Saturday, August 23, 2008

IBJ Examines Ballard's No Bid Real Estate Deal Putting City Assets In Play

The Star's Brendan O'Shaughnessy first raised questions about a contract the City of Indianapolis recently entered into with Venture Real Estate Services, LLC, giving the politically-connected company owned by John Bales the exclusive right to market any property the City decides to sell. That story was in the context of Ballard's desire to rid the city's park system of so-called pocket parks, which have sprung up all over town over the past couple of decades. Today, the IBJ's Cory Schouten examines the contract more closely and uncovers some real jewels, including:

  • The attorney who represented Bales in negotiating the contract with the City was Bob Grand, managing partner at law firm Barnes & Thornburg. Ballard appointed Grand as president of the Capital Improvement Board and he acts as his "right-hand man."
  • "The agreement gives Venture the right to a commission of 2 percent to 3 percent of sale price for disposition of every property the city deems surplus, and for every lease or sale-leaseback deal. "
  • "The deal also gives Venture a percentage of “savings realized or revenue generated” by the firm’s efforts to negotiate better deals on real-estate-related expenses of city government. Bales would pocket 10 percent of savings up to $100,000; 5 percent of savings up to $5 million; and 3 percent of savings above $5 million." What this provision means is that Bales' firm will get paid money even if the City simply donates park land to a neighborhood association to run as a neighborhood park.
  • "In another twist, the agreement appoints Venture the city’s representative for any development or redevelopment project—a clause that would appear to give Venture a leg up on the potential development of the former home of Market Square Arena at Alabama and Market streets."
  • "When Mayor Bart Peterson was in charge, the company had partnered with Hearthview Residential Inc. and Mansur Real Estate Services Inc. on a $150 million proposal for the site calling for a Target store and a 14-story tower with condos, office and retail space." Note: Schouten's article quotes the City's Mike Huber as saying any deal on the Market Square property will be done outside this agreement.
  • "Bales has a reputation for landing deals that benefit him as much as his clients, in some cases buying properties his clients are considering leasing. And he’s equally known for political connections; he represented his friend Carl Brizzi, the Marion County prosecutor, a few years ago in the lease of 72,000 square feet at 251 E. Ohio St."

As the readers of this blog already know, I'm very unhappy with the mayor's decision to enter into this contract. It doesn't pass the smell test by a long shot. Schouten interviewed me for the story and does a good job capturing my thoughts about the deal:

A better approach would be to pay a reasonable fee for a firm to do the review, argues Gary Welsh, a local attorney and author of the conservative blog Advance Indiana who championed Ballard’s election as mayor.

Venture officials have “every interest in identifying as much property to sell off as they can because that’s how they get paid,” he said. “It’s a foregone conclusion you’re going to come up with some property to sell.”

Welsh supports the sale of some small parks that he says are little more than vacant lots turned into parks as political favors or vehicles to honor prominent citizens. But he takes issue with the city’s awarding the contract to Venture.

Welsh said the mayor’s advisers are weaving a tangled web of conflicts of interest. He points to a $30 million real estate investment fund launched recently by Venture that has Bales, Barnes & Thornburg partner Ben Pecar and Marion County Prosecutor Carl Brizzi on its board of directors. The stated mission of the fund: Capitalize on real estate opportunities in Florida and value opportunities in Indiana.

“I don’t think Ballard realizes how much they’re manipulating him on this stuff,” Welsh said.

1 comment:

M Theory said...

I don't like this either Gary.