Wednesday, March 24, 2010

Politically-Connected Real Estate Broker Makes Commissions Off Of City Leases; Is Bales Doing Any Work For His Money?


This morning I watched the video from the Administration and Finance Committee of the Indianapolis City-County Council. During the meeting, the councilors considered a proposal to lease approximately an old Target store at 8115 E. Washington Street to relocate the Traffic Court. The space would be approximately 15,000 square feet and provide for ample parking.

I don't think anyone disputes that the current traffic court location is unacceptable and that a change needs to be made.

The plan though was for the City to pay an upfront "build-out" fee of $500,000 to $600,000 to improve the property so that it could be suitable for use as a traffic court. The landlord would be contributing $240,000.

Councilor Barb Malone pointed out that usually a lessee doesn't contribute that kind of up front money for a lease. Rather it is usually done over the life of the lease. It was pointed out that it was done to buy down the lease. Judge William Young, who presides over the traffic court, also pointed out that since government leases by law have to have an "out" provision in case the agency is not funded, banks are unwilling to finance leases thus requiring more cash up front.

Councilor Malone did a good job of asking questions and raising concerns about who would profit. R.P. Lux is the lessor's broker for Centre Properties which manages the property. I believe Craig W. Johnson and Singleton Associations, LLC owns the property. I'll have to review real estate records though to better sort thing out.

What I found most interesting was a comment that passed quickly, namely that the City was requiring them to use Venture Real Estate as the City's broker. Yep, the same company headed by poltiically-connected John Bales who has entered into questionable real estate deals that have enriched Marion County Prosecutor Carl Brizzi.

About a year and a half ago, the Ballard administration entered into a no-bid contract to allow Venture to inventory city property. In exchange, Bales' company would get the commission on any sale or lease of city property. Testimony from a city official recently indicated that deal may have been quietly scrapped.

Regardless, this doesn't seem to be the same deal that required that Traffic Court use Venture as the lessee's broker, even though from the testimony Venture apparently is not doing any work on the deal. Bales will receive tens of thousands dollars in commissions off the Traffic Court lease even though his company is apparently not doing any work on the lease, probably because everyone involved wants Bales' company to keep a low profile given the numerous media revelations regarding questionable deals involving Bales, including IBJ's expose on the lease with the Marion County Prosecutor's Office that put substantial commissions in Bales' pocket courtesy of his friend Marion County Prosecutor's Carl Brizzi. Of course, much of Bales' commission will undoubtedly end up funnelled back to elected officials in the form of campaign contributions.

Just another day in the life of Indianapolis politics.

4 comments:

Had Enough Indy? said...

Whoa ! If Bales' company isn't doing any work, why would the leasee pay him???

Bill said...
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Paul K. Ogden said...
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Paul K. Ogden said...

Usually in a real estate deal, the buyer's agent does most of the work on the deal while the seller's agent's (the listing agent) job was to llist the property and advertise it. They then split the 6% commission.

So in the comparable lease scenario, Lux would list the property and promote it and Venture would do most of the legwork on the deal. Lux and Venture would then split the commission.

Here it didn't seem like Venture was doing the work on the deal or they weren't talking about Venture's role much maybe because of the negative publicity surrounding Bales, Brizzi, etc. But if Lux is doing all the work, Lux should get all the commission.