Overseas Real Estate

Inaction on Proposals to Sell High-Value Property in Tokyo Gao ID: NSIAD-95-73 April 7, 1995

The State and Treasury Department have been considering selling off part of the 12-acre U.S. embassy compound in Tokyo. However, delays in carrying out these plans have caused the U.S. government to miss an opportunity to sell some of this high-value real estate at the peak of the Japanese real estate market. An undeveloped three-acre parcel appraised at nearly $800 million in 1991 has since dropped in value by 30 percent or more. This report discusses (1) prior proposals to dispose of U.S. property in Tokyo, (2) the reasons the proposals were not implemented, and (3) steps that should be taken at the present time, including the sale and consolidation of facilities at the embassy compound.

GAO found that: (1) the United States has not taken full advantage of opportunities to sell or lease some of its high-value real estate in Tokyo; (2) U.S. options for better managing its high-value property include selling the Treasury House and Deputy Chief of Mission residence and expanding the housing on the Mitsui compound; (3) constructing additional housing on the compound would reduce U.S. lease costs for employees not housed on the compound; (4) Treasury has offered to turn over its Treasury House to State for disposition because it does not have authority to retain proceeds from real estate sales; (5) the lack of interagency cooperation regarding the Treasury House disposition has caused delays which, in turn, have caused property values to decline and the property to deteriorate so that it is uninhabitable; (6) State rejected two proposals to sell the Deputy Chief of Mission's residence for about $92 million because the embassy strongly opposed its sale; (7) State does not plan to sell or lease portions of the Mitsui compound because it would not be allowed to retain and reobligate the proceeds from its sale, the U.S. embassy opposes its sale, and decreases in overall real estate property values have decreased the property's value; (8) although the U.S. government missed the opportunity to sell these properties while property values were high, the value of U.S. properties in Tokyo remains significant; and (9) State needs to prepare a comprehensive plan for managing the Tokyo property in a cost-effective manner.

Recommendations

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