functional Urban Area GBA Gross Built Area GCMB General Council of the Municipality of Bucharest GDP Gross Domestic Product GF Ground floor GHG Greenhouse Gases GLA Gross Leasable Area GSA General Services Administration GTMP General Transport Master Plan HCOP Human Capital Operational Programme ID Unique number IMF International Monetary Fund ISU Romanian General Inspectorate for Emergency Situations IT&C Information Technology and Communication ITI Integrated Territorial Investments IUDS Integrated Urban Development Strategy JLL Jones Lang Lasalle Inc. KPI Key Performance Indicators LIOP Large Infrastructure Operational Programme M&E Monitoring and Evaluation MA Managing Authority MRDPA Ministry of Regional Development and Public Administration NASA National Aeronautics and Space Administration NYC New York City ONG Non- Governmental Organization OPEX Operational Expenditures PDF Portable Document Format PMB Municipality of Bucharest PPP Public - Private partnership PR Public Relations PUD Planned Urban Development PUG General Urban Plan PUZ Zonal Urban Plan RDP Regional Development Plan Software solution for the management and administration of diverse property and asset RE portfolio portfolios RMA Romanian Municipalities Association ROP Regional Operational Programme SME Small Medium Enterprises SO Strategic Objective STB Bucharest Transport Company SUMP Sustainable Urban Mobility Plan TAU Territorial-Administrative Unit TDS Territorial Development Strategy UK United Kingdom USA United States of America 1. EXECUTIVE SUMMARY ...................................................................................................................... 8 2. INSTRUCTION................................................................................................................................ 10 2.1 BACKGROUND..................................................................................................................................................... 10 2.2 MAIN OBJECTIVE ................................................................................................................................................. 11 2.3 SCOPE OF WORK ................................................................................................................................................. 11 3. PORTFOLIO ASSESSMENT METHODOLOGY ....................................................................................... 13 3.1 WORK PLAN – GETTING TO THE DATA ...................................................................................................................... 13 Initial Approach to the Portfolio .................................................................................................................. 13 Alternative Approach to Gathering Data for Representative Sample of Property ................................... 14 Techniques used to address the limited availability of property data ..................................................... 14 Collection of detailed data about Properties included in Sample set ...................................................... 16 3.2 METHODOLOGY................................................................................................................................................... 18 Initial Sample Inventory - Reasoning per class .......................................................................................... 18 Suggested Portfolio Metrics......................................................................................................................... 20 Research and Site Visit Approach ................................................................................................................ 21 3.3 FINDINGS ........................................................................................................................................................... 24 Current Situation .......................................................................................................................................... 24 General Findings .......................................................................................................................................... 25 4. PERFORMANCE OF THE EXISTING PORTFOLIO .................................................................................. 35 4.1 FREEHOLD PROPERTIES ............................................................................................................................................... 35 4.2 BCH’S FREEHOLD PROPERTIES LEASED TO THIRD PARTIES .................................................................................................41 4.3 LEASEHOLD PROPERTIES OCCUPIED BY BCH’S ENTITIES ................................................................................................... 41 5. BEST PRACTICES ........................................................................................................................... 43 5.1 CREATING A REAL ESTATE STRATEGY ...................................................................................................................... 43 5.2 SETTING OBJECTIVES .......................................................................................................................................... 44 5.3 PERFORMANCE MEASUREMENTS ............................................................................................................................ 46 5.4 OPTIMIZATION PLANS .......................................................................................................................................... 47 5.5 EXPECTED GAINS FROM THE PUBLIC ASSETS ............................................................................................................. 49 5.6 SPECIALIZED ENTITY FOR ASSET MANAGEMENT ......................................................................................................... 53 5.7 REAL ESTATE DATABASE MANAGEMENT .................................................................................................................... 54 5.8 DEALING WITH SURPLUS REAL ESTATE ................................................................................................................... 58 6. LESSONS LEARNED ........................................................................................................................ 59 6.1 KNOW WHAT YOU HAVE AND KEEP ALL INFORMATION CENTRALIZED .............................................................................. 59 6.2 STRATEGICALLY DECIDE ON WHERE TO START AND WHAT THE PRIORITIES ARE FOR THE CITY .............................................. 59 6.3 HAVE A DEDICATED REAL ESTATE STRATEGIC BOARD TO CONVENE REGULARLY TO DRIVE RESULTS ..................................... 59 6.4 MAKE REAL ESTATE PORTFOLIO STRATEGY ONE OF THE TOP PRIORITIES OF BCH AND GET THE PROPER RESOURCES IN PLACE 59 6.5 USE THE KNOWLEDGE AND SKILLS OF THE GOOD STANDING PRIVATE SECTOR DEVELOPERS, MAKE SURE THE MUNICIPALITY GETS THEIR FAIR SHARE OF PARTICIPATION AND ALL THE SOCIAL, ECONOMIC, ENVIRONMENTAL BENEFITS OF SUCH PARTNERSHIP ................ 59 7. POTENTIAL REMEDIES .................................................................................................................... 60 7.1 TAKE HOLD OF THE INFORMATION .......................................................................................................................... 60 6 7.2 INTRODUCING THE SURPLUS PROPERTY STOCK APPROACH ........................................................................................ 61 7.3 PERMANENT TRAINING OF THE STAFF ...................................................................................................................... 61 7.4 SETTING UP GREEN GOALS .................................................................................................................................... 61 7.5 PROPOSED ORGANIZATIONAL CHART...................................................................................................................... 62 7.6 SHARED RESPONSIBILITY BETWEEN BUCHAREST CITY HALL AND THE DESIGNATED ADMINISTRATORS .................................64 8. ATTACHMENTS .............................................................................................................................. 65 ATTACHMENT A: INFORMATION ANALYZED AND REQUIRED ...................................................................................................... 66 ATTACHMENT B: ANALYSIS OF INVENTORY’S STRUCTURE ........................................................................................................ 67 ATTACHMENT C: KEY PERFORMANCE INDICATORS & BENCHMARKS........................................................................................... 74 ATTACHMENT D: RESEARCH AND SITE VISIT GENERAL GUIDELINES ........................................................................................... 79 ATTACHMENT E: PROPERTY FACTS SHEET ............................................................................................................................ 88 Figure 1: Asset sifting levels ........................................................................................................................... 16 Figure 2: Google Form composition .............................................................................................................. 22 Figure 3: Portfolio Vision – The desired outcomes of a clear vision ............................................................. 26 Figure 4: AFI organization chart – One of the entities that should be specialized in Real Estate Management ................................................................................................................................................... 29 Figure 5: The main areas where the property information is located - Administrators .............................. 33 Figure 6: Real Estate Portfolio Strategic approach through a knowledge-based model ............................ 34 Figure 7: Property Views - locations across Bucharest ................................................................................. 35 Figure 8: Intervention Type and Relative Cost Over the Life of a Building .................................................. 52 Figure 9: Operating Profit Contributions ...................................................................................................... 52 Figure 10: Organizational Chart - Toronto New Model: Real Estate Services .............................................. 53 Figure 11: Organizational Chart – San Diego – Real Estate Assets ............................................................... 54 Figure 12: Integrated Applications to Provide a Business Solution............................................................. 55 Figure 13: Building Portfolio Statistic – Los Angeles .................................................................................... 56 Figure 14: Ottawa – Strategic Approach ....................................................................................................... 57 Figure 15: Proposed BCH real estate function Organizational Chart ........................................................... 63 Table 1: Criteria for distilling an appropriate sample of the overall portfolio ............................................... 19 Table 2: Property Views – Main Findings and Conclusions ............................................................................. 36 Table 3: Toronto – Priorities Set ..................................................................................................................... 45 Table 4: Physical Condition Description ......................................................................................................... 51 Table 5: Core Inventory and AM Related Systems .......................................................................................... 55 7 1. Executive Summary The main objective of this assignment was to support Bucharest City Hall (noted below “BCH”) in identifying actionable opportunities for measurably improving the performance of its portfolio of real property assets, focusing on the city’s leased and owned office buildings, underutilized land, and leased properties. The team began by trying to identify which BCH departments manage property data, who is responsible for accuracy and completeness of the data, whether the information available reflects reality, whether and how much revenue growth and operating cost savings potential might exist, and what opportunities exist to optimize space occupancy by BCH departments. Because the appointed BCH staff neither directly managed nor had access to property-related data required for this municipal portfolio assessment, the team instead extracted, from the 19,603 real estate assets listed in the 2008 Public Inventory, a representative sample of 166 properties. After identifying the location of the data and ownership status of these 166, the team selected 74 of the properties to assess more in depth. While the process was intense and time-consuming, it was the only way to identify a sample of BCH assets to analyze more in depth. The team also researched global best practices for portfolio management that might be applicable to BCH. Among other findings, the team came across research by the IMF regarding the underutilization by the Public Sector of their real estate portfolio. Applying the IMF methodology to Bucharest, improving the management of the real estate portfolio could yield a potential gain of up to €1.5bn per year which is an interesting enough figure to incentivize BCH to apply itself to the management of its real estate. The team identified some dysfunctionalities in the way BCH runs its Real Estate portfolio (listed in detail in Chapter 6 – Lessons Learned) that lead to five major points of discussion: - Decide on priority goals for BCH in terms of its Real Estate, e.g., maximize economic return - Know what you have in the portfolio and keep information centralized, accurate and current - Have a proper, centralized Real Estate function within BCH to decide, coordinate and hold Administrators accountable - Make the Real Estate portfolio one of the main drivers of revenue growth and a strategic priority - Engage the private sector and identify potentially beneficial partnerships The team has proposed remedies that BCH could act upon immediately in order to make progress in the short and medium term (details in Chapter 7 – Potential Remedies): - Gather real estate-related information currently scattered among various Administrators and centralize it into one database, ideally under one strategic real estate management team - Introduce the concept of Surplus Property Stock approach to optimize the use of the properties - Identify goals for the Real Estate portfolio that are sustainable and “green conscious” -- goals in line with the green aspirations previously articulated by BCH 8 - Leverage existing current available resources and authorities of AFI, putting in place checks and balances as well as Real Estate specialist Based on the team’s initial review, BCH’s Real Estate Portfolio has strong potential to contribute, in the next 3 to 5 years, a more substantive amount of revenue, social and environmental benefits and savings for the city. This potential can only be realized if real estate portfolio management is prioritized and valued by leadership, and managed to the standards described in this report. 9 2. Instruction 2.1 Background According to an IMF estimation, a typical country could increase revenue of 3 % of GDP from improved management of nonfinancial public corporations and government financial assets. This applied to Bucharest could yield a potential gain of up to €1.5bn per year if improving the management of the real estate portfolio. It is important that the City of Bucharest identifies effective and efficient ways to optimize the real estate portfolio, and, in so doing, provide a blueprint for similar undertakings in other cities in Romania. In this context, the World Bank is actively providing technical assistance to BCH, at the municipality's request, over a multi-year period for the purpose of supporting the city's objectives with respect to: ■ strengthen its capacity for strategic planning, capital investment planning and management; ■ implement urban development and regeneration programs; ■ accelerate seismic risk reduction; and ■ improve urban mobility. The city – through multiple entities, including municipal directorates of Patrimony, Urbanism, and Information Technology and the quasi-governmental “Administrarea Fondului Imobiliar” (AFI) -- manages a large real estate portfolio ("Portfolio"). The problem at hand BCH’s real estate portfolio (the Portfolio) includes municipal-owned, leased and State-owned but municipally managed property located throughout the municipality, with a diverse array of uses. According to the law, the General Council of the Municipality of Bucharest can decide on the concession or lease of public services under its authority, including of public or private municipal assets within the district boundaries. Due to a non-consolidated and incomplete cadaster and a poorly managed property restitution process after 1989, Bucharest City Hall, like most other large localities in Romania, lacks a complete understanding of the assets it owns: there is no strategy for the Portfolio, there is no centralized database of the BCH owned properties within the BCH itself, there is no budgeting system for approving costs CAPEX (capital expenditures) or OPEX (operational expenditures), no clarity nor consistency in the legal documentation of the assets or their location, no monitoring of the physical and technical status. Also, for the real estate assets it does own and manage, BCH lacks a coordinated portfolio management strategy, including appropriate metrics for monitoring performance. Responsibility for management of BCH's real estate portfolio is dispersed, as mentioned above, among multiple municipal directorates and quasi-governmental municipally affiliated entities. 10 At least one directorate has the responsibility to engage in portfolio management-related activities such as maintenance of the city's own database of its properties; another has responsibility for leasing and acquisition; while others engage in space planning and facility management. It appears that no entity has the lead responsibility for strategic real estate planning, portfolio monitoring, cost forecasting, and/or identification of revenue generation opportunities, missed opportunities for cost savings and social benefits. 2.2 Main Objective The main objective of this assignment is to support Bucharest City Hall (noted below “BCH”) in identifying actionable opportunities for measurably improving the performance of its portfolio of real property assets, specifically its leased and owned office buildings and land by: ■ Assessing the current performance of the portfolio; ■ Assisting in the development of an asset management framework for the city; ■ Identifying ways in which the portfolio can be better managed. 2.3 Scope of work The scope of work includes the following: ■ Review a representative sample of assets in the city's real estate inventory: start with a review of a roughly representative sample of 50-60 assets, including owned and leased office, industrial/ warehouse and land. To be representative, the sample should include municipally owned office buildings that are occupied by city-affiliated entities; owned office buildings that are out-leased to non-city-affiliated entities; and privately-owned office buildings in which a municipality- affiliated entity leases space. a) Verify the availability and correctness of basic, pertinent data for the selected sample of the city's inventory including but not limited to address, number of floors, building square meters, occupied square meters, lot information, tenant information, and vacancy rate. b) Identify opportunities to optimize space within the existing Portfolio. For cost-efficiency, BCH should ideally meet space needs with current municipally owned or municipally leased property before acquiring new leased space. Drawing upon the review of the sample set of properties, if possible, to identify possible opportunities to reduce occupancy costs, including through consolidation, relocation and/or lease renegotiations. ■ Suggest a shortlist of appropriate portfolio management metrics: review the city's policy goals with respect to its portfolio (e.g., cost efficiency; energy efficiency; exposure to risk of natural disasters; resilience; quality of accessibility of municipal services). Review BCH's existing 11 approach to portfolio management and current performance metrics, including how those metrics are used. a) Based on those inputs and analyses, suggest a dashboard of ongoing performance metrics, e.g. average annual municipal occupancy cost per square meter in owned office buildings; b) Suggest metrics that would enable the municipality to focus, in the immediate term, on issues that would yield reasonably rapid improvements, e.g. % of properties with a complete set of base data; % of properties with clean property rights; c) Consider current organizational and decision-making structure (i.e., the directorates and public entities with decision-making responsibility that affect performance of BCH's portfolio), including skill levels, available technology resources, and industry good practices, map the directorates responsible for critical elements of the portfolio, e.g., database of information about real property; space occupancy planning; facility management; leasing; disposition; tracking operating and maintenance expenses. ■ Suggest criteria for prioritization and decision-making regarding underutilized assets: Drawing upon the review of the sample of the Portfolio and guidance from BCH staff, identify a shortlist of 8-12 properties that have a potential to generate meaningful operating cost savings and/or revenue, and other systemic opportunities to achieve better outcomes. For that shortlist, review property characteristics (e.g. age of building, size of building and/or lot, zoning, use restrictions), estimate order-of-magnitude fair market values, possible highest and best use, and marketability. Take into account Bucharest's general real estate market conditions, and suggest which market segments present the greatest potential for leveraging BCH's assets; ■ Engage with selected BCH stakeholders to vet initial findings regarding space occupancy needs, costs of occupancy, revenue generation opportunities, structure and process for portfolio decision-making. Compare initial findings with available, appropriate private and public sector performance benchmarks. ■ Suggest improvements to the city's portfolio management approach including its system for allocation of space, approach to monitoring portfolio performance, incorporation of environmental and disaster risk mitigation considerations, decision-making process for disposition and leasing/acquisition -- with the overarching goals of increasing efficiency, decreasing risk exposure, reducing waste, and increasing value to the public sector. 12 3. Portfolio Assessment Methodology This chapter describes the methodology used in order to achieve the objectives. The technical team’s approach was tailored to the availability of BCH real property data and information obtained found via initial discussions and research on the legal framework of BCH (public sector specific), an understanding of departmental relationships within BCH’s Directorates and discussions with BCH staff involved in strategy of the Portfolio. 3.1 Work Plan – getting to the data The most challenging part of the assessment was to identify a reasonably complete, reasonably accurate list of Properties in the BCH portfolio and the location of the data, documentation and management of said properties. This section describes how the team arrived at the sample set of properties used for the assessment. Initial Approach to the Portfolio The team’s first step was to review a representative sample of assets in the city's real estate inventory: start with a review of a roughly representative sample of about 60 assets, including owned and leased office, industrial/ warehouse and land. The team met with various department representatives to help secure a list of properties to be evaluated in detail. However, there is no department within BCH that manages a comprehensive list of properties, so data was obtained only for several properties, from a number of individual departments. Although legal ownership of the municipal real estate assets sits within Bucharest City Hall, the city has no specific organization structure in place – which might include a searchable database of BCH-owned and/or -leased properties, or a reporting structure including technical specialists - with incentives and clear lines of responsibility for performance of the real estate portfolio. Currently, BCH does not have a lead, central decision-maker (either a person or an entity/department) responsible for the performance of the municipality’s portfolio. The decision for freehold properties is spread amongst the departments and entities affiliated with BCH or the Sectors that are the designated Administrators/Managers of specific real estate assets. Decision-making about space occupancy, disposition or development of excess land, and leasing, among other issues with cost and revenue implications for BCH, is dispersed among multiple entities -- which results in a fragmented, non- efficient, non-strategic approach. Further, the current operating model (and lack of accountability) results in missed opportunities from both social and financial point of view. The Administrators (full definition and legal framework of such are in General Findings 3.3.2.4) are entities those where the property information and legal documentation sits. The Administrators hold all documentation available either in physical format or electronical format including if available historical maintenance data and other property related information. 13 However, not even the BCH Administrators seem to have complete, accurate property information. Among the reasons cited include, inter alia: recent asset transfer from an Administrator to another, incomplete or not updated documentation, lack of sufficient real estate technical knowledge within the specific Department, not enough resources (human, financial and IT mainly), etc. It is the understanding that the Administrators should act as de facto owners and as such, should update, manage, complete and keep all property information and documentation up to date and accurate. Drawing upon the discussions with various city staff and department representatives a chart showing decision-making functions for real estate portfolio, is included within Chapter 3.3.2 General Findings, Figure - The main areas where the property information is located - Administrators Alternative Approach to Gathering Data for Representative Sample of Property To solve for missing primary sources of property information, as an alternative, the team performed research to collect property data available from public sources. Through the public information available, the team identified the inventory list as approved in the BCH Council Decision No. 186/2008 = Public Domain Inventory of the Bucharest Municipality from the following sources: ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/1_1_1000.pdf ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/2_1001_2000.pdf ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/3_2001_3000.pdf ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/4_3001_4000.pdf ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/5_4001_5000.pdf ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/6_5000_6000.pdf ■ http://doc.pmb.ro/patrimoniu_pmb_2009/patrimoniu/7_6000_6430.pdf The above-mentioned list was published on the municipality’s website in pdf format and included a number of six Volumes noted from I to VI with a total al of 6,441 pages and a number of records (lines) noted from #1 to #145,510. As of November 2019, the team found the above information to be the only identifiable public information both comprehensive and signed, pertaining the BCH’s real estate portfolio. Techniques used to address the limited availability of property data The team understands that the information included in initial Decision No. 186/2008 is not current due to changes between 2008 and 2019, and expects that some properties that should be included in that list are in part or entirely excluded whilst others appended to the list, as consequence of various movements and allocation including potential sales or acquisition that happened in that period. To address this issue, the team took the following steps to gather information, including: 14 ■ Assuming that the initial list would have changed over the 11 year period since the inventory was performed, the team started by selecting a broader than originally anticipated scope of sample properties. ■ The team cross-checked the data, eliminating properties no longer in BCH’s Portfolio or which had other significant data or legal constraints, and targeting a sample set of 50-60 properties. ■ The team also asked BCH’s designated contact, to confirm the team’s initial findings from Decision 186/2008 and provide property data on the list of 166. The team has been advised that only designated Administrators have control of the information about their respective subset of the overall BCH portfolio. BCH was asked to clarify – for each of the properties within the sample -- which Administrator the team should contact to collect and verify data for the properties included in the sample. Two areas have been identified: (1) no comprehensive database exists of buildings & land; and (2) individual departments who have ‘administration’ power of portions of the portfolio are wholly responsible for monitoring accuracy and completeness of portfolio data. The Strategy Department in BCH mentioned that the general procedure is that all properties belonging to BCH should have a designated Administrator in theory. However, in practice there are some exceptions to this rule, some examples being: a temporary situation where a property was taken back by BCH from an Administrator and for the moment there is no new Administrator designated, if BCH receives a property from the Government and no Administrator is nominated on the spot, the legal status of a property is not established yet (example: being in process of retrocession); ■ The requests were done to the Administrators using Property Data Base Excel file to capture fields, as shown in the Attachment D: – Research and Site Visit General Guidelines tables a, b, c, and d; BCH returned this information within 10-15 working days. Different than typical practice in other capital cities, communications between departments in BCH was done by official registered requests, signed by the City Manager with set official deadlines rather than natural, collegial requests over e-mail based on delegation of authority from the City Manager to the Strategy Department. This type of task should take no more than two-three days, in case a property database would have been available, accurate and complete with designated permissions per levels of access and data-management. ■ Information was obtained for 44 out of 74 properties from 10 companies affiliated with BCH and 4 sectors; and for 7 properties which were not within original sample set. With the information collected at the step mentioned above, the team populated the Property Data Base including the information as within the table heading mentioned within the Attachment D: – Research and Site Visit General Guidelines tables a, b, c, and d; 15 Figure 1: Asset sifting levels Collection of detailed data about Properties included in Sample set The team selected 74 properties to be included in the sample set based on the following criteria: ■ Excluded real property assets no longer owned by BCH; ■ Excluded assets without a designated Administrator – there is only one such property (Service Titulescu) that has unclear title and was not allocated to any Administrator; ■ Excluded assets with unclear title; ■ Excluded properties that were in use with a clear social function, such as schools and hospitals; however, the team included vacant or underutilized properties that were formerly used for social functions; ■ Prioritized properties with an excess land reserve, with redevelopment potential. The team created a database for these 74, to be filled in by Administrators who had to be formally asked for data by official registered requests, signed by the City Manager with set official deadlines. The entire process was significantly more time-consuming that anticipated. 16 The official requests had attached an excel template with predefined columns regarding three datasets as follows: a) land (“T” columns) – required; b) buildings (“C”) – required; and c) already existing information from the Inventory List 186/2008 – informative. For the leased properties, the team sent addresses via the Strategy Department in BCH to all the directions, companies and entities under BCH, asking if they rent space from third parties. Upon receiving a significant number of answers, the team selected a list of relevant contracts and asked for additional information regarding the contractual clauses. The team was informed that the tenants (BCH divisions or companies) cannot send us the actual contracts but can provide rental and term information. There is an internal norm regarding procurement and renting buildings from third parties but there is not a specific procedure to approve the lease contracts signed by BCH’s divisions. There is no centralized information for leases signed by BCH’s divisions, the only centralized are only across the BCH’s departments. The technical team asked if BCH uses a standardized lease template and whether all BCH entities are required to use such a standard form. The team received the template of a Landlord lease, not a Tenant lease. The team was informed by BCH Strategy Department representatives that BCH has a recommended lease contract, but BCH departments are not required to use the form; besides, the form is only applicable when BCH is acting as a Landlord, not a Tenant. All Tenant leases are held and managed by the space-occupiers benefiting from the Lease as tenants. As mentioned above, internal communication between BCH departments on these topics was conducted by official requests with set official deadlines. The process to collect information took time, and the team was provided names of Department contact persons for follow up if additional clarity is needed. The team received a number of calls, rather referring to extend deadlines, some regarding the legal issues, transferred properties, operational issues. The main findings of the team’s analysis of this sample of BCH real estate include: ■ Currently, BCH does not have a management reporting structure, portfolio monitoring metrics, or standardized processes in place to provide City leadership with even basic portfolio updates – such as operating costs, service quality, risk exposure - for the city’s real estate portfolio; – In the 166 properties that have been selected in Phase 1 the team has identified at least 30 Administrators responsible for decision-making and monitoring of their respective portions of the BCH portfolio. Each of those Administrators maintains its own proprietary database, if at all; as best the team could determine, no synchronization occurs among the data. Further, no benchmarking – such as of operating costs per square meter for comparable assets across the portfolio – currently takes place. ■ The request for specific information reached 96% from the initially selected number of properties some information being difficult to obtain, companies not having a designated Administrator, in process of restitution, etc. 17 ■ The team received information from Administrators regarding 59% of the total number of properties in the sample set (i.e., 44 of 74 properties), managed by 10 Administrators affiliated to the Bucharest City Hall plus other 4 sectors. The team has also received information on 7 properties that were not within the initial list submitted to BCH. ■ The team received information of a total of 707 records (lines) for a number of 44 properties, reflecting an average of ~9.55 records (lines) per property; ■ From the total number of records (lines), the largest dataset was received from Administratia Fondului Imobiliar (AFI) with 293 which are apartments leased in two locations in Bucharest." ■ Using the answers received, the team populated the Property Data Base Excel and used further to check onsite and reach the Specific Findings mentioned within the following section; ■ Only part of the designated contact persons was available for the site visit – this case is noted in the database as 'A' case (can inspect) representing a total of 12% from the total number of properties and 59% from the properties for which the team received information. The other case were: case note with B – the team had to receive specific approvals from the hierarchically superior contact person in order to inspect, with C – contact details are not accurate (BCH mentioned these were the contacts received), with D – indicated contact does not know the property and with E – indicated contact mentioned is not in charge anymore and address this back to BCH. The team resolved some of B and C cases following the recommended actions and performed site visits (either full or drive-by) for 15% from the total number of the properties. The statistics of requests versus answers as resulted from the process are listed within the Attachment D: Research and Site Visit Approach, Section e). 3.2 Methodology Initial Sample Inventory - Reasoning per class The team reviewed the large quantity of information, extracted in excel format with more than 19,000 individual entries and selected a sample of 166 properties, for which the team endeavored to collect more information. The information was limited. To perform this assessment work, a series of data sources were reviewed, as well as guidelines formulated to standardize the research, site visits and data reconciliation to ensure more consistency; From the total 145,510 records, the team distilled to the 19,619 most relevant assets, including only buildings and land (and not public infrastructure) and analyzed this initial sample. Having said that the information is limited, to perform this assessment work, a series of data sources were reviewed, as well as guidelines formulated to standardize the research, site visit and data reconciliation to ensure more consistency. 18 The data sources and guidelines are attached as Attachment D to this report for more detailed information. The main criteria for selection per class are detailed within the table below, showing the mix of properties selected compared to the mix of the entire portfolio and rationale. Table 1: Criteria for distilling an appropriate sample of the overall portfolio Main profile in Total % of Selected % of 166 Reasoning Class records Total records 19,603 Land 622 3.2% 18 10.8% Selected for potential for immediate value-add Coding misleading 294 records in total, Offices, includes small annexes to administrative Agencies, 294 1.5% 39 23.5% building, the team selected the most important Annexes administrative buildings to analyze Retail, Farmer Market, 467 2.4% 26 15.7% Selected due to prominent locations Cinema Depot for this type of property is usually well located and Public 439 2.2% 23 13.9% included excess land with potential for Transportation development Social houses 987 5.0% 17 10.2% Selected due to prominent locations Museum, Selected due to prominent locations, and Library, 1 024 5.2% 20 12.0% potential for underused assets Schools potential for adding amenities to the city life; Parks and 407 2.1% 12 7.2% with proper management these can be public pools important source of income. Green houses, lakes and Part of the green-house stock is interesting for 122 0.6% 8 4.8% agricultural redevelopment. land Concrete Interesting locations for large concrete 67 0.3% 3 1.8% Platform platforms and others The classification holds very small workshops Industrial 33 0.2% 0 0.0% that are not significant in size or value The classification holds statues and other Others, 219 1.1% 0 0.0% decorations that are not significant in terms of decorations real estate perspective Heating The classification includes heating system; not system 557 2.8% 0 0.0% significant in terms of real estate perspective Building 19 Main profile in Total % of Selected % of 166 Reasoning Class records Total records 19,603 The classification holds infrastructure (roads, Infrastructure 14 365 73.3% 0 0.0% sewerage, etc.) not significant in terms of real estate perspective Total records 19 603 100.0% 166 100.0% Suggested Portfolio Metrics Based on the scale and composition of the portfolio, the team suggests the following shortlist of Metrics and Key Performance Indicators (KPIs). These Portfolio KPIs are structured in: ■ 1) Data Accuracy KPIs – Given the current disjointed and incomplete status of BCH’s property database, these metrics could help the municipality monitor progress in cataloguing their Real Estate. As per the current status of the information of BCH property portfolio, there is no possibility to have a general understanding of what is included in the inventory. In order to get to this general understanding, step need to be taken to correctly catalogue and store property data. The Data Accuracy KPIs are meant to measure the progress of collecting and storing the data. ■ 2) Property Management KPIs: - these are typical Asset Management KPIs found in any portfolio analysis. Once the data is complete and accurately stored, the Property Management KPIs that are common to the entire property market, both public and private, can be applied on a property by property basis or at portfolio level in order to optimize use, costs and outcomes. In Attachment C - The KPIs are also benchmarked against the available data on comparable commercial properties (office, retail, industrial) or at least to collect historical information, analyze and propose improvements, if required. The information available for the sample that was analyzed did not permit the calculation of the Property Management KPIs. The recommended indicators were inspired, in part, by how comparably sized real estate portfolios are managed by other global municipalities or locally by private portfolio owners. KPIs that the team wanted to assess include (complete list including definition, formulas and benchmarks in Attachment C): ■ Exposure to risk of natural disasters (Seismic risk mitigation, Technical Expertise availability); ■ Energy efficiency (Thermic optimization programs); ■ Efficiency indicators (Operational Cost per FTE, Occupancy Cost per FTE, Portfolio Vacancy); ■ Technical parameters (Land book availability, Cadaster information availability); ■ Patrimony indicators (Clean property rights, Book-values up to date, Valuation frequency); ■ Occupancy permits (including building permits, fire permits, etc.); ■ Rent collection (if marked to market). ■ Quality of working space; 20 Based on the above analyses, the team suggested a dashboard of ongoing performance metrics. The indicators would be advisable to be applied to all BCH portfolio, as an example of good practices to other cities but more important to increase the efficiencies, working quality, properly manage exposure to risks, finding opportunities to support development programs of the city, ultimately making more money for the city’s budget. The entire list of Matrix KPIs is attached at Appendices: Attachment C: Key Performance Indicators & Benchmarks. Research and Site Visit Approach The Team developed an initial work plan to research and visit all the sample properties. Due to limited information provided to us including sites with wrong or not up to date indicated contacts, and with limited time due to delays in receiving documents, the team focused to: ■ Schedule site visits to all those possible in due time – the team discussed with each contact indicated to conduct viewings, as mentioned within the property files collected as answers from BCH and Sectors; ■ For some properties without a contact, the team performed a drive-by exterior view. ■ During site views, the team captured the information using below mentioned Google form; Before the site view, the Team developed a model of Google Form to collect information as shown in the above Table and: https://docs.google.com/forms/d/1Nu2Ct-DpTHxIgQpurknItTL_8V_vu1PG8P8pUFG7LIM/edit 21 Figure 2: Google Form composition After defining a database with the properties having a unique ID, the team designed a Google form generating a survey to fill via mobile phone tablet or computer with the following main fields to complete: ■ Specific Property (Main “ID” identical to the initial database ID); ■ Specific building number (new “Sub-ID”); ■ Open answers * pertaining location, description, occupation, issues and opportunities; ■ Possibility to register voice rather than transcript notes; ■ Possibility to attach property photos; ■ Possibility to repeat the above-mentioned cycle for the next building or close the survey; 22 * In this phase, the team used open answers rather than focused and comprehensive to enable a quick collection of data and capture various information onsite and where possible save on time entering the material. The responses were collected to: https://docs.google.com/forms/d/1Nu2Ct-DpTHxIgQpurknItTL_8V_vu1PG8P8pUFG7LIM/edit#responses The collection of photos was available to: https://drive.google.com/drive/folders/0B1xdvuOa6Y22fnNubldZOFJGRTZ5ZllPcjdVYm9BQW9tSEtQalVD WXRUV09mVVd4WlBGbjA The main database to collect primary information from the Administrators regarding a set of properties noted with a unique ID from 01 to 77 was provided in Excel format as this is often used tool within Administration Departments and easier to understand to all involved parties. After receiving answers, the team consolidated back to the unique database using codification of the unique “ID.” But also added a “SUB-ID.” for each row received per property from the Administrators. To capture the research data and the site visit information, the Team used the Google forms and finally consolidated the information in an exported file in Google Spreadsheet. This may allow to design from a flat open-source database format and capture the online and records research. The database formed from the team’s site visits has one or more rows (records) per each unique property ID - depending on how many buildings or building parts were inserted or inspected to the visit. The above-mentioned Excel initial database and the site views database were kept distinct to avoid potential conflicts/difference. However, the two databases can be appended / consolidated based on the unique property ID. The Google Sheet format would be preferred as it can enable multiple users working in the system at one time. The collected information from the site visits, using a google form and the datasets are listed within the Appendices – see the Attachment D: Research and Site Visit General Guidelines. The google form is only an example of short form to collect initial information, expecting to find onsite various inputs. This form can be improved to picture relevant elements required either when set up the initial database or after this, having clear understanding of all portfolio types. An indication of proper capture of data can be “Property Fact Sheet”. The team proposed a “Property Fact Sheet” as a way to align the chapters below for property management: ■ All property data necessary according to the law (comments on seismic risk if any); ■ All operational documentation necessary for normal management of such assets; ■ Occupational data (owned or lease) including details; ■ Qualitative assessment of the building (light, conditions of amenities etc.). This Fact Sheet would provide unified information used for the property management of the entire BCH portfolio. The Property Data Base header is listed within the Appendices – see the Attachment D: Research and Site Visit General Guidelines. 23 3.3 Findings This section summarizes the team’s findings about how BCH is currently managing its portfolio and offers observations as to how and why BCH arrived at the current institutional structure. Findings are grouped thusly: ■ Current Situation: overview of how the BCH real estate portfolio is organized, how much and in what way and time frame they were able to provide information and for what amount of properties they could identify data. ■ General Findings: summary of the strategic, management, organizational factors leading to the current situation of the entire portfolio; Current Situation Drawing upon documents collected, discussions with staff, and site visits conducted, the team found that the BCH Real Estate Portfolio is organized according to the following: ■ The ownership of the inventory sits with BCH but is not managed by BCH; ■ Overall responsibility for each property sits with the designated Administrators of such properties (see Attachment D – Section E) and they should act as de facto owner; ■ Decisions regarding the management of the properties as well as the annual budgets are proposed by the Administrators and approved by the Bucharest Municipality General Council; ■ The BCH Patrimony Department, according to the municipality’s Organizational Chart , should hold records of the patrimony of the BCH, including Cadastral, Concessions and Expropriation information. However, the Patrimony department only has information on the identity of the Administrator of each property and no other property data. ■ The Administrators have the authority to use, for their own purposes, the properties that they manage, or to lease out such properties to third parties; the specifics of the rights and obligations of the Administrators are detailed in Chapter 3.3.2. General Findings, Section 5. The rights and responsibility of Administrators; ■ Annually, upon submission of budgets for each BCH entity, the entities that are Administrators (in the understanding defined in this document) submit to the city council the budget proposals for the properties they have under administration. The understanding is that there is no specialist that reviews the budgets for the Real Estate, and it is unclear if the budgets submitted for approval have distinct lines for the real estate. Administrators are divisions, public companies, departments and such like that belong to Bucharest City Hall and have varying degrees of independence in relation to the City Manager (formal or informal). ■ No entity within BCH maintains a comprehensive database of owned and/or leased properties ■ The team was unable to confirm that the data base received is complete and accurate as at a specific date, despite communication with 51 divisions/ tenants; ■ The most recent date when the BCH portfolio underwent an inventory assessment was 2008. The outcome of that exercise was a City Council Decision 186/2008 “Inventarul domeniului public al 24 Municipiului Bucuresti conform Anexa la Hotararea CGMB nr. 186 din 2008”. This database was the only source of data available to the technical team for the exercise described in this report. Data was in the form of seven PDF files with more than 1000 pages each, and contained everything from road infrastructure, to hospitals, street furniture, office, industrial and residential buildings. The information contained in this inventory is very basic and contains the address of the property and size however, only 10% of the entire list has any input in the built square meter section. In conclusion it is just a place to start an investigative piece of work; details were already discussed in 3.2. Methodology section. The most difficult part of this assessment was to obtain a complete and accurate set of data from BCH, making difficult to correctly identify the assets and their status and confirm this with the site views. It will take dedicated time and budget to fully verify all portfolio property information, which may be prioritized according to factors such as policy importance, property type, agency, cost, and/or revenue (e.g. lease revenue). General Findings This section summarizes general findings and suggestions, including: Vision & Objectives for Real Estate in BCH, data availability as well as ownership of data, how communication is done between different departments, how the current organizational structure is, current rights and responsibilities of the Administrators, Reporting dashboard & Strategy. 1. Vision & Objectives for Real Estate in BCH Given the size and prominence of BCH’s portfolio, the team expected that BCH would have a vision and/or specific goals for its real estate portfolio. As example, to optimize the underused assets in order to increase the potential outcome to the budget. However, it seems clear that no such guiding vision or clearly stated objectives yet exist. The City Manager has indicated a strong interest in identifying opportunities to better leverage the portfolio – and the team hopes that this document can provide initial steps in that direction. 25 Figure 3: Portfolio Vision – The desired outcomes of a clear vision • Data quality and accuracy • Tracking key metrics that can be base lined and trended across the portfolio. Enhanced Visibility • Services offered by BCH to its employees occupying the buildings, to citizens visiting its real estate, to the tax-payers by properly making use of their taxes • Adapting the best practices, tools and templates to streamline, trainings staff, combine Streamlined expertise and re-organize if other processes may support on the information provided Services by the tools; also sharing experience and knowledge to other municipalities; • Cost savings and avoidance of, ~5% to 10% through proactive portfolio optimization and better real estate decisions based on accurate, real time data; Increased Productivity • Increase portfolio efficiencies, create a productivity by supporting better space quality workplace – may appeal to young professionals to join public administration’s teams; Enhanced Visibility into Occupancy BCH currently lacks a Real Estate specific division to make use of the existing resources (IT, Legal, Financial etc.) while adding specific Real Estate functionalities and reporting in order to manage the portfolio, both for freehold and leasehold assets. A property management team, either in-house or contracted out, could enhance the portfolio performance, generate cost savings, increase the money collections to the budget while keeping in mind the ultimate goal of generating additional social benefits. An indication of how such portfolio would be seen from a property management view is illustrated in the figure above. These are the reasons why a vision is important for the portfolio and the areas of attention should be the ones above. Until a clear vision for the Real Estate Portfolio is not distilled in actionable objectives and agreed at a BCH level, there is little a portfolio analysis can do. A portfolio analysis is only valuable when it has guiding principles to apply to inform its outcome. 2. Data Availability / Ownership of data The Team regularly heard from BCH staff the assumption that an Administrator “should have that information”. The assumption regularly was held that some other party should be able to provide documentation or data, but for the majority of the properties it was not the case, due to various reasons. Specifically, after the property information request (beginning of December 2019), within about 1 ½ months, the team received answers for only 23 properties out of 74 total requests. Moreover, the information provided did not cover all the required fields and most of them had no property documentation attached. 26 Based on discussions with various Administrators, the team understands that the factors contributing to missing and/or incomplete documentation: ■ Divisions outside of BCH direct control (such as Municipality Sectors) did not prioritize the requests for information (only 25% of all the requests to Sectors reverted with information); ■ Not having an internal property database or not having one organized and optimized in a manner to provide answers in short time, ideally generating customized reports in real time sourced by Administrators input created and updated with some frequency in time; ■ Not having enough trained staff aware of how to answer to such requests without a specific procedure – please see chapter 4.3. Potential Remedies for details; ■ Staff not entirely understanding the initial data request; anticipating this, the team had provided a technical person’s contact to advise on details of how to fill the requested file. The team received phone calls from under 50% from the total number of administrator’s representative and a part of these referred to slightly different than technical scopes (e.g. for extension of a short deadline); ■ Other disruptions like: the property being in process of transfer from an entity to another -ex: asset no #50 (Land assigned as cemetery but not used as such) transferred from ACCU (Romanian: CMMU) to BCH – Investment Department according to Bucharest General Council Decision 106/2015); slowing the answer due to the period in year including Christmas, New Year’s Eve Holidays; also congested period of year-end when various types of data requests (financial, budgets, inventory); internal reorganizational process, etc. Focusing on staff training, investing in tools to easily update datasets, as well as more efficient communication would allow BCH to improve their management of the Real Estate portfolio to the benefit of its staff occupying it and its citizens using it. These improvements are detailed in Chapter 7. Potential Remedies. 3. Intra departmental Communications As discussed earlier, the real estate-related communications between departments in BCH were done by official written requests, signed by the City Manager in person, with set official deadlines instead of a system of delegation of authority. Such a process is extremely time-consuming for all involved and inefficient, exacerbated by the lack of a shared database that could be accessed by all authorized stakeholders. Information requests were sent via internal addresses through the Strategy Department in BCH for all the directions, companies and entities under BCH asking information regarding the freehold properties and for the rent space from third parties. Upon receiving a significant number of answers, the team selected a list of relevant contracts and asked for additional information regarding the contractual clauses. It was mentioned that they cannot send us the full contracts to check due to legal constraints and the information included answers to specific clauses, centralized by the Strategy Department. There is even more difficult to interact with the Administrators of the properties held by BCH which outside the BCH’s controlled entities like the Sectors of Bucharest city. Obviously, there is a poor communication, mainly because there is no chain of command to manage the real estate portfolio held and leased. The team came to the conclusion that the current structure includes no incentives (or penalties) for Administrators regarding portfolio performance, and as such, they appear unwilling to consider modernizing the way they manage their respective portions of the portfolio. 27 4. Real Estate specific entities / specialists It is expected, and case studies shows, that there are specialized entities within municipalities dealing with the Real Estate that are part of municipalities. It is considered that there are four such entities that could, within BCH, take charge of the portfolio, however, none of them actually covers the entire scope of modern asset management. a. The Patrimony Department, a specific department within BCH structure plays a role in patrimony inventory, cadaster, concession and expropriation and may have a better control and strategic vision across the entire portfolio. b. There is AFI (translates into the Real Estate Fund Administration – “Administratia Fondului Imobilar”) which should be one of the key players in managing the Real Estate Portfolio. In fact, AFI is an Administrator for just a small part of the entire assets, mostly residential and of little commercial consequence. Even so, you can see from its structure that it is not tailored to an Asset Management function – its structure is the typical one for any direction of BCH or any public authority for that matter. Given its function and history (as the former Communist entity dealing with Residential and small commercial spaces) AFI as well as the company specific activities and knowledge as well as the answers received, it is considered that this entity may potentially accommodate a property management structure to address portfolio management requirements. Below it is presented how AFI is currently organized, and note that this is a typical organizational chart to most others of the Administrators, without being adapted for a real estate management specificity. 28 Figure 4: AFI organization chart – One of the entities that should be specialized in Real Estate Management * Source: AFI’s website http://afi.pmb.ro/organigrama/ c. Bucharest Metropolitan Building Trust (Trustul de Cladiri Metroplitane Bucuresti), is a development company that is supposed to build affordable housing established in 2017 alongside other Bucharest Real Estate Company. d. Bucharest Real Estate Company (Compania Imobiliare Bucuresti SA) is a facility management company established in 2017 alongside other 22 BCH companies meant to decentralize decisions at a municipal level. In terms of in-house specialists in real estate management, the team is unaware of the staff trainings or events pertaining the real estate BCH portfolio. The 22 municipal companies established in 2017 are not 100% functional as the decision to establish them was challenged in court but they were re-established by the city council in 2019 so, unfortunately, the Bucharest Real Estate Company and Bucharest Metropolitan Building Trust cannot be counted on the structure managing the Real Estate. The rights and responsibilities of the Administrators According to the answers received from the Patrimony Department and Legal Department of BCH, the procedure through which BCH allocates specific real estate properties to specific Administrators is 29 regulated by the Administrative Code of 2019 and the Civil Code. Details on how a property is given to an Administrator and the Administrators rights and obligations are detailed within the following page. The Strategy Department also informed us that there is no fixed number of Administrators for the BCH real estate portfolio. Every division, institution or entity under the coordination of BCH, along with the Sector City Halls, can qualify to become an Administrator. However, the number of Administrators vary, for example, due to following reasons: • Some properties are being returned to BCH by the Administrators; • BCH has to return properties to the Romanian State; • If BCH receives new properties from the Government; • If new entities are being created under the coordination of BCH. There are properties entered in the patrimony of the Municipality of Bucharest for which the Administrator was established through a Government decision or based on laws issued during the period of 1990-2015, as stated by the Patrimony Direction of the Bucharest City Hall. The administration of assets belonging to the public or private domain is made based on the adoption of a decision in this regard by the General Council of the Municipality of Bucharest (GCMB herein). This procedure is based on the provisions of the Administrative Code, according to which the Local Councils and the County Councils decide that the goods belonging to the public or private domain are given in the administration of the public institutions and the autonomous regions, subordinated to the administrative- territorial unit that owns them. In Bucharest, a property is given in administration only following the approval through decision of the GCMB, either based on a decision of the Sector Councils asking the Administrator right for properties which currently do not have an Administrator assigned or following requests from directions or public institutions under the coordination of the Bucharest City Hall (BCH). According to the same source, the rights and obligations regarding the administration of real estate property owned by the municipality of Bucharest are those provided in the Administrative Code. The act of establishing the administrative right may include other rights and obligations, the provisions of the Administrative Code being the minimum elements that must be mentioned in this act. However, a royalty fee is levied for real estate property belonging to the public domain of the Municipality of Bucharest and is the subject of concession contracts in order to provide public services for the municipality by commercial companies in which GCMB is a majority or minority shareholder such as BCH’s divisions or based on a commercial agreement to third parties. There is no statistical data on this (lease and royalties are bundled under the same P&L line RON824M ie €175M in 2019 ; a lot of this is rent cashed from entities of BCH so it will also show as a cost in the consolidated budgets. There is a methodology to calculate the royalties based on valuation and time to recover from lease, however the team could not find out how many Royalties alone are nor if these are on a market level. The rights of the Administrators are those included in the document through which the property is given into administration, according to the provisions of both the Administrative and the Civil Codes. 30 Additional information and explanations are required to be transmitted by some entities that have administrative rights, respectively the local councils of the Sectors and the Administration of the Real Estate Fund, as well as by the General Economic Direction of the Bucharest City Hall. According to the Civil Code, the Administrator of the property must take all the necessary measures to ensure the conservation of the property and is also responsible for gathering the legal permits requested in order to be able to use the property according to its destination. Also, the Administrator can alienate the asset only with the owner’s authorization this means that there is a BCH check on what is being done with the properties so at least they can stop a sale initiated by the Administrator in case they believe it is not in their interest. According to the Administrative Code, the Decision of the GCMB through which a property is given to an Administrator must contain at least the following details: ■ Information on the identity of the asset to be given to an Administrator and an inventory value of the asset; ■ The destination of the asset to be given in administration; ■ The term to conclude the surrender-receipt of the asset. The Administrators have the following rights and obligations: ■ The use and disposition of the asset given in administration under the conditions established by law and, if applicable, by the act of constitution; ■ Ensuring the protection and preservation of the asset, as a good owner, and bearing all the expenses necessary for a good functioning; ■ Carrying out the necessary formalities regarding the renting, within the limits of the act through which the asset was given in administration and observing the applicable legislation. ■ Collecting the benefits of the asset –clarification have not been received, by the team, as to whom benefits from this received income (Administrator, BCH, or a split between both) ■ Carrying out investment works on the asset, under the terms of the act of administration and of the legislation regarding public procurement; ■ Supporting all the expenses necessary to bring the asset to the appropriate state of use in case of its degradation, as a result of the improper use or not providing adequate security; ■ Obtaining the permits for the urban zoning plan without changing the destination of the asset, as well as the permits for improvement works and maintaining the technical characteristics of the asset; ■ Re-evaluation of the assets, according to the law. Unless otherwise stated in the decision of GCMB when giving the property under administration (that the team had no access to) there is no penalty or incentive for the Administrator to manage the properties efficiently other than revoking them as an Administrator. As most of the property rights are delegated to the Administrators through the decision of GCMB and it is this document that should regulate the extent of the mandate of administration in time and rights; given the status of the property data, the team has concluded that either the documents do not provide 31 for rights and obligations of the parties or BCH is not following up on said obligations of Administrators. In this context, the team suggests that an internal audit of all such decisions should be undertaken to clarify who needs to do what and who is in default regarding its obligations. It does not need to be a complicated or costly exercise – just an internal information gathering exercise to compile the decisions for even this sample set of 74 properties, and confirm BCH obligations. It should take, at most, 2hrs per property; if two people were decided to the task, it should take no more than 10 working days for the set of properties. 5. Reporting dashboard & Strategy As stated above, the Administrators currently hold the property information. However, the Administrators do not necessarily have the full property understanding and a quality information due to various reasons, inter alia: recent asset transfer from an Administrator to another, incomplete or not updated documentation, not specialized/trained or enough members of the team, etc. The team prepared a chart showing decision-making functions for the sample real estate portfolio according to the current situation, which the team has included in the figure below. 32 Figure 5: The main areas where the property information is located - Administrators State- or Privately- Bucharest City Hall Sectors (1,2,3,4,5,6) as Lease owned companies Owner Administrators Lease Administratia Fondului Imobiliar (AFI) Societatea de Transport Bucuresti Administrația Lacuri, Parcuri și Agrement București Administrators Administratia Strazilor Administratia Cimitirelor si Crematoriilor Umane Centrul pentru Protecție a Plantelor Circul & Variete Globus Other Municipality subordinated companies The attributes and functions of the listed Administrators are listed in Attachment D- Glossary section. As discussed above, BCH currently does not have a separate department, or even a reporting structure among multiple departments, focused on the performance BCH’s real estate portfolio. Further, BCH’s goals and strategy have yet to be defined. In absence of goals or metrics, Departments are carrying on however they see fit, with limited if any reporting or accountability. The team’s suggestions draw upon 33 known good practices by the private sector following responsible and professional Asset Management goals. The private sector typically uses a knowledge-based model as per figure below when approaching medium-large and diverse portfolios. Figure 6: Real Estate Portfolio Strategic approach through a knowledge-based model No technical capacity or formal tools exist at a centralized level to understand and address cost, revenue, risk management issues related to holding a real estate portfolio. The team is aware that BCH completes the balance sheet and other similar, legally mandated reporting documents, however, such cannot replace a proper portfolio management structure. Decision makers, heads of department, managers, etc. may have or request information regarding some or all of these properties, however there is no management structure in place responsible to both day to day building requirements and medium-long development programs. Without a specific structure of management of BCH’s real estate portfolio, BCH has no understanding of the value of the portfolio as entire or per property or how this value may support better BCH’s long- term strategy, individual programs, or specific city policy goals. 34 4. Performance of the existing portfolio This chapter describes the team’s findings related to BCH-owned and leasehold properties, based on observations and the team’s professional opinion. 4.1Freehold Properties After the team collected data for the 74 properties from the Administrators, the team selected 11 of them to take through the full assessment and data collection process. The goal of this was to test the quality of the data as well as the way it verifies on location. Findings were mixed: some of the data matched the records, some did not. Conclusions following the inspection of a sample of 11 properties: ■ Current situation does not entirely match what was provided to us in the inventory and further data received from Administrators – in terms of number of buildings, areas (buildings and land) or who administrates them; ■ Underutilized assets (not fully occupied or leased) that leads to higher costs or loss of revenue; ■ Facility management could be improved. Below is a brief summary of the inspected properties: Figure 7: Property Views - locations across Bucharest 35 Table 2: Property Views – Main Findings and Conclusions Expected to No.* Property Site Plan from Google MyMaps Comments from inspection & Conclusions Opportunities identified in a commercial context see • To maximize the space that can be leased – further lease to retailers and raise money from rents; • The team has seen a building and a 3,000 • To maximize the use of the office area; sqm land - not clear what the rest of the land 6 buildings • To consolidate the administrative team in one office 1 is used for – for BCH to clarify the legal status and a building together with their peers and rent the building (15/ 15. Piata Obor • New construction/ warehouse where 39,177m2 entirely; 2120) Markets Administration sits is underutilized land • To launch an urban renewal study for Obor Market area in (~50% of commercial space on ground floor order to have a coherent redevelopment vacant and 2 offices out of 7 vacant) • Estimated loss from rent: min. €100,000 pa (conservative scenario) • The total site is of approx. 10,000m2 • To reintegrate these green areas into the educational measured on map – to clarify the legal circuit and collaborate with the universities, after situation; refurbishment; • A large site within the Herastrau Park used 2 4,800m2 site 33. Sera for planting flowers for the parks (Herastrau & • To create a pole of leisure integrated with agricultural use, (33/ with green Herastrau Bordei); opened to public use – opportunity to raise money whilst 10217) areas on it • Green areas in poor condition; two creating an environmentally friendly leisure element constructions are relatively new (from 2008); • Current activities do not match with the • Very high potential for social benefits as well as events potential of the area location for let with potential of €120,000 pa • Activities in this region would benefit better management • 1 ha of green building areas which produce • To consolidate the activities from Drumul Cooperativei 10 3 34. Drumul flowers; to the south side there are external and Drumul Cooperativei 22 (Sere Plante Perene) (34/ Cooperativei 80,892m2 areas used for flowers acclimatization • Or to create a synergy with Sector 5 Antiaeriana project 10218) 75A • More than half of the site is unutilized located adjacent to the site, towards the east; (around 4ha) 36 Expected to No.* Property Site Plan from Google MyMaps Comments from inspection & Conclusions Opportunities identified in a commercial context see • Activities in this region would benefit better management • Underutilized - used only to park some • To move the activities from here to Drumul Cooperativei machinery; 6 employees; some small 75A; warehouses on site • Use the land for residential development – either develop/ 4 35. Drumul • on Google Maps site area would be around sell/ concession the land / enter a PPP agreement with a (35/ 31,720m2 Cooperativei 22 4ha-to check the legal situation private developer 10219) • Located in between two large residential • Suited for built to rent compounds (New Residence and Quadra • Land price in the area -~€150 per sq m i.e. total value for Trees) sale of land ~€4.76 mil. • Activities in this region would benefit better management • To move the activities from here to Drumul Cooperativei 75A; • on Google Maps site area would be around 3.5ha-to check the legal situation • Use the land for development – residential, potentially a 5 37. Drumul • Used for composting organic waste (done hypermarket - either develop/ sell/ concession the land / (37/ 11,000m2 Cooperativei 10 manually, not using technology), enter a PPP agreement with a private developer 10221) • also used for storage of disposable vehicles • Suited for built to rent and equipment (used in public domain) • Land price in the area -~€150 per sq m i.e. total value for sale of land according to documents (11,000m2) of €1.65 mil. and value according to measurements post viewing of €5.25 mil. 37 Expected to No.* Property Site Plan from Google MyMaps Comments from inspection & Conclusions Opportunities identified in a commercial context see Map to the right shows all three the properties at Drumul Cooperativei 10,22 and 75A • Current activities could be relocated, and land given in concession for a redevelopment – could accommodate a museum or leisure (including restaurants and children playground); • Production of flowers done here for Carol • Residential use could be best use if the land would be and Tineretului Park (no technology used-all buildable and not a green area within the park – but this 32. Sera done manually) could raise some potential issues with ONG (non- 6 6 buildings Libertatii governmental bodies); (32/ Historical Candiano • Site appears to have potential. Current land • Considering that several other land plots nearby are 10214) monument Popescu 4A use (flowers production) does not maximize unused or underused, like the former Filaret Electrical value of site, whilst land value in the area is Power Station (historical monument), the whole area over 2,000 euro/ sq m if land buildable should be considered for an urban regeneration study; • For immediate potential gains, the area can be adapted to be used for events (light temporary constructions or concerts, weddings, corporate events etc.) with potential of €120,000 pa. 38 Expected to No.* Property Site Plan from Google MyMaps Comments from inspection & Conclusions Opportunities identified in a commercial context see • There are two areas of intervention: 1) Relocate the administration into a quality office building 17 better connected to public transportation construction • Used as administrative headquarters 38. Use the land for hotel development, including leisure s – approx. Administrative and restaurants – either develop/ sell/ concession the land 7 2,571 m2 • Underutilized given its use and location Headquarters / enter a PPP agreement with a private developer (38/ built area ALPUB, 2) Optimize the office occupancy and try to lease to third 10222) 12,011 m2 • In the initial inventory area given was Bucuresti parties, however the quality of the building is poor, with vacant land 4,663m2, compared to information received in Ploiesti 8B uncertain health & safety status that might not be (14,582m2 excel – to check the legal situation marketable to the private sector land in total) • Land value: ~€1,000 per sq m i.e. ~€14 mil. total land value • Leased to a private operator • Opportunity to renegotiate the lease & investments to be • Underutilized - around 10% used from the 44. Strand Cara ~6ha of land done, together with agreeing business plan with either the whole swimming park area and used 3-4 8 Titan (Titan with current or a future operator in order for the leisure park to months per year, during the summer season (44/ Swimming Pool swimming be used at full capacity and generate more revenue • Anecdotic evidence suggests that the lease 10,234) area) – Nicolae pools and • Titan is a desirable area for young families with growth with potential revenues for BCH of a % of €2 Grigorescu sports fields opportunities and investment in this area would bring great million of revenue does not have the support social benefits of the administration • Facility fully functional and modernized • Opportunity to maintain a land reserve at the back of the crematory for a future expansion either of the Mina Minovici • Business increased in the last 4-5 years Legal Medicine Institute or the Sf Ioan Hospital, on the 9 Vitan Barzesti neighboring plots; (49/ Crematory -Iuliu crematory • Columbarium (where the ash urns are being • A heliport could be envisioned if needed by the hospitals; 10,351) Hatieganu 1 stored) could use some small refurbishment • An alternative would be to extend the columbarium if demand increases on the longer term. • No immediate benefits out of this property 39 Expected to No.* Property Site Plan from Google MyMaps Comments from inspection & Conclusions Opportunities identified in a commercial context see • Good condition • Cars parked on the premises suggest that Social housing disposable income might be higher than the 10 – 6 blocks – • Renegotiate periodically the rents to reflect the actual ones for social housing (26/ around 150 income of the occupiers; Manzului 24 – • Underground parking (for 20 lei /mth per 8,290+) apartments social housing place) (for €4.2 /mth per place) • Average rent of 100 lei per month per On 8,235m2 apartment (in average of 60m2) (for €20 /mth land per apartment) • 10-20% owners of the apartment (information collected via interviews on the site) • Poor condition • Improve facility management and improve 11 Social housing Bucuresti • Average rent of 134 lei per month per refurbishments; (25/ (Lemon Targoviste 16A apartment (in average of 83m2) (for €28 /mth • Renegotiate rents, including commercial spaces for at 8733+) Garden) per apartment) least €8 per sq m per month • Commercial spaces at GF in a poor condition; from interviews on site, rent is low, below market *No. -table above/ number in the excel file with data asked & received/ number in inventory Viewings of more properties were not possible, due to the bureaucracy involved in setting up such detailed viewings. As such, the team was only able to analyze in detail the above listed properties so far. It is however easy to spot that in this small sample there is potential to monetize in the short term some of the existing assets of BCH. 40 4.2 BCH’s Freehold properties leased to third parties There are two types of entities to sign a lease agreement with BCH as lessor: ■ Lease agreements signed directly by BCH which are based on two Bucharest Municipality General Council Decisions (“HCGMB”) no. 400/2017 pertaining the leases for medical units and no. 426/2018 pertaining the leases for medical units; ■ Lease agreements signed by BCH’s affiliated companies which are not centralized within a BCH database; this kind of lease was required as initial information form the Administrators within the Property Data Base Excel form and discussed within the Freehold section. 4.3 Leasehold Properties occupied by BCH’s entities BCH and some of its divisions rent spaces from third parties. Regarding the leasehold properties, the team started with asking BCH representatives to provide an exhaustive database of the leases within their portfolio. However, there is no BCH internal database providing information of lease agreements signed with third parties. Based on the answers received from BCH’s affiliated companies, the team built a database (please see Chapter 3.2.3. Research and Site Visit for details) using best practices in portfolio management. However, the information provided initially was still limited and unclear. From the database, the team selected a sample of properties, based on a sample assessment considering two parameters: ■ eliminating the cross leases between internal entities of BCH; ■ based on the highest rent level paid. A total number of fifteen institutions were selected to provide additional information from the lease contract clauses: Directia de asistenta sociala, Compania Managementul Transportului, Centrul pentru tineret al municipiului Bucurestii, Creart, Compania Energetica, Compania Paza si Securitate, Club Sportiv CSM, Compania Strazi,Poduri si Pasaje, DGPLCMB, Administratia Monumentelor, Teatrul Dramaturgilor, Trustul de Cladiri Metropolitane, Trustul de Cladiri Metropolitane, Compania Protectie Civila and Compania Managementul Traficului. On 17th of December 2019, the team was informed by the Strategy Department that it is not possible to receive contract copies of the leases from any of the fifteen institutions as according to the Law 544/2001 – article 12 (1) c, the commercial or financial information, if their publicity may infringe the principle of loyal competition or if according to the same law – article 12 (1) d, refers to personal data, are excepted from the free access to public information. The team was informed that only comments to the different parts of the lease can be provided if specifically asked. Therefore, the team turned its attention to the entire database with limited data. The team was provided by the Strategy Department with information for 147 records, the number of unique 41 tenants being 51. It was not clear whether this list is exhaustive, and the team did not receive any lease contract to analyze. Observations below are based solely on the database the team managed to put together. The findings suggest that generally data provided was incomplete, in terms of the 147 records received by the team: ■ area leased (12% did not have the area leased mentioned); ■ landlord (27% did not have the landlord identified); ■ rent paid (12% did not have the rent paid mentioned); ■ destination of rented space (11% did not have the use of the space mentioned); ■ lease terms (11% had incomplete term, or start/end dates). 42 5. Best Practices The team reviewed more than 20 case studies from North America, Europe and Asia, analyzing how public real estate portfolios are managed. This chapter is structured following 8 key issues which can influence the performance of the public real estate portfolio: 1. Creating a Real Estate Strategy 2. Setting objectives 3. Performance measurements 4. Optimization Plans 5. Expected gains from the public assets 6. Specialized entity for asset management 7. Costs should be associated with the entire life cycle of a building 8. IT Systems for keeping the real estate databases 5.1 Creating a Real Estate Strategy Undermanagement of government owned Real Estate is a common global issue now being addressed by many major cities around the world. A common goal is to increase a city’s revenue, and alternative solutions to raising taxes. Cities generate diverse approaches when it comes to strategies for dealing with their real estate assets. For example, the following cities in Europe and North America approach their real estate portfolios thusly: I. Edinburgh, UK • Raise awareness of the significance of the public realm. • Provide a clear framework for the delivery and maintenance of high quality, coordinated, connected and coherent public realm. • Develop priorities for investment in public realm. • Develop an approach to public realm funding and delivery that will allow the strategy to be realized. • Achieve excellence by following and sharing good practice. II. Glasgow, UK • More efficient, sustainable, smaller, and better-quality estate; • Agile estate capable of meeting current and future service delivery needs; • Collaborate and co-locate with community planning partners, third sector organizations and city region partners; • Achieve cost reductions, increase income and generate capital receipts; • Embrace digital and technological innovation to reduce reliance on and improve the performance of the estate. III. Vancouver, Canada • Improve the sustainability of City operations to reach Greenest City targets: 43 • Plan and implement a comprehensive corporate waste reduction and diversion program for all City facilities; • Develop a procurement policy and practice that supports the purchase and use of local food in City-run facilities; • Look for opportunities to green community events that the City runs, sponsors, and permits; • Plan and implement a program to significantly reduce greenhouse gas emissions and fossil fuel use in City-run buildings and vehicles. IV. Toronto, Canada • Ensure legislative requirements for asset management are achieved. • Optimize asset life-cycle costs while achieving defined levels of service. • Continually seek opportunities for improving efficiencies in operations, maintenance and asset renewal practices. • Foster an environment where staff across the organization are integral in the overall management of assets through training and development of asset management knowledge and competencies. • Ensure existing and future asset needs are prioritized. • Link infrastructure investment decisions to service outcomes. • Improve decision-making, accountability and transparency. As shown by the case studies above, efficient Real Estate management is educated and guided by a coherent, clearly thought through Real Estate Strategy put in place by the authority. BCH has not yet done this. The team suggests that BCH consider a multi-stakeholder workshop to help articulate the guiding principles of said strategy. 5.2 Setting Objectives In order to optimize a public real estate portfolio and create value, a set of specific objectives should be considered by the local authorities to start with. Toronto Example: For example, the city of Toronto uses the following set of priorities in regards with managing the public real estate portfolio: 44 Table 3: Toronto – Priorities Set Source: Toronto - Report ModernTO: City-Wide Real Estate Strategy and office portfolio optimizations, 18 September 2019 USA Governmental Agencies Example: When dealing with their real estate portfolios and prioritizing their investments in the portfolio, some governmental agencies in the USA have some specific approaches, according to the United States Global Accountability Office Report to Congressional Requesters, November 2018, Federal Real property Asset management. As such: ■ the National Aeronautics and Space Administration (NASA): calculates a property score using a matrix of responses to two questions: • How long will NASA be able to sustain its operations without the asset? • How easily another asset could assume the asset’s functions? ■ the General Services Administration (GSA) refers to assets with high annual return on equity and low investment needs as “tier 1” assets, with lower-performing assets placed into lower tiers. GSA also designates as “core assets”: • Those that the agency expects to remain in the inventory for more than 15 years; • Have a solid customer base; • Are in a stable real estate market; • Have sustainable reinvestment needs. The vision and strategy above inform the objectives to be set. For BCH, these need to be SMART (Specific, Measurable, Achievable, Realistic and Timely). The beauty of BCH’s current Portfolio situation is that goals can be simple with great impact such as collecting all data, digitalizing the data recording methods, etc. 45 5.3 Performance measurements The performance of the real estate portfolio can be measured by taking into account a variety of outcomes that support City needs, according to the Toronto ModernTO: City-Wide Real Estate Strategy and office portfolio optimization, 2019: I. Social – not applicable for Bucharest Real Estate 1. Affordable housing units added (in units) 2. Senior housing units improved/creates (in units) 3. Shelters improved/created (in units) 4. Rental units added (in units) 5. Community infrastructure space improved/created (in square feet) 6. Park space improved/created (in square feet) 7. Heritage preservation and/or adaptive reuse (in square feet) II. Economic 1. Commercial space added and/or employment lands developed (in square feet) 2. Employment generated (persons per year) 3. Hard infrastructure improvements enabled (number of projects/transactions) III. Environmental 1. Reduction in energy consumption and greenhouse gas emissions (in USD) 2. Brownfield remediation (in acres) 3. Energy efficiency and/or Smart projects enabled (number of projects) 4. Residential units created around transit hubs (in units) IV. Fiscal sustainability and portfolio performance 1. Assets unlocked for value creation (number of properties) 2. Co-location solutions (properties) 3. Real estate acquisition avoidance (in USD) 4. Savings realized (in USD) 5. Revenue generated (in USD) 6. Property taxes created (in USD) V. Collaboration and engagement 1. Community consultations (number of meetings) 2. Councillor engagement (number of meetings) 3. Partnerships established (number of solutions) 4. Staff engagement (number of committee / input meetings Source: Toronto City-Wide Real Estate Portfolio Strategy, 2019 It is considered that this structure should be observed by BCH in order to improve its Real Estate portfolio outputs. 46 5.4 Optimization Plans Once the City Hall collects sufficient data regarding how its real estate portfolio is being used it can also highlight which assets are underused or where there are opportunities to optimize the efficiency of the portfolio. In some instances, it might be more suitable to relocate certain activities in other buildings, to decrease or increase the space allocated for a specific institution or department, to rent additional space from the open market or even to surrender a lease contract with third parties if a building in the portfolio is available instead, fetching a lower cost. Toronto City Hall example In terms of specific numbers, as a pilot initiative, the Toronto City Hall launched an Office Modernization Program in 2016. The pilot initiative has demonstrated measurable financial, operating and employee benefits, including: • Improved Space Efficiency: 25% improvement (average 131 sq.ft/workstation) • Net New Capacity: space for over 300 workstations created in City-owned buildings • Increased Employee Satisfaction: 65% increase (based on staff survey results) • Improved Environmental Benefits: 26% cost reduction (utility costs per employee) • Lease Savings: $2 million/year in rents (40,000 sq.ft of leased space eliminated) As shown in the table below, the Toronto City Hall currently occupies approximately 3.1 million square feet (roughly 288,000 square meters) of usable office space that accommodates 15,400 employees, resulting in a ratio of approximately 200 square feet (18.5 square meters) per workstation, on average. The recommended standard by Gensler (a third-party consultant hired by the City to advise on modern workplace design and practices), is 140 square feet (13 square meters) per workstation , supported by public and private sector benchmarking. CreateTO and City staff estimated that the Office Optimization Plan can generate 25% space savings across the portfolio (750,000 square feet of space, or almost 70,000 square meters) by applying these new space standards and implementing workplace mobility practices. In addition to efficient office space design at 140 square feet per workstation, other key efficiency measures include vacancy rate and workspace utilization. The Gensler Real Estate Strategy and Office Optimization Plan identified a current vacancy rate of 1% to 5% in City buildings (almost all workstations are assigned to employees). However, a workspace utilization rate of 36% was also identified, which implies that assigned workstations and private offices are vacant 2/3 of the time. This observation is common across private sector and public sector portfolios with dedicated seating arrangements (Gensler identified an industry average desk utilization rate of 42%). This occurs because work is increasingly being completed in collaborative or remote settings, such as team work in breakout rooms, attending meetings at various site locations, or finding quiet space to concentrate and complete focused tasks. As a result, providing dedicated workstations for each employee generates space inefficiencies. 47 To address this, a degree of shared workstations with a greater mix of space types is recommended to make better use of space and adapt to changing work patterns. Suitable mobility ratios (i.e. the degree of unassigned workstations) will be evaluated by a workplace consultant based on the unique functions across each City division, agency and corporation, with recommended mobility targets (by job function). Source: Report ModernTO: City-Wide Real Estate Strategy and office portfolio optimization, 18 September 2019 New York example Real estate is also considered an extremely valuable asset by the City of New York. The City has a responsibility to maximize its real estate portfolio in terms of utilization and economic value. The City occupies over 300 million square feet (almost 28 million square meters) of space in office buildings, warehouses, police precincts, schools and other buildings, according to the report ‘Maximizing Efficiency in NYC Government: A Plan to Consolidate and Modernize Back‐Office Operations’. Within the City’s portfolio, the most valuable real estate, in terms of annual cost, is office space. At least 75,000 City employees work in office space that together occupies over 19 million square feet (1.75 million square meters) in 250 buildings. This office space can be divided into leased and City‐owned categories: 12.5 million square feet (1.16 million square meters) is leased at an annual expense cost of $365 million and 6.5 million square feet (approximately 604,000 square meters) is City‐owned at an annual expense cost of at least $70 million in operating expenses. Using office space more efficiently is an important cost‐saving action that will also positively impact the provision of City services. For this reason, the City was committed to reducing its office portfolio by 1.2 million square feet (111.500 square meters) and $36 million annually by the end of 2014. This sizable reduction in office space was expected to save at least $4 million per year in energy costs and reduce the City’s emissions significantly. During the first three years of implementation of the program by 2013, the city reduced office space by 400,000 square feet and saved $15 million in annual rent occupancy cost. Additional savings in energy costs totaled $4 million as the footprint shrank. This approach can also apply to BCH. Once the city gathers and clarifies the characteristics of its portfolio, BCH can measure what it has, apply strategic decisions towards ultimate policy goals. As discussed in Chapter 4 (performance of the existing portfolio), there are large and small initiatives that can be 48 undertaken in order to increase the financial, economic, social and environmental benefits of the Portfolio within BCH’s reach. 5.5 Expected gains from the public assets Many governments can improve returns on public sector assets , according to the International Monetary Fund (IMF), in the report Managing Public Wealth, IMF Fiscal Monitor, October 2018. While recognizing that these assets often have operational objectives, there is still considerable room to improve asset management. Given the scale of public assets and the existing poor quality of asset management, Detter and Fölster (2015) argue that a small increase in yield could provide significant increases in fiscal revenues. Governments should at a minimum expect a reasonable rate of return from the large commercial and financial assets they control. First, the analysis quoted by the IMF looks at the return on assets among nonfinancial public corporations across a sample of 14 countries. The country-specific sector-wide return on assets of nonfinancial corporations is defined as the net operating surplus as a share of total assets. For the sample, the average return on assets during 2010 –16 was 1.9 % (median 0.6 %). This compares with the equivalent rate of return of 8 % for United States private nonfinancial corporations over the same period (Osborne and Retus 2017). Raising the return on asset performance from the 25th to the 75th %ile of the cross-country distribution of returns would bring average yields to 4.3 %—still well below the comparable private sector rate of return—and increase profits by an average of about 1% of the local economy’s GDP according to the IMF. This overall revenue gain from improved management of nonfinancial public corporations and government financial assets of 3% of GDP per year is equivalent to corporate income tax revenue in advanced economies. Still, it leaves out the potential gains from better management of government nonfinancial assets. For example, Detter and Fölster (2015) argue that governments’ real estate portfolios are heavily underestimated, and that there is considerable scope for both better management and higher returns, according to the same source. Applying this expected gain of 3% to the GDP of Bucharest or €50.6bn in 2017 (Eurostat), improving the management of the real estate portfolio could yield a potential gain of up to €1.5bn per year. The team analyzed what major cities gained from active asset management. 1. Generate additional revenue Creation of BIG in Austria to manage and dispose of assets at a profit The creation of a central entity (BIG) to manage public assets improved the cost-efficiency of various government departments and forced them to allow surplus stock to be put to alternate use or sold. Following a revision of the regulation of BIG’s activities in 2000, the company purchased government assets for €2.4 billion, which are then able to be sold with a positive margin over the purchase price, with any gains shared with the State. 49 2. Promote Economic Development UK, Birmingham using existing portfolio to guide future development Rather than acquiring new sites, the City Council is using their existing portfolio to ensure that future development is aligned with local priorities. The City Council’s property was divided into an Investment Portfolio, a Growth and Development Portfolio, Community Portfolio, and Operational Portfolio to strategically know how municipal properties can support the City’s growth plans. For example, through strategic management, the City Council has been able to complete over 3,000 homes. 3. Improve operational efficiency UK, Cambridgeshire saves euro 3.6 mil. p.a. The County has created a Local Government Share Service solution, resulting in a quasi-independent venture that provides a range of public services. By the 6th year of operation, they had saved €3.6 million annually though the shared services of various County Councils. 4. Promote Green Development and Disaster Resilience USA, San Francisco tracks energy efficiency for 500 government held properties Tracking energy performance of nearly 500 municipal facilities has resulted in the city improving overall Energy Use Intensity (EUI) by 15.6% from 2009 to 2016. The carbon footprint within the same period decreased by 26.5%. 5. USA, Baltimore launched in 2010 the Vacants to Value initiative The goal was to raising property values, attracting new residents and businesses and increasing local tax revenue. At the time of the program’s launch, Baltimore had over 16,000 known vacant properties and a declining population. The Vacants to Value program helped the City gain control over vacant properties so that they could be given to buyers that would rehabilitate them. As of late 2018, Baltimore has rehabilitated 4,200 vacant buildings and demolished more than 2,700 or roughly 43% of known vacant buildings at the start of the program. 6. Centralization of control and more PPPs Poland, Warsaw Warsaw’s achievements in asset management started with administrative unification of the City in 2002, which resulted in a shift from the boroughs controlling land management to centralization of control. This allowed for a more unified, city-wide geodetic system. The City has also been introducing more public- private partnerships (PPPs). Active asset management can also generate revenue for public companies, for example companies operating mass transport systems. For example, the Mass Transit Railway Corporation (MTR) in Hong Kong, operating the rail-based transportation system of Hong Kong, has a program to develop real estate around major transport nodes. MTR Corporation is involved in the development of residential and commercial projects, property leasing and management, advertising, telecommunication services as well as international consultancy services, according to the company’s website (www.mtr.com) 50 This has led to more effective integration between its railway and property developments, increased catchment and passenger flows for the railway, and enhanced investment returns. Costs should be associated with the entire life cycle of a building The cost associated with a building should take into account not just the initial investment, but also the total maintenance cost throughout the life cycle of that building. In regards with the technical conditions, a building can be included in one of the following categories, as proposed in the Ottawa Strategic Asset Management Plan 2017. Table 4: Physical Condition Description Moreover, the model in Ottawa also provides an estimate on how much money are expected to be spent for maintaining the building during its life cycle, as seen in the figure below. 51 Figure 8: Intervention Type and Relative Cost Over the Life of a Building Source: Ottawa Strategic Asset Management Plan 2017 Figure 9: Operating Profit Contributions Source: Mass Transit Railway Corporation (MTR), www.mtr.com In property developments, the Company will enter into partnerships with reputable developers whereby the developers will bear all development costs, including land premium and construction costs, and therefore all development risks. The Company will supervise construction of the projects and profit sharing will be either in form of percentage of profits or assets in kind. 52 Some of the examples of properties developed by MTR in conjunctions with mass transportation hubs: Source: Mass Transit Railway Corporation (MTR), www.mtr.com 5.6 Specialized entity for asset management All of the case study cities analyzed for this report have in common a specialized entity, either a public division or agency specialized with managing the public real estate portfolio. There are several types of organizational charts typical of such entities. Examples are presented below and refer to the city of Toronto, in Canada, and the city of San Diego, in the USA. Figure 10: Organizational Chart - Toronto New Model: Real Estate Services Source: Presentation Toronto Realty Agency 23 August 2017 53 Figure 11: Organizational Chart – San Diego – Real Estate Assets Source: San Diego, Real Estate Assets Department’s Fiscal Year 2018 Portfolio Management Plan Functions of a real estate division A real estate division or agency is in charge with several tasks in order to manage the public real estate portfolio. For example, the Real Estate Division of the City and County of San Francisco, has the following responsibilities: • Is responsible for the acquisition of all real property required for City purposes, the sale of surplus real property owned by the City, and the leasing of property required by various City departments. • Provides custodial and engineering services for various City departments as well as full-service property management services to the following City owned buildings. • Completes market value appraisals or analysis of real property considered for City sale, development or acquisition, and acts as a real estate consultant to Departments, the Mayor, and the Board of Supervisors. BCH would benefit from professionalizing its approach to its Real Estate function. Chapter 6 suggests potential remedies to strengthen BCH’s capacity. 5.7 Real estate database management Major cities around the world use one of several options of basic and specialized software to keep their real estate related databases up to date and to facilitate information flow throughout the departments in the City Hall. Ottawa Example: The City of Ottawa, Canada’s capital of almost one million inhabitants, uses a large array of inventories, business applications and enterprise systems. The City operated as of 2017 with close to 300 databases, over 225 software applications and approximately 10,000 desktop or laptop computers. 54 The applications range from spreadsheets to small database tools, to specialized expert systems, to large multi-faceted integrated enterprise dataset systems, according to Ottawa’s Strategic Asset Manageme nt Plan 2017. Some of the core systems used are those found in the table below: Table 5: Core Inventory and AM Related Systems Source: Ottawa Strategic Asset Management Plan 2017 Moreover, business specific applications and enterprise applications are brought together and integrated to meet specific business requirements. Figure 12: Integrated Applications to Provide a Business Solution Source: Ottawa Strategic Asset Management Plan 2017 King County Example: King County in Washington State, USA, with a population of roughly 2.1 million, includes the largest city in the state, Seattle. King County has a Facilities Management Division (FMD). This Division manages as of 2016 more than 40 county-owned buildings and nearly 400 additional leasehold and lease-fee spaces. FMD is also responsible for a real estate portfolio of over 4,000 parcels. 55 In 2003 FMD implemented the Maximo computer program to manage work order assignments for its Building Services Section maintenance staff. In 2009 the Capital Planning and Development Section implemented the Unifer program to manage project records and workflows such as contract actions and payment requests, according to the King County Real Property Asset Management Plan 2016. District of Columbia Example: The District of Columbia, better known as Washington D.C., a city of roughly 700,000 inhabitants within the administrative limits, but with a far larger population in the metropolitan area, has been using an Integrated Work management System (IWMS), ARCHIBUS, to collect and maintain their portfolio data, according to the May 10, 2018 Report on Portfolio Verification of the Department of General Services, District of Columbia. Los Angeles Example: Maintaining an accurate asset inventory was also a priority for Los Angeles County. In July 2015, the new County Asset Management Property System (CAMPS) was implemented to replace an antiquated asset inventory system. The CAMPS was developed jointly by the CEO and Internal Services Department (ISD) and: ■ is a robust tool that includes, for example, a centralized asset inventory and lease management functions; ■ In addition to the inventory, the CEO is overseeing facility condition assessments, as well as developing standards for capacity and service delivery analyses to be completed by departments. ■ focuses on buildings and facilities that constitute the real property assets of the County, including leased properties. Based on preliminary data available, the County’s portfolio includes approximately 4,000 owned buildings encompassing an estimated 44.9 million square feet. In addition, the County has approximately 800 active leases comprising roughly 15 million square feet of space, predominantly for office space supporting a variety of healthcare and social services functions, according to the County of Los Angeles Strategic Asset Management Plan, 2016. Figure 13: Building Portfolio Statistic – Los Angeles Source: County of Los Angeles Strategic Asset Management Plan, 2016. 56 It is not the scope of this report to suggest any investment in any particular tool for the digitalization of the portfolio. Nevertheless, it seems clear that BCH would likely benefit from incorporating such a tool. At minimum, the City could start with a simple Excel database containing all property information, one for budgeting and following property performance and a server holding scanned documentation for all the properties in BCH (not with the Administrators). Details are discussed in Chapter 6 – Potential remedies. Tools Ottawa Example: The strategic approach of the city of Ottawa’s towards its asset management approach starts with collecting data regarding the community’s and stakeholder’s expectations and also taking into account the City’s strategic and business plans. The next step is generating a comprehensive Asset Management Policy and an Asset Management Strategy. Furthermore, is the tactical step, analyzing demand management, lifecycle management and financial management. The final step is elaborating the Asset Management Plans, as seen in the graph below. Figure 14: Ottawa – Strategic Approach Source: Ottawa Strategic Asset Management Plan 2017 57 5.8 Dealing with Surplus Real Estate Most municipalities have surplus real estate. Managing it in an efficient manner is part of what drives growth for the outcomes of the Portfolio in medium and long term. • City of Ottawa in the Ottawa Strategic Asset Management Plan 2017: Real Property that is not required to meet the current or future program or operational requirements of the City and that has been declared surplus by City Council or its delegated authority. On the opposite side, a viable Real Property is one for which a building permit can be granted. • City of San Diego, USA, in the Real Estate Assets Department’s Fiscal Year 2018 Portfolio Management Plan: Surplus properties/parcels are vetted for potential future park land or affordable housing. They typically do not meet the minimum size requirements or future funding is unavailable. 58 6. Lessons Learned This chapter highlights the main lessons derived from the case studies mentioned in the previous chapter which could be taken into account for managing the Bucharest City Hall public real estate portfolio in order to increase the annual budget and generate additional benefits. 6.1 Know what you have and keep all information centralized The first step is to analyze the whole real estate portfolio of the Bucharest Municipality, including properties assigned to Administrators. The process should also include site visits. That is because data in the Bucharest Municipality inventory does not always match reality on the ground. All the data should be collected in one centralized online database, which is to be made available to all the authorized users. 6.2 Strategically decide on where to start and what the priorities are for the city The public real estate portfolio should be regarded as a valuable tool to support the development strategies of the Bucharest City Hall. For example, urban renewal strategies, investment strategies etc. The resources offered by the public real estate portfolio should be first considered when designing such strategies. Moreover, a dedicated real estate management strategy should be considered, after analyzing all the priorities set by the other major strategies of the City Hall, as seen in the case studies. 6.3 Have a dedicated Real Estate strategic board to convene regularly to drive results In order to achieve improved results, the public real estate portfolio should be managed by a professional team or with the help of external professionals, in order to correctly identify potential opportunities, challenges and limitation. 6.4 Make Real Estate Portfolio Strategy one of the top priorities of BCH and get the proper resources in place In order to properly manage the public real estate portfolio is necessary to provide the adequate financing. Moreover, in order to preserve or to increase the value of the portfolio, constant resources must be allocated to maintaining, modernizing and expanding the portfolio. 6.5 Use the knowledge and skills of the good standing private sector developers, make sure the Municipality gets their fair share of participation and all the social, economic, environmental benefits of such partnership Bucharest City Hall could consider for at least part of the portfolio to enter agreements, either concession contracts or PPP, with the private sectors, who has more know-how in managing commercial assets. This could generate additional revenue to be spent in further upgrading the portfolio or to cover other needs of the City Hall and the citizens of Bucharest. 59 7. Potential Remedies This chapter proposes a list of potential remedies having the potential to boost the efficiency of the Bucharest City Hall public real estate portfolio and to generate additional benefits. A proper structure management should follow at least the below: ■ Set up, update and optimize a database with specific property information; ■ Perform site visits to verify the correctness of various technical, economic or development parameters; ■ Verify law requirements applicable to the properties, manage risks or improve living or working within the buildings (e.g.: earthquake risk, fire permits, insurance, operating approval, thermal insulation, etc.); ■ Keep in analysis the real estate portfolio parameters using KPIs, historical information and industry benchmarks; ■ Periodically report to higher management team to finding opportunities in line with the BCH’ s objectives, report issues, propose action plans. 7.1 Take hold of the information Start by a city-wide inventory of the entire real estate portfolio of BCH as well as all the related documentation, centralize it under a department that can responsibly manage it. Collecting and updating data about a large and diversified real estate portfolio, like the one owned by the Bucharest City hall, is a continuous and time-consuming process. This process could be accelerated by introducing an internship or practice program in the City Hall for students and young professionals. They could make regular onsite visits and inspections and update property information as well as spot in a timely manner possible deficiency which need to be further investigated. This will also help preparing the new generation of future public servants and also improve the practical abilities of young professionals. At the same time, it will remove some pressure from the employees of the City Hall, which could thus allocate their time for better use. Depending on the complexity of the property, the inspection could last on average one hour. With a proper mapping and prior review of documents the inspections time could be improved. A health & safety training before site inspections is highly recommended. Partnerships could be envisioned with the major Universities operating in Bucharest and especially those with a technical or administrative profile (architecture, construction, public administration etc.). 60 7.2 Introducing the Surplus Property Stock approach Bucharest City Hall has a diversified portfolio of real estate properties, with various functionalities and sizes. Not all of those properties are being used or expected to be used in the foreseeable future. • In some instances, properties cannot be used at all, for example if plots of land are too small or narrow to be constructed on. • Moreover, some properties are only partially owned by the City Hall (there are one or several co- owners). This restricts the way the property can be used and complicates the decision-making process. However, those properties do generate maintenance costs or simply decrease the value of the adjacent public or private properties due to the fact that they are either not in use or are misused. Therefore, such properties could be considered for disposal in order to tidy up the real estate portfolio, and generate additional income, while decreasing the operational costs. Moreover, from this could benefit other institutions, enterprises or citizens which could find another use for those assets. However, the decision to introduce an asset in the Surplus Property Stock should only be taken after finding reasonable reasons to do so and after informing potential internal users of the City Hall about the start of this procedure. This is in order to give the opportunity to certain departments, administrations or companies under the coordination of the City Hall to express their point of view if they can have a specific need which could be covered if the property proposed for disposal remains in the City Hall’s portfolio and given in their administration. 7.3 Permanent training of the staff The team suggests that BCH to launch and maintain a dedicated training program for its staff managing the real estate portfolio, in order to stay in touch with the best practices and latest technologies available. Such courses could include topics as Real Estate Asset Management, Real Estate Investments, Risk Management, Finance and Accounting. Aside of the internal procedures, trained staff would likely better understand the approaches and tools associated with real estate management (e.g.: understanding the legal framework, technical specifications, property management procedures, development aspects, using software to manipulate information, understanding the industry’s benchmarks), thus becoming more efficient in their daily activity. 7.4 Setting up green goals Public authorities should act as role models for the private sectors and individuals when it comes to promoting greener buildings and environmentally friendly approaches. This process should start with the buildings owned by the City Hall. Decreasing energy and resource consumption, recycling waste and using alternative energy sources when possible should be taken into account. Considering that the City Hall controls a sizable portfolio, the direct impact on the local budget and the environment is likely to be consistent. Moreover, it will also help to encourage private property owners to follow a greener path. More important than setting up very high standards is to make sure those 61 standards are achievable and that the results are measurable and well communicated to the general public having also a positive PR impact. 7.5 Proposed Organizational Chart The team does not believe it would be necessary to create a new entity within BCH to take lead responsibility for the public real estate portfolio; an existing or a combination of existing functions within BCH should be able to manage strategically the portfolio. One candidate could be AFI, the current Administrator of part of the BCH real estate portfolio. They are the ones that have historically dealt with large portfolios of real estate (be it of residential alone) and should have the expertise to maintain and optimize the outcomes from the portfolio. Of course, a system of checks and balances where other entities crosscheck the decisions and outcomes. - Patrimony can support with the actual storage and maintenance of the property documentation, the accuracy of it and the compliance with norms. - Finance can check if budgets are observed and followed and if pricing methodology is correct when disposing or leasing properties AFI’s current organizational structure is typical of one would expect from a public institution and doesn’t suggest it represents a specialized real estate management entity. It is also very different from what it can been seen in the case-studies presented above. An option for an organization structure is based on the model used by Toronto City, as presented in Figure 14: Organizational Chart - Toronto New Model: Real Estate Services, amended into the proposed figure below. 62 Figure 15: Proposed BCH real estate function Organizational Chart 63 7.6 Shared responsibility between Bucharest City Hall and the designated Administrators Many real estate properties of the BCH portfolio have a designated Administrator, which might be an institution, administration, division or company under the coordination of the Bucharest City Hall or one of the Sector City Halls, which are independent from the Bucharest City Hall. However, once an Administrator is designated, BCH no longer seems to be responsible on how that property is performing, and how it is maintained. Moreover, they are no longer collecting property data. These responsibilities are transferred to the Administrators. For example, when the team requested the Bucharest City Hall, for data, regarding the properties for the current report, directions were given to the Administrators, as only they have the data requested on the properties to be analyzed. It is considered that, even if a property in the Bucharest City Hall portfolio is given to an Administrator, the City Hall should still be aware of the state of that property, how it is used, the income generated, the occupancy of that building etc. In this context, the team suggests: ■ a system must be introduced for regular reporting from the Administrators of the properties in the BCH portfolio towards BCH; ■ BCH should collect this data in a centralized online platform, permanently updated by BCH and the authorized Administrators; ■ All the departments in the Bucharest City Hall with responsibilities connected with the public real estate portfolio should be given access to the online platform. 64 8. Attachments The Data Sources for this exercise are shown on the following page 65 Attachment A: Information Analyzed and Required A0 – Information Collected by the team from public inventory list provided to BCH and various entities Answer Identification according to “Inventarul bunurilor domeniul public Bucuresti - vol.1” public information Not required Use In / Administrare la… Y/N (va rog scrieti numele complet al Autoritatii/Companiei etc) astfel incat sa putem identifica usor Contact from Administrator / Persoana de contact la Administrator Contact details A1. Specific Information to be provided at a later stage Answer Name of the building Nume cladire Occupancy / Purpose of building Destinatia cladirii Address Adresa Cadastral documentation in place Y/N Documentatie cadastrala disponibila D/N Owner Proprietar Occupied Y/N Ocupat D/N “ISU” fire permits approval Y/N Aprobare “ISU” D/N Clear title – if no, details Titlul fara litigii-daca nu, detalii Use Utilizare Description Descriere Land area Suprafata teren GBA (Gross Built Area) SCD (suprafta construita desfasurat) Owned / Under management / Leased Detinut / In administrare / Inchiriat If space leased, where Daca spaitul este inchriat, unde If space leased, conditions of the lease (area, rent term) DAca spatiul este inchiriat, conditiile (aria,termenii) Interactive Cadastral mapped – provide info Cadastru organizat interactive – furnizeaza info Owner Proprietar Aministrator Administrator Land book registered Y/N Carte Funciara D/N Tenants/ Occupier (who?) Chiriasi/Ocupant (Cine?) Number of Occupants Numar de persoane în cladire Number of floors above ground Numarul de etaje (Supraterane) Year of construction Anul constructiei Type of structural system Tipul sistemului structural Cultural heritage Monument istoric Has the building been consolidated? cladirea a fost consolidata ? Has the building had technical expertise? Cladirea are expertizata tehnica ? Has the building had energy efficiency improvements? Cladirea a beneficiat de lucrari de reabilitare termica Legal or statutory issues (if yes, brief details) Probleme legale / regim special (daca da- detaliere) Urban planning issues Probleme de urbanism OTHER DETAILS: ALTE DETALII Daca este ocupat - Scopul Utilizarii Imobilului: • Sediu unei directii/divizii etc a Primariei Municipiului Bucuresti; • Inchirat catre alta institutie a statului, • Inchiriat catre terti, • altele Daca este sediul unei directii/divizii etc a Primariei Municipiului Bucuresti: Cati angajati lucreaza in cladirea respectiva; Cu cine putem vorbi pentru detalii de costuri actuale de mentenanta (apa, lumina, gaze, curatenie etc) Daca este inchirat catre o alta institutie a statului: care este chiria platita, cine achita utilitatile, cand expira contractul, ce activitate se desfasoara acolo Daca este inchiriat catre tert privat: Data de semnare a contractului, Data de expirare a contractului, Chiria lunara, Cine achita utilitatile?, contractul/contractele de inchiriere in copie - daca se poate Dimensiuni: teren (mp); Cladire mp construiti; Cladire mp utili. 66 Attachment B: Analysis of Inventory’s Structure B1 – Initial database * Class Records Class Name ** Main profile in Class Code * 0 622 Land Land Depot for Public 1.1.1. 73 Cladiri industriale în afara de cladirile din: Transportation Cladiri industriale - industria alimentara, industria materialelor de Depot for Public 1.1.1.1. 9 constructii, industria metalurgica si industria siderurgica; Transportation 1.1.10. 4 Rampe de încarcare-descarcare Infrastructure Constructii miniere subterane: pentru personal; gari si remize; statii de 1.1.11. 3 pompare; statii de compresoare; canale pentru aeraj; buncare; suitori- Industrial coborâtori; etc 1.1.12. 20 Cosuri de fum si turnuri de racire Infrastructure 1.1.16. 1 Poligoane de încercari experimentale în aer liber sau în încaperi închise Industrial Constructii usoare cu structuri metalice (hale de productie, hale de 1.1.2. 27 Industrial montaj, etc) în afara de: Retail, Farmer 1.1.2.1. 20 Constructii usoare - baraci, soproane, etc Market, Cinema Centrale hidroelectrice, statii si posturi de transformare, statii de Depot for Public 1.1.3. 49 conexiuni, în afara de: Transportation 1.1.3.1. 1 Centrale hidroelectrice- constructii speciale metalice; Industrial 1.1.4. 1 Centrale termoelectrice si nuclearo-electrice, în afara de: 32-48 Industrial 1.1.5. 8 Piste si platforme Platform 1.1.5.1. 26 Piste si platforme - din beton; Infrastructure 1.1.5.2. 1 Piste si platforme - din balast, macadam Infrastructure 1.1.7. 1 Turnuri de extractie miniera Infrastructure Parks and public 1.10. 393 Alte constructii neregasite în cadrul grupei 1 pools Green houses, lakes 1.2.1. 2 Cladiri agrozootehnice and agricultural land Green houses, lakes 1.2.10. 9 Sere, solarii, rasadnite si ciupercarii: and agricultural land Sere, solarii, rasadnite si ciupercarii: - din zidarie, beton, metal sau Green houses, lakes 1.2.10.1. 43 lemn si sticla and agricultural land Sere, solarii, rasadnite si ciupercarii: - constructie usoara din lemn si Green houses, lakes 1.2.10.2. 8 folie din masa plastica and agricultural land Green houses, lakes 1.2.2. 20 Constructii agricole usoare (baraci, magazii, soproane, cabane) 8-12 and agricultural land Depozite de îngrasaminte minerale sau naturale (constructii de Green houses, lakes 1.2.3. 1 compostare) and agricultural land Green houses, lakes 1.2.7. 23 Constructii pentru cresterea animalelor si pasarilor, padocuri and agricultural land Helestee, iazuri, bazine; ecluze si ascensoare; baraje; jgheaburi etc. Green houses, lakes 1.2.8. 15 pentru piscicultura and agricultural land Green houses, lakes 1.2.9. 1 Terase pe arabil, plantatii pomicole si viticole and agricultural land Cladiri pentru transporturi: autogari, gari, statii pentru metrou, Depot for Public 1.3.1. 235 aeroporturi, porturi, hangare, depouri, garaje, ateliere, în afara de: Transportation Depot for Public 1.3.12. 12 Constructii accesorii pentru transport rutier, aerian, naval Transportation 67 Class Records Class Name ** Main profile in Class Code * Poduri, podete, pasarele si viaducte pentru transporturi feroviare si 1.3.17. 33 Platform rutiere; viaducte: Poduri, podete, pasarele si viaducte - din zidarie, beton armat sau 1.3.17.2. 2 Infrastructure metal Linii si cabluri aeriene de telecomunicatii (stâlpi, circuite, cabluri, 1.3.20. 3 Infrastructure traverse, console, etc) Retele si canalizatii subterane de comunicatii urbane si interurbane, în 1.3.21. 1 Infrastructure afara de: Platforme, turnuri si piloni metalici pentru antene de radiotelefonie, 1.3.22. 2 Infrastructure telefonie mobila, radio si TV Constructii usoare pentru transporturi si telecomunicatii (baraci, Depot for Public 1.3.24. 61 magazii, soproane, cabane) Transportation Alte constructii pentru transporturi, posta si telecomunicatii neregasite 1.3.25. 13 Others, decorations în cadrul subgrupei 1.3 1.3.3. 236 Infrastructura si statii de tramvaie Infrastructure 1.3.4.2. 139 Retele electrice de contact - pentru linii de tramvaie si troleibuze Infrastructure Constructii pentru transport feroviar: peroane; treceri de nivel; port- gabarit; cheiuri de încarcare-descarcare; pentru alimentare si revizie 1.3.5. 31 Infrastructure locomotive; canale de coborât osii; fundatii de placi turnante si pod bascula; canale de zgura, etc 1.3.6. 648 Aparate de cale Infrastructure Infrastructura drumuri (publice, industriale, agricole), alei, strazi si 1.3.7. 6 413 autostrazi, cu toate accesoriile necesare (trotuare, borne, parcaje, Infrastructure parapete, marcaje, semne de circulatie): Infrastructura drumuri - cu îmbracaminte din balast, pamânt stabilizat 1.3.7.1. 1 Infrastructure sau macadam Infrastructura drumuri - cu îmbracaminte din beton asfaltic sau pavaj 1.3.7.2. 85 Infrastructure pe fundatie supla 1.3.7.3. 5 Infrastructura drumuri - cu îmbracaminte din beton de ciment Infrastructure Piste pentru aeroporturi si platforme de stationare pentru avioane si 1.3.8. 26 Platform autovehicule Constructii aeroportuare Baraje si constructii accesorii baraje (ecluze, deversoare, porturi si 1.4.1. 7 fronturi de asteptare, disipatoare de energie, goliri de fund, canale de Infrastructure derivatie) Diguri - din piatra bruta; blocuri de beton; zidarie de piatra; beton 1.4.2.2. 1 Infrastructure armat 1.4.4. 21 Pereuri Infrastructure Constructii hidrotehnice, hidrometrice, hidrometeorologice, 1.4.5. 37 Others, decorations oceanografice, platforme meteorologice; în afara 1.4.5.1. 4 Constructii hidrotehnice, - constructii usoare Others, decorations Parks and public 1.4.7. 14 Alte constructii hidrotehnice neregasite în cadrul subgrupei 1.4. pools Retail, Farmer 1.5.1. 23 Centre de afaceri Market, Cinema Constructii usoare pentru afaceri, comert, depozitare (baraci, magazii, Retail, Farmer 1.5.12. 260 soproane, etc) Market, Cinema Alte constructii pentru afaceri, comert, depozitare neregasite în cadrul Retail, Farmer 1.5.14. 4 subgrupei 1.5 Market, Cinema Cladiri comerciale pentru depozitare-comercializare si distributie Retail, Farmer 1.5.2. 80 Magazine Market, Cinema Constructii pentru depozitarea marfurilor de larg consum, a marfurilor Retail, Farmer 1.5.3. 29 industriale, a materialelor de constructii si a produselor agricole Market, Cinema 68 Class Records Class Name ** Main profile in Class Code * Constructii pentru depozitarea si comercializarea produselor Retail, Farmer 1.5.4. 5 petrolifere (benzinarii, etc) Market, Cinema Constructii pentru depozitarea explozibililor, carburantilor si Retail, Farmer 1.5.5. 6 lubrifiantilor Market, Cinema Silozuri pentru agregate minerale, minereuri, carbuni, materiale Retail, Farmer 1.5.6. 2 pulverulente (ciment, var, ipsos), etc Market, Cinema Retail, Farmer 1.5.7. 15 Rezervoare si bazine pentru depozitare, în afara de: Market, Cinema Retail, Farmer 1.5.8. 14 Depozite frigorifice pentru alimente. Ghetarii Market, Cinema Retail, Farmer 1.5.9. 9 Platforme pentru depozitare si activitati comerciale Market, Cinema Offices, Agencies, 1.6.1. 66 Cladiri de locuit, hoteluri si camine, în afara de: Annexes Cladiri de locuit, hoteluri si camine, - cladiri pentru locuinte sociale, 1.6.1.1. 987 Social houses moteluri si camine amplasate în centre industriale, WC publice Constructii pentru învatamânt; stiinta; cultura si arta; ocrotirea Museum, Library, 1.6.2. 755 sanatatii; asistenta sociala; cultura fizica si agrement, în afara de: Schools 1.6.3. 6 Împrejmuiri din: Others, decorations 1.6.3.1. 7 Împrejmuiri din: - lemn; Others, decorations 1.6.3.2. 133 Împrejmuiri din: - zidarie, beton armat, metal Others, decorations Offices, Agencies, 1.6.4. 201 Cladiri administrative Annexes Heating system 1.6.5. 555 Constructii pentru centrale termice si puncte termice Building Offices, Agencies, 1.6.6. 20 Constructii suport pentru panouri de afisare si publicitate Annexes Constructii pentru turnuri de ceas, turnuri de paza si alte amenajari Offices, Agencies, 1.6.7. 6 asemanatoare Annexes Alte constructii de locuinte si social-culturale neregasite în cadrul Museum, Library, 1.6.8. 269 subgrupei 1.6 Schools Retele de alimentare, de iluminat si linii de transport a energiei 1.7.1. 9 Infrastructure electrice: Retele de alimentare, de iluminat si linii de transport a energiei 1.7.1.1. 14 Infrastructure electrice: - aeriene pe stâlpi din lemn Retele de alimentare, de iluminat si linii de transport a energiei 1.7.1.2. 43 Infrastructure electrice:- aeriene pe stâlpi metalici sau din beton armat Retele de alimentare, de iluminat si linii de transport a energiei 1.7.1.3. 90 Infrastructure electrice:- subterane 1.7.2. 15 Instalatii electrice de forta: Infrastructure 1.7.2.1. 9 Instalatii electrice de forta: - aeriene sau aparente Infrastructure 1.7.2.2. 8 Instalatii electrice de forta:- îngropate Infrastructure 1.7.2.3. 54 Instalatii electrice de forta: - în tub, canal sau tunel de protectie Infrastructure Alte constructii pentru transportul energiei electrice neregasite în 1.7.3. 2 Infrastructure cadrul subgrupei 1.7 Constructii pentru alimentare cu apa, canalizare si îmbunatatiri 1.8. 1 Infrastructure funciare 1.8.1. 31 Puturi sapate sau forate Infrastructure 1.8.11. 3 Rezervoare din beton armat pentru înmagazinarea apei Infrastructure 1.8.12. 29 Statii de pompare si separare a apei, în afara de: 32-48 Infrastructure Constructii si instalatii tehnologice pentru alimentare cu apa si 1.8.13. 16 Infrastructure canalizare 1.8.14. 1 Constructii usoare (baraci, magazii, soproane, etc.) Infrastructure 69 Class Records Class Name ** Main profile in Class Code * Alte constructii pentru alimentare cu apa, canalizare si îmbunatatiri 1.8.15. 34 funciare neregasite în cadrul subgrupei 1.8 (Constructii pentru Infrastructure alimentare cu apa, canalizare si îmbunatatiri) Offices, Agencies, 1.8.2. 1 Drenuri pentru alimentari cu apa Annexes 1.8.4. 2 Canale pentru alimentare cu apa si evacuarea apelor Infrastructure Heating system 1.8.5. 2 Galerii pentru alimentare cu apa si evacuarea apelor Building Conducte pentru alimentare cu apa, inclusiv traversarile; retele de 1.8.6. 87 Infrastructure distributie Galerii subterane pentru instalatii tehnico-edilitare 1.8.7. 27 Conducte pentru canalizare, în afara de: Infrastructure 1.8.7.1. 1 - conducte tehnologice pentru ape acide Infrastructure 1.8.8. 4 Statii de tratare, de neutralizare si de epurare a apelor Infrastructure Conducte magistrale pentru transportul produselor petrolifere, gazelor 1.9.1. 3 si a lichidelor industriale, inclusiv traversarile si instalatiile tehnologice, Infrastructure în afara de: 1.9.2. 6 Conducte de termoficare Infrastructure 1.9.2.1. 1 094 Conducte de termoficare - aeriene sau în canale de protectie vizitabile Infrastructure 1.9.2.2. 2 015 Conducte de termoficare - în canale nevizitabile Infrastructure Conducte, bransamente si instalatii tehnologice pentru distributia 1.9.3. 96 gazelor, produselor petroliere si a lichidelor industriale, apa sarata, din Infrastructure exteriorul si interiorul constructiilor Alte constructii pentru transportul si distributia petrolului, gazelor, 1.9.4. 1 lichidelor industriale, aerului comprimat si pentru termoficare, Infrastructure neregasite în cadrul subgrupei 1.9 2.2.4.2. 3 023 Contoare pentru apa calda si energie termica Infrastructure 3.1.1.1. 1 - mobilier comercial de prezentare din lemn si plastic cu structura Others, decorations 3.1.2. 16 Firme, panouri si reclame luminoase Others, decorations 3.2. 2 Aparatura birotica Others, decorations 19 603 Total recorded lines * The “Class Codes” and inventory records were extracted from the list mentioned as “Inventarul domeniului public al Municipiului Bucuresti conform anexa la Hotararea CGMB nr 186 din 2008”. This document is assumed in line with Government Decision 2139/30 November 2004 for buildings. However, the team was not provided with any electronical and official database and complied from very large pdf files with low resolution, subject of potential spelling errors, typo, missing pages, etc. The team is aware that between the date of the above-mentioned Inventory list (November 2004) could be some additions or deductions from the portfolio. Some assets have been added in line with the Patrimony Department to public admin notice 8706/6.6.2019 provided to us as well as a large important land of around 5,000 sq m (Unirii – Esplanada area) and cinemas, which the team assumed as is in municipality real estate portfolio – subject to confirmation. ** The class “land:” is not subject of the Decision 2139/30 November 2004 where only the building and oth er fixed assets are classified, and it was added as distinct position “0” to the class column. This is also including green areas and parks. 70 The table and chart below present in summary the structure of the INITIAL DATABASE B1: Main profile in Class Total records % Land 622 3.17% Offices, Agencies, Annexes 294 1.50% Retail, Farmer Market, Cinema 467 2.38% Depot for Public Transportation 439 2.24% Social houses 987 5.03% Museum, Library, Schools 1 024 5.22% Parks and public pools 407 2.08% Green houses, lakes and agricultural land 122 0.62% Platform 67 0.34% Industrial 33 0.17% Others, decorations 219 1.12% Heating system Building 557 2.84% Infrastructure 14 365 73.28% Total records 19 603 100.00% 294 Land 622 439 467 122 Offices, Agencies, 987 Annexes 407 Retail, Farmer 1,024 Market, Cinema 67 Depot for Public Transportation 33 Social houses 219 557 Museum, Library, Schools Parks and public pools Green houses, lakes and agricultural land Platform 14,365 Industrial Others, decorations Heating system Building Infrastructure Source: Compiled by the World Bank team and produced for this engagement 71 B2 – Selected database Class Name Main profile in Consolidated Total selected Class Main profile in per main Class profile Land Land Land 18 Cladiri industriale - industria alimentara, industria Depot for Public materialelor de constructii, industria metalurgica si Industrial 0 Transportation industria siderurgica; Centrale hidroelectrice, statii si posturi de transformare, Depot for Public Platform 3 statii de conexiuni, în afara de: Transportation Parks and public Piste si platforme Platform 12 pools Green houses, Parks and public Alte constructii neregasite în cadrul grupei 1 lakes and 8 pools agricultural land Green houses, Depot for Public Sere, solarii, rasadnite si ciupercarii: lakes and 23 Transportation agricultural land Green houses, Depozite de îngrasaminte minerale sau naturale Retail, Farmer lakes and 26 (constructii de compostare) Market, Cinema agricultural land Green houses, Offices, Terase pe arabil, plantatii pomicole si viticole lakes and Agencies, 39 agricultural land Annexes Cladiri pentru transporturi: autogari, gari, statii pentru Depot for Public metrou, aeroporturi, porturi, hangare, depouri, garaje, Social houses 17 Transportation ateliere, în afara de: Poduri, podete, pasarele si viaducte pentru transporturi Museum, Library, Platform 20 feroviare si rutiere; viaducte: Schools Piste pentru aeroporturi si platforme de stationare pentru Others, Platform 0 avioane si autovehicule Constructii aeroportuare decorations Total selected 166 72 The table and chart below present in summary the structure of the SELECTED DATABASE B2: Main profile in Class Total % Selected % records records Land 622 3.17% 18 10.84% Offices, Agencies, Annexes 294 1.50% 39 23.49% Retail, Farmer Market, Cinema 467 2.38% 26 15.66% Depot for Public Transportation 439 2.24% 23 13.86% Social houses 987 5.03% 17 10.24% Museum, Library, Schools 1 024 5.22% 20 12.05% Parks and public pools 407 2.08% 12 7.23% Green houses, lakes and agricultural land 122 0.62% 8 4.82% Platform 67 0.34% 3 1.81% Industrial 33 0.17% 0 0.00% Others, decorations 219 1.12% 0 0.00% Heating system Building 557 2.84% 0 0.00% Infrastructure 14 365 73.28% 0 0.00% Total records 19 603 100.00% 166 100.00% Land 8 3 18 12 Offices, Agencies, Annexes Retail, Farmer Market, 20 Cinema 39 Depot for Public Transportation Social houses 17 Museum, Library, Schools Parks and public pools 23 26 Green houses, lakes and agricultural land Platform Source: Compiled by the World Bank team and produced for this engagement 73 Attachment C: Key Performance Indicators & Benchmarks C1. Clearness KPIs C1. Indicatori cheie de performanta (“KPI”) cu privire la acuratetea datelor ID Data Ccuracy Calculation Description Benchmark Priority KPI Name formula LBR Land Book No. of properties It has been found, that there are few BCH owned properties that are registered in the Land Book. Over 90% of the Critical Registered recorded in land As land book registration is a legal requirement in Romania, it should be considered absolutely commercial properties are properties book necessary in order to improve from a legal perspective. registered / Total no. of If a property is registered into the Land Book office, will allow third parties to inform, to rely for a deal or properties to note if any leasehold, right of way, easements or other encumbrances. It is required for a transfer agreement. An indication of %age of properties registered in the Land Book will provide transparency over a publicly held property and to potential occupiers. CIA Cadastre No. of properties It has been found that there are few BCH owned properties that have valid and up to date Cadastral Over 90% of the Critical Information with cadastre information. commercial properties Availability documentation to As this is a legal requirement in Romania, it should be considered absolutely necessary in order to have this information date improve from a legal perspective. Cadaster plans for land and buildings including floor plans are / Total no. of essential and a minimum requirement for both the legality of the title of the building as well as the properties management. TEA Technical No. of properties Given the average age of the buildings in the portfolio, it is considered that it is very important that BCH 80% of the commercial Critical Expertise with technical knows what technical standing the buildings are in in order to build a consolidation/ properties have either Availability expertise refurbishment/maintenance plan. ongoing maintenance / No. of properties Standards of construction were updated few years after the big earthquake in 1977; if raised in line with reports of Technical raised before the standards, it is less probable a building raised after ~1980 to require a technical expertise with Expertise ~1978 normal use. TRI Thermic No. of properties in Given the average age of the buildings in the portfolio, even the recent years shown an effort for Relative to BCH’s portfolio Normal Rehabilitation need of thermic rehabilitation of block of flats in order to save energy, the portfolio might still be in need of – from a starting point; Indicator rehabilitation improvements of insulation. Ideally should be close to / No. of properties This is a indicator that follow the progress of such a need. zero BVR Book-value No. of properties It was observed that the information provided was either missing the book value or had a book value Large SPVs are valuing Critical Reliability revalued last 3y. that was not in line with the fair value at a very high-level initial assessment. each 3y.in line with F.M. / Total no. of The reasons for that is related to a proper management of a real estate portfolio. Order 3471/2008 so for properties commercial properties this stands at 100% OPP Occupancy No. of compliant Documents pertaining to occupancy permits have not been provided for all the BCH buildings that are in Should be as close as Critical Permits properties / Total occupation. This is a compliance issue, it includes the fire permit and it is absolutely necessary to make possible to 100% if no. of properties sure that they become compliant.This indicator needs to be followed and its improvement is important optimised to protect the citizens and staff that visit and occupy the BCH buildings. 74 ID Data Ccuracy Calculation Description Benchmark Priority KPI Name formula TCL Clean title No. of properties A lot of the lands in the portfolio and some buildings have still title issues and ongoing title related Almost all commercial Critical with litigations litigation. properties have clear title – / Total no. of This needs to be addressed and sorted for the portfolio to maintain value and be tradable. Also, any 100% properties investment in a property that is under litigation should be treated with a lot of care as it can result in losses. In order to have quick gains, and be able to trade/develop/contribute some of the more lucrative assets, this is a indicator to follow. PPD Properties in No. of properties The assessment so far shows that there is no one entity within the BCH that holds all the property data. 100% Normal Patrimony registered by The data is scattered between the owner registry (“Directia de Patrimoniu”) and the Divisions that Department Patrimony manage (“Administrator”) and use or not the assets. Department It is essential to compile and maintain a proper property data base in order to be able to plan, mange, database maintain, optimize and use the assets properly. /Total property no. A property fact sheet has been compiled that needs to be observed in order for this to be considered complete. There are also property management tools like ARCHIBUS (Washington DC uses it), that can help but the first step it to collate all info in one place. 75 C2. Property Management – Owned Portfolio KPIs C2. Indicatori cheie de performanta (“KPI”) cu privire la managementul proprietatilor pentru portofoliul detinut ID PM (Owned) KPI Calculation Description Benchmark Priority Name formula DSO Density GLA (occupied Given a normal policy objective to increase operating efficiency, a relevant metric that should be tracked Office properties ~5- Critical (owned assets) area) across the office portfolio of BCH space include benchmarking square meters per employee among 10sqm/FTE; / FTE buildings and city department. The indicator will be expressed per building and at a portfolio level; if GLA not available, GBA can be considered prudently. This reflects the operational cost per head. ISU recommendation should also be considered OCO Occupancy Occupancy Cost This will be expressed per building, compared within portfolio and leasehold properties. This reflects the Class A office building 15- Critical Cost - owned per building operational cost per head, tracking/benchmarking operating costs per building and head. 25 Euro/FTE including rent assets /month blended and service charge / FTE VAC Vacancy Vacant area An indicator to benchmark the use of existing buildings to the market and identify potential gains from Office normal vacancy: ~5- Normal / Total owned leasing it out to occupiers. On a case by case basis, for good quality space, this should be optimized. 10% Bucharest Vacancy area 8% CAR Collected In case there is space to be let, this should always be marked to market and included in annual BCH Office Rent per class: 10- Normal Average Rent approval cycle. 18.5euro/sqm/month + Different office areas should command different investment grade rents and BCH should make sure that Service Charge like on like, they are quoting market level rents LTQ Litigation No. of properties Solving legal issues will improve the transactional interest and overall, the asset’s quality. Relative to BCH’s portfolio Normal Coefficient under litigation Optimization is required as a continuous management process, a way of adjusting to, environment – from a starting point / Totals No. of changes, cost analysis, BCH’s objectives, etc. It can be assessed periodically (quarterly, half of year, properties annually, etc.) SRQ Seismic risk No. properties The analyze has showed a significant number of properties of age older than 30. Relative to BCH’s portfolio Critical coefficient with seismic risk Given the policy objective to eliminate hazard risk including seismic risk, it is considered that it is very – from a starting point; / Totals No. of important the BCH after knowing what technical standing the buildings are, to implement a ideally should get as close properties consolidation/ refurbishment/maintenance plan. As the cost is high, it is expected BCH will prioritize to zero as possible assets of high importance (e.g.: hospitals, schools, high workers density offices) but also maintain a program for less prioritized assets including identifying alternative financing sources. Optimization is required as a continuous management process, a way of adjusting to, environment changes, cost analysis, BCH’s objectives, etc. It can be assessed periodically (quarterly, half of year, annually, etc.) OPT Optimized No. of properties Thermal rehabilitation optimization would improve the energy cost and space quality. Optimization is This indicator is annual Normal properties – with thermal required as a continuous management process, a way of adjusting to, environment changes, cost indicator showing the plan rehabilitation analysis, BCH’s objectives, etc. and progress of the 76 ID PM (Owned) KPI Calculation Description Benchmark Priority Name formula thermal / No. of It can be assessed periodically (annually). thermic rehabilitation rehabilitation properties that It should also be assessed on a square meter basis. program of the requires thermal municipality rehabilitation QSP Quality Space Area of quality Quality stock as per the Property Fact Sheet that JLL is proposing for BCH, needs to acquire more than Relative to BCH’s portfolio; Normal space average 3.5 out of 5 points in order to qualify it should ideally as close to / Total area The analyze showed that the CBH stock is improper compared to commercial stock and this is an 100% as possible indicator to help BCH to monitor their progress in improving the quality of the square meterage. It has been introduced a quality matrix in the data sample that will score from 1-5 the quality of the stock and this will be used in order to show where the portfolio stands in terms of life quality. 77 C3. Property Management – Leased Portfolio KPIs C3. Indicatori cheie de performanta (“KPI”) cu privire la managementul proprietatilor pentru portofoliul inchiriat ID PM (Owned) KPI Calculation Description Benchmark Priority Name formula LPO Leased per Sq m leased Depending on the strategy of the strategy and availability of resources of BCH, this can either grow in Normal Owned portfolio order to offer proper office spaces to staff and citizens until the portfolio is brought to standard or should / Sq m total decrease if there is available owned space of proper quality. owned portfolio This will provide indication of amplitude of the leased properties compared to the owned portfolio. SCP Service charge Weighted annual This will be expressed per building, compared within portfolio and leasehold properties. Office properties ~3- Normal paid property cost / This reflects the property cost per sq. m. 5euro/sqm/month Sum of: Square meter DSL Density GLA / FTE The indicator will be expressed per building and per portfolio; if GLA not available, GBA can be Office properties ~5-10 Normal (leased space) considered prudently; ISU requirements are also to consider. sqm/FTE; This reflects the operational cost per FTE. OCL Occupancy Occupancy Cost Occupancy cost rent and service charge will be considered here to be benchmarked against owned Class A office building 15- Normal Cost - leased per building portfolio and the market level. 25 Euro/FTE including rent assets /month blended This reflects the operational cost per head and building, benchmarking occupancy cost per employee to and service charge / FTE compare to owned space. PAR Paid Average Monthly Rent Paid Rent and service charge paid will be benchmarked against owned portfolio and the market level. This Office Rent per class: 13- Normal Rent per for total leased reflects the operational cost per head and building, benchmarking occupancy cost per employee to 18/10-12/6-9 leased area compare to owned space; portfolio / Total area leased 78 Attachment D: Research and Site Visit General Guidelines This section will outline Research Guidelines when collecting information Guidelines All records research can best take place and be documented in the Google Sheet. The primary goal for the research is to collect current real property data points, identify sources with building square meters, and verify ownership. Key record information: Areas, Plot, Property’s unique identifier, Occupant, if there are multiple buildings on the same lot, a distinct row was required (Excel line), addresses to identify the location, contact person to facilitate inspection, etc. – The entire initial information (header) is attached beneath (a and b tables). Organization and Data Entry: Google Sheet is organized by the Administrator / website and then specific agency data sources and variables. Building Name provided by the Administrator, but can updated, best to use the name of the building listed on the face of the building or on a sign out front. If there are multiple buildings on one lot, but no names, note the addresses Building Use - This information can update. Property Code - This information was generated based on an initial portfolio but should be updated and must align with the appropriate internal code. Administrator Ownership Assessed Value Area in square meters information (useable and built) Report or information in data room (files like: .PDF .DWG .XLSX .ODF .DOC, etc. Site Visits For each site to complete a check using materials viewed and summarized during the research phase and using the short Google Form (for site with less than 10 buildings). Use Google Maps to identify surroundings, use MyMaps for a rough check and map the inventory as a rough indication Use interviews if allowed or spoken notes for quicker view and attach these to the drive storage. Take pictures if allowed and attached to the drive storage. Before visiting the site: Review and print out the Excel/Google Sheet for background research and notes for the visit, make sure you have researched and entered what Administrator representative’s may be present in the building; verify the original data on the main sheet and if any, the potential occupants, as well as the Out Leased spaces list. 79 Exterior Inspections Walk around the exterior of the property (all sides); prior to entering to check for possible recent additions, cell towers or signs with occupant information (look for names of different agencies or non-profits), if are there any additional sheds, additions or smaller buildings? If so, those need to be documented, note the name of the exterior of the building, make note of any particular buildings Interior Inspections Check the interior directories for the names and locations of occupants; if you are unsure about the affiliation or name of an entity, write down the information and you can double check with the Team; Note a brief description of the facility and any amenities, building / site condition. The condition of the facility needs to be determined. Building Class * Class A - Most prestigious buildings competing for premier users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence. For a site without a building, this would likely be a new park or space with well-maintained landscaping. * Class B - Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price. For a site without a building, this would likely be a generally well- maintained landscaping, but with improvements that could be made (like repairing cracked pavement or fences). * Class C - Buildings competing for tenants requiring functional space at rents below the average for the area. Improvements / obsolesce For a site without a building, this would likely be having average maintenance, but with significant improvements that could be made (like repairing cracked pavement, fences, benches or playground equipment): * Poor – Buildings likely not occupied or about to be vacated. Generally, not maintained. * Dilapidated – Buildings or sites not maintained at all; buildings with structural issues; overgrown sites. Who works in the buildings?/ What is the use of each occupant’s space?/ What would the user say the condition of the facility is? Are there any operational issues? 80 a) GENERAL INFORMATION 1. Identificare proprietate & administrator ID In administrare la: Note de la Administratori: COD CLASIFICARE / CODE CLASS 2139 DENUMIREA BUNULUI / NAME ID In administrare la: Note de la Administratori: COD CLASIFICARE / CODE CLASS 2139 DENUMIREA BUNULUI / NAME I01 I02 I03 I04 I05 b) BUILDING INFORMATION 2. Titlu proprietate/ Cadastru Persoana de contact Exista litigii legate de proprietatea imobiliara? Exista documentatie cadastrala Exista extras de Carte Funciara? Cine detine informatiile privind cadastrul si planurile cladirii Nume, Telefon, Email nu / da (daca da- detaliere) Da / Da / Da dar nu include planuri / Nu/ Nu/ (daca da - copie scan) Alte situatii: C01 C02 C03 C04 C05 3. Descriere proprietate (suprafete, nr. & tip cladiri, nr. etaje, an constructie) ST - Suprafata teren mp. SC - SCD - Suprafata Tipul structurii Nr. Detaliere Nr. niveluri/etaje SU - Aria utila pe fiecare etaj mp. Capacitate Anul Monument Amprenta construita (Optional) Constructii constructii edificarii istoric cladirii mp. desfasurata mp. pe teren A. Teren B. Teren C. Total Suprafata Suma Zidarie / Beton (sera, cabina, ca nr. ca nr. Aria utila Aria Aria utila Nr. YYYY da / nu / nu construit liber de ST constuita (la suprafetelor armat monolit / cladire (Subterane) (Supraterane - subteran utila etaje Persoane stiu -m2- constructii (C=A+B) sol - ocupata construite pe Beton armat administrativa se numara -m2- Parter superioare (ptr -m2- -m2 - doar de fiecare etaj prefabricat / etc.) inclusiv -m2- -m2- stranduri, constructie) -m2- Otel / Lemn / parterul) stadion) -m2- Altul:.. C06 C07 C08 C09 C10 C11 C12 C13 C14 C15 C16 C17 C18 C19 C20 C21 4. Status cladire - ocupat de proprietar / inchiriat 5. Stare cladire / Urbanism Ocupare (daca nu este inchirat) Inchiriat de (daca este inchiriat) Cladirea a fost Cladirea a fost Clasa risc Cladirea a Cladirea are Exista Exista Exista Exista ORICE ALTE consolidata ? expertizata tehnic ? seismic beneficiat certificat Certificat de PUZ/PUD ? Autorizatie Autorizatie DETALII / de lucrari de energetic? urbanism? de ISU? COMENTARII reabilitare construire? termica ? Ocupat de Suprafata Costul intretinerii (cheltuielile de Numar de Inchiriat Suprafata -- localizat Costul intretinerii Chiria Chiria Anul si Anul si luna da/nu (daca da/nu (daca da se va (I, II, III, IV da/nu (daca da/ nu da/ nu (daca da/ nu da/ nu da/ nu …...... catre: ocupata operare a imobilului: taxe, persoane de catre/ m2- la etajul: (cheltuielile de operare lunara mentionata luna Sfarsit da - anul furniza sau nu) da cand si (daca da - da - (daca da- (daca da - (daca da - Directia / -m2- asigurari, utilitati curatenie, care Nume a imobilului: taxe, de: este in: EUR / Inceput chirie consolidarii) expertiza/rezultatele daca mai de trimis detaliere/ detaliere/ copie scan) copie scan) Biroul / paza, etc.) lucreaza in chirias: asigurari, utilitati RON / USD / chirie (luna/an) expertizei) sunt scan) scan) copie/scan) Serviciul, -in lei/ pe an (sau altfel - se cladire: curatenie, paza, etc.) in etc. (luna/an) necesare etc. mentioneaza pentru ce lei pe un an altele) perioada) C22 C23 C24 C25 C26 C27 C28 C29 C30 C31 C32 C33 C34 C35 C36 C37 C38 C39 C40 C41 C42 C43 81 c) Land information 2. Titlu proprietate/ Cadastru Persoana contact Exista litigii legate de Exista documentatie cadastrala Exista extras de Carte Funciara? Cine detine informatiile privind cadastrul administrator: proprietatea imobiliara ? si planurile cladirii Nume, Telefon, Email nu / da (daca da- detaliere) Da / Da dar nu include planuri / Da / (daca da - copie scan) Nu/ Alte situatii: ….. Nu/ T01 T02 T03 T04 T05 d) Existing Information (not necessarily up to date) ID Document Nr. COD CLASS DENUMIREA LAND ELEMENTE DE ADRESA / TIP NUME NR. / PC Sector VECINI / AN VALOARE TIP NR. TITLU Nr./data Emitent BAZA Crt. CLASIFICARE EXPLANATION BUNULUI / SQM IDENTIFICARE ADDRESS STRADA STRADA (Adresa) (Adresa) NEIGHBOURS TRANSFER / INVENTAR / TITLU / SI DATA / (Situatia (Situatia DATE / ID / CODE NAME DESCRIPTIVE / / STREET / STREET INPUT YEAR INVENTORY TYPE OF TITLE juridica) juridica) / ID CLASS 2139 IDENTIFICATION, TYPE NAME /HANDOVER VALUE IN TITLE NO./DATE DATA DESCRIPTION (Adresa) RON (Situatia (Situatia BASE juridica) juridica) 82 e) Statistic of information requested and received Info Required via: No Accuracy KPI Info Required via: TOTAL 74 100% PMB (representatives) 49 66% SECTORS (VIA WORLD BANK) 25 34% Property Info received (complete & incomplete) No Accuracy KPI Property Info received (complete & incomplete) TOTAL 74 31% yes 44 59% no 30 41% Contact person available (Case A,B,C,D,E,-) No Accuracy KPI Contact person available (Case A,B,C,D,E,-) TOTAL 74 12% A 9 12% B 1 1% C 1 1% D 0 E 1 1% - 62 84% Site Visits No Accuracy KPI Site Visits TOTAL 74 15% YES 11 15% NO 60 81% SCH 3 4% Administrators Total no. of No of prop. No of records (lines) prop. with info of info provided provided TOTAL 74 44 707 Administratia Fondului Imobiliar 3 2 293 Administrația Lacuri, Parcuri și Agrement București 16 16 116 Administratia Cimitirelor si Crematoriilor Umane 2 2 4 Societatea de Transport Bucuresti 20 20 282 Societatea de Transport Bucuresti + ASSMB 1 1 1 Societatea de Transport Bucuresti + Consiliul Local al Sectorului 4 1 0 0 Consiliul General al Municipiului Bucuresti 1 0 0 Consiliul Local al Sectorului 1 14 0 0 Consiliul Local al Sectorului 2 3 3 11 Consiliul Local al Sectorului 4 4 0 0 Consiliul Local al Sectorului 6 4 0 0 Centrul pentru Protecție a Plantelor 1 0 0 Circul & Variete Globus 1 0 0 Administratia Strazilor 3 0 0 83 Information Received and Site Visit from Total Property Requested-Freehold Completed Site Visits & No Research information 11 received 15% 30 40% Info received 33 45% Source: Compiled by the World Bank team and produced for this engagement Percentage of received information records per divisions - Freehold STB+ASSMB 1 0% CLS2 ALPAB 11 116 2% 16% STB 282 AFI 40% 293 41% ACCU 4 1% Source: Compiled by the World Bank team and produced for this engagement 84 f) This section will outline a Glossary of the often-used terms Glossary BCH Bucharest City Hall Freehold properties Properties held with title as owner. They can be either owner-occupied or leased to third parties (or out-lease) Leasehold properties Properties occupied based on a lease contract (or in-lease) The Administrators Affiliated entities of the Bucharest City Hall and Bucharest’s Sectors which manages the real estate properties based on their rights and obligation Administratia Fondului Administration of the Bucharest Real Estate Fund (AFI) is a public service of local interest, with legal personality, financed entirely from the local budget of the Imobiliar (AFI) Municipality of Bucharest, carrying out its activity within the limits established by the legislation in force, the decisions of the General Council of the Bucharest Municipality and the provisions of the General Mayor. It has as object of activity the administration to sale, repair and maintenance of the real estate fund both public and private property of the Municipality of Bucharest and in the private property of the state (fund acquired under administration by virtue of the laws in force at the date of the acquisition). http://afi.pmb.ro/ Administrația Lacuri, Administration of the Bucharest Lakes, Parks and Recreation (ALPAB) has the mission to do an efficient management of the heritage, combining the Parcuri și Agrement responsibility of preserving and enriching the natural and cultural heritage with the efforts to increase the opportunities for recreation, education and București (ALPAB) recreation. http://www.alpa.ro/ Administratia Administration of Cemeteries and Human Crematorium (ACCU) activity log consists of: administration, maintenance, hygiene and sanitation of human Cimitirelor si cemeteries and crematoriums; making the provision of services to the citizens, for burial, exhumation, cremation and works funeral; providing specific religious Crematoriilor Umane services, free of charge, in specially arranged spaces, as well record and concession of burial places and eternal places. (ACCU) http://accu.ro/ Societatea de Transport Bucharest Transport Company (STB) is the main public transport operator in Bucharest, Romania, owned by the Municipality of Bucharest. STB operates a Bucuresti (STB) complex network of buses, trolleybuses, light rail and trams, basically most of the public transport except the Bucharest Metro. http://stbsa.ro/ Administrația Spitalelor Administration of Hospitals and Medical Services Bucharest (ASSMB) offers information about the 19 hospitals and 598 clinics medical and dental schools, și Serviciilor Medicale kindergartens, secondary schools, colleges and universities and about the work of medical staff in these institutions. București (ASSMB) http://www.assmb.ro/ 85 Glossary Consiliul General al General Council of Bucharest Municipality is the legislative body of the Municipality of Bucharest and is made up of 55 councilors elected every four years. Municipiului Bucuresti Together with the Mayor of Bucharest and the Vice-Mayor, the General Council makes up the General City Hall of Bucharest which is responsible for citywide affairs, such as the water system, the transport system and the main boulevards. Bucharest is also divided into six sectors, each of which has their own 27-seat Sectorial Council and Mayor, and is responsible for local area affairs, such as secondary streets, parks, schools and the cleaning services. http://pmb.ro/ Centrul pentru Protecție The main purpose of the Bucharest Plant Protection Center is to carry out treatments to combat the diseases and pests of green spaces in order to maintain a Plantelor their health in parks, greenhouses, nurseries, road alignments on the territory of Bucharest. http://pmb-cpp.ro/ Circul & Variete Globus The State Circus is a building in Bucharest, Sector 2, the headquarters of the Globus Circus, built in 1960–1961 following the plans of the architects Nicolae (from 2017 Porumbescu, Nicolae Pruncu, Constantin Rulea, a result of the concept of working-class culturalization with the scope of providing recreational spaces within Metropolitan) the socialist regime before 1990; it was declared a historical monument – code B-II-m-A-20964 (2010). https://circulmetropolitan.ro/ Administratia Strazilor Administration for Streets has in the acitivty field administration of the roads, circulation, parking, procurement, services related to the Street management. http://www.aspmb.ro/ Consiliul Local al Local Council of the Sector 1 is one of the total six administrative units of Bucharest. It is located in the northern part of the city and the wealthiest sector in Sectorului 1 Bucharest, including the north, one of te most developed areas. http://www.primariasector1.ro/ Consiliul Local al Local Council of the Sector 2 is one of the total six administrative units of Bucharest. Sector 2 is the city's most multicultural sector; particularly contains Sectorului 2 Romania's largest community of Chinese people in Colentina & Obor areas. https://cl.ps2.ro/ Consiliul Local al Local Council of the Sector 4 is one of the total six administrative units of Bucharest. It is located to the south of Bucharest. It has the third largest park area in Sectorului 4 the city, around 80 hectares. https://www.ps4.ro/ 86 Glossary Consiliul Local al Local Council of the Sector 6 is one of the total six administrative units of Bucharest. It is located to the west side of Bucharest, the second densest Sector Sectorului 6 having the larges artificial lake – Morii Lake of around 242 hectares area. https://www.primarie6.ro/ BCH Main Departments DIRECȚIA GENERALA INFRASTRUCTURĂ – GENERAL DEPARTMENT FOR INFRASTRUCTURE WITH ROLE FOR BIG INFRASTRUCTURE PROJECTS, TECHNICAL DOCUMENTATION, MONITORING-CHECK-VERIFICATION OF LARGE INFRASTRUCTURE PROJECTS. DIRECȚIA GENERALĂ INVESTIȚII – GENERAL DEPARTMENT FOR INVESTMENT: PLANING, PPP, PROJECT MONITORISATION, CONTRACTS, VERIFICATION OF WORKS DIRECȚIA GENERALĂ MANAGEMENT PROIECTE CU FINANȚARE EXTERNĂ –PROJECT MANAGEMENT EXTERNAL FINANCING: NON-REINMBURSABLE FUNDS, PROJECT MANAGEMENT, POIM, NON-REINBURSABLE FUND REPORTING UNITS, UP-GLINA2, REIMBURSABLE FUND MONITORING DIRECȚIA GENERALĂ URBANISM ȘI AMENAJAREA TERITORIULUI – GENERAL DEPARTMENT FOR URBAN PLANNING AND TERITORY SPECIAL DEVELOPMENT: URBANISM, AUTORISATION, URBAN PROJECTS, STREET ADVERTISING DIRECȚIA GENERALĂ SERVICII PUBLICE – PUBLIC SERVICES AND INTEGRATED SERVICES DEPARTMENT: ENERGETIC EFFICIENCY, PUBLIC LIGHTING, INTEGRATED SERVICES MONITORISATION, DESINSECTION, COORDINATION OF INFRASTRUCTURE WORKS DIRECȚIA DE MEDIU – ENVIRONEMENTAL DEPARTMENT, DIRECȚIA TRANSPORTURI –DEPARTMENT FOR TRANSPORT DIRECȚIA CULTURĂ, ÎNVĂȚĂMÂNT, TURISM – CULTURE, EDUCAITON, TOURISM DEPARTMENT DEPARTMENTS WITH ROLE IN IMPLEMENTATION OF THE INVESTMENTS OF THE BEFORE MENTIONED DEPARTMENTS: DIRECȚIA PATRIMONIU – PATRIMONY DEPARTMENT: ROLE IN PATRIMONY INVENTORY, CADASTRE, CONCESSION, EXPROPRIATION DIRECTIA GENERALA SITUATII DE URGENTĂ, STATISTICI ȘI STRATEGII – DEPARTMENT FOR EMERGENCY SITUATION, STATISTICS AND STRATEGIES WITH ROLE FOR PLANIFICATION AND IMPLEMENT INVESTMENTS 87 Attachment E: Property Facts Sheet This section will outline JLL’s best practices for portfolio information management. A. Freehold properties Type Name of the field Data input JLL Comments ID BLD_0001 unique ID no. that should correspond to the inventory no. into the BCH accounting system City Bucharest Sector 1 Postal Code 10123 Street Name and type Calea Victoriei Street No. 200 Block, stair, floor, ap., etc. Entire building ten floors Identification Cadastral plans exist? yes/no/partial if yes or partial, please upload document into the data room Cadaster number 123456 this field can contain one or more cadaster numbers for the buildings Land Registry no. 789012 Land Registry Bureau Sector 1 Land Size in sq m 1000 Land Owned by Bucharest City Hall Documentation Data room / Plans, Acquisition Documents, Title documents, Archive Insurance, Lease Agreements should pe uploaded into the data room and accessible through a link from this property sheet Notes – Identification n.a. Partially or entirely owned entirely owned Notes if Partially owned n.a. Owner of building PMB Owner of land attached PMB Primary Administrator Patrimony Department Statutory Responsible Agency Patrimony Department Occupying Agency Municipal Hospital Year of the most recent valuation Fair Value of the most recent valuation (RON) Valuer Notes – Statutory n.a. Present Use Office Construction Class steel Type of structural system (Masonry, cast-in-place reinforced concrete, prefabricated reinforced concrete, steel, wood, other) Building Quality 3.5 It is a calculated indicator of the Quality parameters below Year Built 1980 As built plans exis? yes/no if yes, please upload document into the data room Technical Technical expertise done? yes/no if yes, please upload document into the data room Seismic risk assesment and costing of yes/no if yes, please upload document into the data room improvements done? Building Maintenance plan exists? yes/no if yes, please upload document into the data room 5 year CAPEX plan exists? yes/no if yes, please upload document into the data room Historical patrimony yes/no if yes, please upload document into the data room No. of floors 5 OPEX budget yes/no if yes, please upload document into the data room 88 Type Name of the field Data input JLL Comments Total annual cost to be picked up from only if the OPEX total amount / year that can be then used to multiple the oppex budget budget exists. occupancy cost calculations Quality of natural light inside the office 1-poor to 5-best indicator per each floor Quality of the office interiors 1-poor to 5-best indicator per each floor Quality Parameters – bathrooms 1-poor to 5-best indicator per each floor Quality of facilities (bathroom, archive) 1-poor to 5-best indicator per each floor Amenities availability and quality 1-poor to 5-best indicator per each floor Building book according to the law Data room / available at Archive Notes – Technical n.a. Unit ID ID / floor/unit it is a unique number formed from the ID of the property Occupancy – Lease (per each unit above/floor number/unit within the floor If leased: yes/no if yes, please upload document into the data room Lease start only if leased to a third party Lease end only if leased to a third party available) Renewal only if leased to a third party Average rent paid only if leased to a third party Average service charge only if leased to a third party Termination clause only if leased to a third party No of FTE in occupation 112 x 2080 Notes – Occupancy n.a. B. Leasehold properties Occupancy Information Unit Type of space Floor Occupying Admin. Occupying Capacity Occupancy Vacancy SQ M SQ M Density (SQ m Quality of Quality of Quality Quality of Amenities (floor, Entity Code 3rd Party Useable Total /headcount) natural the officeParameters – facilities availability parking, (with light inside interiors bathrooms (bathroom, and quality common, add-on) the office archive) etc.) G24 89