Real Property Acquisitions UPPS
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.
02.01 "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:
Real Estate Specialist November 1 E4Y
Vice President for Finance and November 1 E4Y
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