GAO urges federal landlord to disclose foreign-owned spaces leased for high-security purposes

The General Services Administration is leasing 20 spaces for high-security government business, in buildings owned by foreign companies. Federal auditors say th...

The prime suspect of the 2015 Office of Personnel Management data breach also happens to be the property owner of a Secret Service office.

A report from the Government Accountability Office shows that not only does China own a Jacksonville, Florida, property used by the Secret Service, it also owns property leased by the Justice Department’s Drug Enforcement Administration, the Social Security Administration and the GAO.

While the federal government isn’t prohibited from leasing space from foreign owners, GAO said in its report, auditors urged the General Services Administration to start sharing that information when an agency is considering a lease for a high-security purpose. GSA agreed with GAO’s recommendation.

“Federal agencies are required to assess and address the risks to their high-security facilities but GSA does not inform tenants when leasing space from foreign owners,” the report stated. “When leasing space, GSA is required, among other things, to determine whether the prospective lessor is a responsible party, but foreign ownership is not one of the factors that it must consider. As a result, tenants may be unaware that they are occupying foreign-owned space and not know whether they need to address any security risks associated with such foreign ownership.”

GAO determined in its report that foreign entities owned high-security space leased by GSA in 20 buildings, through 25 leases, as of March 2016.

Based on an analysis of the real property database, GAO found that the spaces were “owned by 16 different foreign entities, 7 of which are based in non-NATO countries.”

“However, the real property database did not include information on all of the buildings in which GSA leases high-security space,” GAO reported. “Therefore, the results of our analysis are likely understated and GSA may be leasing more high-security space than what we identified in the 25 leases.

GSA is considered the federal government’s landlord, handling building access, maintenance and security fixtures.

But it and DHS’ Federal Protective Service (FPS) have joint responsibility for protecting federal facilities held or leased by GSA. FPS is the point service for security and protection of a building and its tenants.

When GSA leases space, it’s required to determine whether the owner is responsible, financially sound, and if the building will be properly run. But according to GSA’s Acquisition Manual, foreign ownership isn’t something that’s considered when handling a lease.

According to GSA, every standard lease contains the same general restrictions on owner access without regard to the owner’s nationality. Specifically, the restriction states that ‘the lessor may at reasonable times enter the premises with the approval of the authorized Government representative in charge.’ Of the 11 buildings owned by companies based in non-NATO countries, the tenant agencies or the owners told us that the owners or their representatives had entered eight of them, for example, for inspection purposes.

“Offerors are required to disclose certain ownership information that may indicate whether they are foreign owned,” GAO reported.

Investing in government-leased buildings isn’t far-fetched, according to GAO. Some of the real estate companies GAO spoke to for the report said government lessees “provide a safe and reliable rate of return.”

And foreign ownership doesn’t mean an automatic threat to security, but auditors said it was an important factor to consider when planning things like security features and accessibility before settling into a new tenant space.

“When GSA does not know the beneficial owners of the high-security properties that it is leasing, it lacks information that should be shared with its tenants for their facility risk assessments,” GAO said. “Moreover, when tenant agencies lack information about the beneficial owners of their high-security facilities, they may not correctly evaluate the security risks and, consequently, not take the most appropriate steps to secure their buildings, leaving the facilities vulnerable, for example, to cyber intrusions.”

On the other hand, real estate experts and companies told GAO that high-security spaces, no matter the owners, have strict controls and limited access, even for building owners.

Also, foreign-owned buildings can be managed by American companies, and not have any interest in what the building is being used for.

“A representative from a fourth company said that foreign ownership is irrelevant when capital funds come from many investors that do not control the buildings,” GAO said. “A representative from a fifth company said that people such as property managers, asset managers and building engineers, have more direct access to building systems and data than the owners and that they are subject to background checks and must be escorted in high-security buildings. He added that there could be cheaper ways to conduct nefarious action than by buying a building.”

 Old Post Office

House Committee on Oversight and Government Reform Chairman Jason Chaffetz (R-Utah) sent a letter to GSA Jan. 26, asking for a complete, unredacted copy of each of GSA’s outlease agreements, and a list of federally owned properties that are part of outleases, as well as their location, use and the tenant’s name.

Chaffetz also asked for a complete, unredacted copy of the outlease agreement with the Old Post Office.

GSA’s outlease with the building has made headlines in recent months, as government ethics watchdogs and members of Congress have questioned a possible conflict of interest between President Donald Trump and his company’s Old Post Office hotel in Washington, D.C.

GSA awarded Trump Old Post Office LLC a 60-year, $180 million lease in 2013.

Trump’s lawyer said the President doesn’t have any conflicts of interest, and Sean Spicer, the White House spokesman, said at his press briefing on Jan. 23 that President Trump had resigned from his company.

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