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The CRE-Exec-Turned-President's Real Estate Agency: Inside The GSA's Ongoing Transition Process

As the first modern developer-turned-president settles into office, the agency that oversees the federal government's real estate decisions has garnered increased attention from congressional leaders and ethics watchdogs. Meanwhile, those tasked with transitioning the General Services Administration expect the White House to take a greater interest in its activities than past presidents have.

When President Donald Trump was sworn in on Friday, the GSA's political appointees from the Obama administration, including administrator Denise Turner Roth, left their positions. They have been replaced by interim leaders given 120-day appointments by Trump while he picks and gets Senate confirmation for his permanent appointments. 

The acting administrator will be Timothy Horne, who previously served as regional commissioner of GSA's Rocky Mountain Public Building Service. The GSA was tasked with housing and providing IT for the full presidential transition, an effort Horne oversaw.

"I think it’s fair to say they were impressed with what he did and asked him if he would serve as acting administrator," Holland & Knight partner Bob MacKichan told Bisnow. "He certainly had access to the senior management of the transition, and I believe they liked what they saw."

MacKichan, a former GSA counsel, with former GSA National Capital Region administrator Donald Williams and Colliers EVP of government solutions Kurt Stout, led the pre-inaugural GSA transition effort known as the "landing team."

After the inauguration, they handed the transition process over to the "beachhead team," a group of interim Trump-appointed federal employees led by senior policy adviser Jack St. John and White House liaison Emily Murphy. St. John and Murphy will work closely with Horne to ensure a smooth transition while Trump selects the person he wants to lead the GSA permanently.

Trump's team has begun to interview potential candidates for the job, a source told Bisnow, and expects to make a selection soon.

With the president's background, MacKichan expects he will pick someone from the commercial real estate development world to lead the agency. 

"I do think you’re going to see a significant interest from this administration in the real estate side of the GSA, more than the previous president," MacKichan said. "This president has been a real estate developer for a long time. I think you’ll see an interest in finding a means by which they can broaden the tools available to deliver the real estate needs of the federal government." 

Stout agreed that Trump will take an interest in the property side of GSA, but he doesn't expect the overall budget goals and footprint reduction will change.

"The means by which the government achieves cost reduction may evolve some," Stout said. "Whether the government were to achieve cost reduction by improving its dispositions process, finding more inventive ways to enter into public-private transactions, or whether the government would achieve cost reduction just by entering into better lease structures, the theme of cost reduction itself has been the prevailing theme at GSA since 2012, if not earlier, and will continue to be."  

The biggest decision the next administrator will have to make is where to build the new 2.1M SF FBI HQ, a choice that has been narrowed down to sites in Greenbelt, Md., Landover, Md., and Springfield, Va. The bid will likely include a swap with a developer to build a mixed-use project on the Hoover Building site on Pennsylvania Avenue. 

Peebles Corp CEO Don Peebles, who met with Trump during the transition, previously told Bisnow he believes Trump will take an active role in the decision, which had been planned for last year but was pushed back to March. This could present potential conflict of interest issues, as two NY-based developers bidding on the project have deep ties with the president. 

MacKichan said he is not concerned about Trump's ties to the development community when it comes to the GSA's decision-making. 

"There are safeguards and those that deviate from those requirements usually are not very successful," MacKichan said. "You have to do it within the context of competition and contracting. There are certain requirements that have to be followed. I’m not concerned at all. They will have to operate under the same ethics rules as any other administration."  

The Trump International Hotel at the Old Post Office building

Trump's other GSA-related conflict of interest concern also sits on Pennsylvania Avenue, the luxury hotel The Trump Organization opened in the Old Post Office building in September. Trump owns 76% of the LLC in control of the hotel, which he said he would place in a trust but not divest from. The contract he signed with the GSA states that no elected official can benefit from the lease in any way. 

A group of House Democrats wrote an open letter to the GSA on Monday asking the agency to address the potential breach of the lease agreement. The letter also included monthly revenue numbers for the hotel, showing that it lost more than $1M in its first two months and is performing well below the expectations the company set. 

In a statement released on Jan. 11, the day Trump outlined the nature of his relationship with his company while in office, the GSA said it would review the new structure to determine if it complies with the terms and conditions of the lease. The agency has not made any public statements on the matter since and did not return Bisnow's multiple requests for comment. 

MacKichan pushed back on the notion that Trump is in violation of the lease, saying he is not sure the House Democrats' interpretation of the contract is necessarily correct.

"I am certain that the GSA is well aware of the issue and has it under review as we speak," MacKichan said. "The government has broad discretion to consider a number of factors, which they will do, and if they feel that the Trump Organization is not in compliance with any terms they will request that the lessee cure those issues."