Real Property Acquisitions UPPS
No. 08.04.01
Issue No. 3
Effective Date: 09/14/2008
Review:
November 1 E4Y
01. POLICY STATEMENT
01.01 This
UPPS describes the process for acquiring real property.
02. DEFINITIONS
02.01 "Real
property" is the asset of land and any improvement such as buildings for
which specific Coordinating Board procedures are prescribed as outlined in
Texas Administrative Code, Chapter 17, Subchapters A through
K. The Texas State University System (TSUS) Board of Regents (the Board) must
approve all purchases, exchanges, or sales of Components’ real property as
specified in Chapter III Section 1.(13), Rules and Regulations.
02.02 "The
acquisition of real property" shall also include the gifts of real
property regardless of the value of the property as specified in Chapter III
Section 1.(12)1 of TSUS, Rules and Regulations.
02.03 "Market
analysis" will consist of the study of the value of the real property
under consideration for acquisition. Market analysis can include real estate
appraisals as prescribed in Texas Administrative Code, Chapter 17, Subchapter
F, Section 17.50 and Section 17.51. Market analysis can also consist of
additional consultant studies or appraisals used to assess the market value of
the real property under consideration.
02.04 "Business
plan" will consist of the study of the operational aspects associated with
the acquisition of the real property in which there is a need to consider the
impact of both upfront costs and annual operating expense on the financial
posture of Texas State. The plan will also consider the impact of the proposed
financing method on the operations associated with the acquisition.
02.05 "Feasibility
study" will consist of evaluation and of subsequent recommendation from
data obtained from the business plan, market analysis and any other relevant
study to conduct a thorough analysis of the proposed acquisition. Evaluation
will consist of appropriate analysis techniques such as cost/benefit, multiple
scenario, need or internal rate of return comparisons to determine the overall
value and impact of the proposed acquisition.
03. IDENTIFICATION OF APPLICABLE LAW AND
RELATED BOARD POLICY
03.01 Under
Texas Education Code, Section 61.0572, the Coordinating Board is required to
"assure the efficient use of construction funds and the orderly
development of physical plants to accommodate projected college student
enrollments." Texas Education Code, Section 61.058, authorizes the
Coordinating Board to “approve or disapprove all new construction and repair
and rehabilitation of all buildings and facilities at institutions of higher
education.” In conjunction with this provision, the Texas Administrative Code,
Chapter 17, Subchapters A through K identify procedures that are to be taken in
order for the institution to comply.
03.02 Under
Texas Education Code, Chapter 95, Administration of the TSUS, Section 95.31,
The Board “may acquire land, including the improvements thereupon, needed for
the proper operation of a system university."
03.03 Under
Texas Education Code, Chapter 95, Section 95.30, the Board has the power of
eminent domain to acquire for the use of the system universities the lands
necessary and proper for carrying out their purposes, in the manner prescribed
in Title 4, Chapter 21 of the Property Code.
03.04 Texas
Education Code, Section 51.9045 prohibits an institution of higher education
from using eminent domain to acquire land to be used for a lodging facility or
for parking or a parking structure intended to be used in connection with the
lodging facility. “Lodging facility” is defined to exclude a dormitory or other
student housing.
03.05 The
Uniform Relocation Assistance and Real Property Acquisition Policies Act of
1970, as amended, provides for uniform and equitable treatment of persons displaced
from their homes, businesses, or farms by federal or federally assisted
programs. This act also establishes uniform and equitable land acquisition policies
for federal and federally assisted programs.
04. PROCEDURE
FOR THE OVERALL COORDINATION OF THE ACQUISITION PROCESS
04.01 All
acquisitions of real property, whether by purchase, lease, or other means, will
be coordinated through the office of the Vice President for Finance and Support
Services (VPFSS). The VPFSS will oversee all phases of the acquisition as
outlined in this UPPS. All materials documenting any aspect of the acquisition
including studies, meeting minutes and memoranda will be maintained in a
specifically indexed file for each acquisition process initiated. The file will
be maintained even if the acquisition is not completed.
04.02 The
President will review with the Board of Regents all analyses, appraisals,
business plans, and due diligence studies for each potential acquisition.
04.03 During
the acquisition process, Texas State elects that "... appraisal figures
will be held in confidence and not released publicly. The requiring of
appraisals in no way requires the institution to release the figures to
property owners during the acquisition process..." (Chapter 17, Subchapter
F, Section 17.51(c) of the Texas Administrative Code).
05. PROCEDURE FOR INITIATING THE ACQUISITION
PROCESS
05.01 Any
action taken to acquire real property through a purchase or lease type
transaction will be referred to the VPFSS in order to initiate the acquisition
process. The VPFSS will review the Campus Master Plan and determine if the real
property under consideration is in the areas targeted for acquisition.
05.02 Master
Plan Acquisitions
a. If
the property is in the Campus Master Plan, the VPFSS will determine if funding
is available. If so, the VPFSS will notify the Campus Facilities Planning
Committee (Facilities Committee) that Texas State is entering into the
feasibility study per Section 06 of this UPPS.
b. If
the real property is in the Campus Master Plan or if there is justification
that the acquisition should be considered, the VPFSS will initiate a meeting
with the property owner.
c. The
VPFSS will develop or obtain a preliminary outline of the acquisition, and the
proposed terms for the transaction.
d. If
the VPFSS determines that the real property could be of value to the
University, the VPFSS will present to the President the outline and proposed
conditions for the transaction so that the President can contact the Associate
Vice Chancellor for Contract Administration (AVCCA) in consultation with the
Chancellor and advise of the offer.
05.03 Non-Master
Plan Acquisitions
a. Typically,
all real property considered for acquisition will be in the Campus Master Plan.
If the real property is not in the Campus Master Plan, strong justification
will be required, and a recommendation from the Facilities Committee to revise
the Campus Master Plan must be developed. The Facilities Committee will review
the potential benefits of all proposed acquisitions.
b. If
the property is not in the Campus Master Plan, the VPFSS will, in conference
with the President, determine if the property could be of interest to Texas
State. If it is determined that the property is of interest, the VPFSS or his
or her designated representative will present the item for consideration to the
Facilities Committee. If it is determined that the proposed acquisition is
of interest, the Facilities Committee will forward to the President’s Cabinet a
recommendation that the Campus Master Plan be amended to reflect inclusion of
the proposed acquisition. The recommendation will be supported with
relevant justification for the revision.
c. If
the recommendation is endorsed by the President’s Cabinet and approved by the
President, the President will present the proposed amendments to the Campus Master
Plan for review and approval by the Chancellor via the AVCCA prior to
submission to the Board of Regents for approval.
05.04 The
VPFSS or his or her representative will review funding to determine if any
federal funds will be used to acquire the property. If federal funds are
involved, the VPFSS will facilitate compliance with the federal requirements
listed in the Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970.
06. PROCEDURES
FOR CONDUCTING A FEASIBILITY STUDY OF THE PROPOSED ACQUISITION
06.01 Establishing
the Committee
After
the proposed acquisition is determined to be in the Campus Master Plan and to
be of value to Texas State, the VPFSS will establish a working committee to
conduct a feasibility study. The committee will consist of, at least: the
VPFSS, the Associate Vice President for Financial Services, the Treasurer, the
Associate Vice President for Facilities, the Real Estate Specialist, the University
Attorney, and primary stakeholders whom the acquisition will benefit or whom
Texas State will hold responsible for management of the property. Outside
expertise may also be employed as recommended by the committee and approved by
the VPFSS. The feasibility study may be comprised of two primary
components: a market analysis and a business plan as outlined in Sections
06.03-06.04.
06.02 Outlining
Procedures to Follow
Recognizing
that the particular aspects of each acquisition will be unique, the first
charge of the committee will be to develop a specific outline of the procedures
to follow with regard to the specific proposed acquisition. The outline will be
forwarded by the VPFSS to the President for approval. The President will
advise the AVCCA of the proposed outline for studying the feasibility of the
project. The Chancellor or other Regents will also review the outline, if
appropriate. Modifications to the process already in progress, based on the
final approval by the Board of Regents, will be made and documented in an
updated outline.
06.03 Conducting
the Market Analysis
The
market analysis phase of the study will be comprised of, at the very least, the
two appraisals as required by the Coordinating Board. Texas State will use the
appraisal value to determine the market value of the property. The market
analysis can also consist of a consultant report, to be used to compare
appraisal values. The consideration of the financing terms of the offer will be
considered in the context of the business plan and will be referenced back into
the market analysis only insofar as it provides a value for the consideration
offered by Texas State in the transaction. The market analysis will be used as
the basis for negotiations with the property owner as noted in Section 07.01.
06.04 Writing
the Business Plan
a. The
business plan phase of the study will be comprised of a thorough review of all
upfront and subsequent costs of an ongoing concern associated with the proposed
acquisition.
Texas
State will retain as its primary objective during this phase a determination of
the most realistic financial impact that the ongoing concern will have on the
University. It will include references to points at which the University will
consider a fallback or alternative strategy, as well as methods by which the
fallback position can be implemented.
b. The
components of the business plan will consist of a review of upfront and
subsequent costs, as well as revenue potential associated with the proposed
acquisition. Cost and revenue will be identified and will then be reviewed
using an appropriate analysis technique. At a minimum, a cost/benefit approach
using a worst anticipated and best case scenario will be used. The assumptions
behind each scenario must be clearly stated in the analysis, and predictions of
future performance must be supported by documentation from third party experts.
If alternatives to the proposed acquisition can be identified, a comparison of
alternatives utilizing a suitable multiple option model is to be used.
c. The
business plan will specifically address any conditions which would have an
impact on tax status or legal liability. The conditions will also be reflected,
as appropriate, in the cost/benefit analysis and the multiple scenario
presentation.
d. The
business plan will address, if appropriate, the issue of a contracted versus a
self-operative approach. The conditions will also be reflected in the
cost/benefit analysis and the multiple scenario presentation.
06.05 Conducting
the Feasibility Study
The
feasibility study will consist of a presentation of all findings of the
committee, an executive summary consisting of the primary findings of the
committee, and a recommendation as to the ability of the University to
successfully implement the acquisition. The feasibility study will be reviewed
with the VPFSS, the President, and the AVCCA, as necessary. The study will then
be presented to the Board of Regents for approval to implement the completion
of the proposed acquisition.
07. PROCEDURE FOR COMPLETING THE PROPOSED
ACQUISITION
07.01 The
VPFSS will follow the appropriate procedures outlined in Texas Administrative
Code, Chapter 17, Subchapter C, Sections 17.20 through 17.24 to present a
request to the Coordinating Board for approval to finalize the acquisition. The
VPFSS will have one year after the Coordinating Board endorses the acquisition
to purchase the approved property. If the acquisition is not completed within
one year, the VPFSS will advise the President who will request that the Board
of Regents provide guidance on the appropriate steps to take with regard to the
acquisition.
07.02 It
is anticipated that preliminary interaction with the appropriate funding
agencies, financial advisor and bond counsels will need to occur during the development
of the business plan. After endorsement by the Coordinating Board of the
proposed acquisition, the VPFSS will work with the appropriate agencies,
financial advisor and bond counsels as necessary to finalize the necessary
financing.
08. PROCEDURE
FOR MONITORING ONGOING FINANCIAL CONCERNS AFTER ACQUISITION
08.01 The
VPFSS will be responsible for assuring oversight of the operations associated
with the acquisition.
08.02 At
a minimum, quarterly financial statements of the operation will be provided to
the VPFSS. An annual report will also be prepared highlighting results of
the review and recommendations for future activities of the operation. The
report will be forwarded to the VPFSS.
08.03 The
VPFSS will present to the President, at least annually, the status of the
operations and will discuss any proposed revisions needed. If revisions are
needed because of evidence of financial strain, the VPFSS will also be prepared
to discuss recommendations to correct the status of the operation. The President
will approve the recommendation that it deems as the most appropriate to keep
the University from experiencing excessive financial drain.
09. REVIEWERS OF THIS UPPS
09.01 Reviewers
of this UPPS include the following:
Position Date
Real Estate Specialist November 1 E4Y
Vice President for Finance and November 1 E4Y
Support Services
10. CERTIFICATION STATEMENT
This
UPPS has been approved by the following individuals in their official
capacities and represents Texas State policy and procedure from the date of
this document until superseded.
Real
Estate Specialist; senior reviewer of this UPPS
Vice
President for Finance and Support Services
President