As of March 2016, GSA had about 1,400 leases of high-security space in  about 850 buildings. GSA and DHS’s Federal Protective Service (FPS) have joint responsibility  for protecting federal facilities held or leased by GSA. Based on our independent analysis using the real property database,  foreign entities owned high-security space that GSA is leasing in 20  buildings through 25 leases as of March 2016. We found that 26 different agencies and departmental components  occupy high-security leased space in buildings that we identified as  foreign owned, 22 of which occupy space that we identified as owned by  companies based in non-NATO countries (China, Israel, South Korea,  and Japan). Because the tenants include intelligence and law enforcement agencies,  this high-security space is used, among other things, for classified  operations and storage of weapons, law enforcement evidence, and  sensitive data. The total amount of space leased was about 3.3 million square feet at an  annual cost of about $97 million. The other five agencies that knew about  occupying foreign-owned space had taken actions to mitigate the risk or  were not concerned. Potential Risks of Leasing Foreign- Owned Space Include Espionage, Cyber Intrusions, and Money Laundering Concerns Selected Federal Officials and Real Estate Company Representatives Cited Physical and Cyber Security Risks Posed by Foreign Ownership

Several federal officials who assess foreign investments in the United  States and selected real estate company representatives we spoke to told  us that leasing space in foreign-owned buildings could present security  risks such as espionage, unauthorized cyber and physical access to the  facilities, and sabotage. GSA Does Not Check the Beneficial Owners of the Buildings It Leases

Another potential risk to the government regarding foreign-owned leased  space is the possibility of entering into leases with hidden beneficial  owners of buildings that are using the investment to launder money. GSA’s lease of space for the FBI field office in Seattle may be an  example of GSA leasing high-security space from a beneficial owner who  is a politically exposed person. When leasing space, GSA is  required, among other things, to determine whether the prospective  lessor is a responsible party. However, under GSA’s Acquisition  Manual, foreign ownership is not one of the factors that GSA must  consider when deciding whether to contract for a lease. Offerors are  required to disclose certain ownership information that may indicate  whether they are foreign owned. As discussed earlier, GSA’s information on foreign ownership of high- security space was not reliable, and, as a result, tenant agencies lack  information on such foreign ownership even though it can pose risks  involving physical and cyber security and foreign financing. Because GSA is not required to identify beneficial ownership information  for the space it leases and because GSA is not informing tenant agencies  when the space they are occupying is leased from foreign owners,  tenants may not be aware that they are occupying space that is foreign  owned and may not be addressing any security risks associated with  foreign ownership. Conclusions

GSA’s incomplete information and lack of policies and procedures  regarding foreign ownership of high-security leased space may  undermine the security of the tenants’ facilities. Our review found that GSA is leasing a small portion of its high-security  leased space from foreign owners. However, because ownership  information was not available regarding about one-third of the buildings  with high-security leased space, GSA is likely leasing from more foreign  companies than is readily identifiable. Recommendation for Executive Agency Action

We recommend that the Administrator of the General Services  Administration determine whether the beneficial owner of high-security  space that GSA leases is a foreign entity and, if so, share that information  with the tenant agencies so they can adequately assess and mitigate any  security risks.
Why GAO Did This Study

GAO has previously reported that federal facilities are vulnerable to threats from foreign sources that may target their information systems and affect the physical security of the occupants. GAO was asked to examine GSA's lease of high-security space from foreign owners.
This report addresses (1) what is known about foreign ownership of high-security space leased by GSA, (2) potential risks posed by such foreign ownership, and (3) policies and procedures regarding GSA's leasing of space from foreign-owned entities. GAO reviewed GSA's leasing documents; identified and checked ownership information regarding high-security leased space to the extent possible using data, as of March 2016, from a firm that specializes in analyzing the commercial real estate market; interviewed GSA and federal foreign investment officials, tenant agencies that were occupying space owned by foreign entities, and five real estate companies that lease space to GSA or provide related services; and visited three foreign-owned high-security leased facilities selected to represent a variety of owners and tenants.

What GAO Found

GAO reviewed available information on the ownership of General Services Administration (GSA) leased space that requires higher levels of security protection based on factors such as mission criticality and facility size (high-security space) as of March 2016 and found that GSA is leasing high-security space from foreign owners in 20 buildings. The 26 tenant agencies occupy about 3.3 million square feet at an annual cost of about $97 million and use the space, in some cases, for classified operations and to store law enforcement evidence and sensitive data. The foreign-owned leased space included six Federal Bureau of Investigation field offices and three Drug Enforcement Administration field offices. GAO determined that the high-security space is owned by companies based in countries such as Canada, China, Israel, Japan, and South Korea. GAO was unable to identify ownership information for about one-third of GSA's 1,406 high-security leases as of March 2016 because ownership information was not readily available for all buildings.
Federal officials who assess foreign investments in the United States and some tenant agencies occupying high-security leased space told GAO that leasing space in foreign-owned buildings could present security risks such as espionage and unauthorized cyber and physical access. However, 9 of the 14 tenant agencies GAO contacted were unaware that the space they occupy is in a building that we identified as foreign owned. The other five agencies that knew about occupying foreign-owned space had taken actions to mitigate the risk or were not concerned. Another risk is possibly entering into leases with hidden beneficial owners—the persons who ultimately own and control a building. According to the Treasury Department's Financial Crimes Enforcement Network, the risks of contracting with hidden beneficial owners include money laundering. GSA is not required to collect beneficial ownership information and therefore does not know the beneficial owners of the buildings it leases.
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. 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.

What GAO Recommends

GAO recommends that GSA determine whether the beneficial owner of high-security leased space is a foreign entity and, if so, share that information with the tenant agencies for any needed security mitigation. GSA agreed with the recommendation.