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No answers about commission rate paid to broker

Dallas ISD bought 14 acres for a new Dade Middle School in South Dallas (background) and paid a real estate firm to broker the transactions. The district’s auditor has initiated an investigation into the deal.
The Dallas Morning Newsmhaag@dallasnews.comPublished: 09 December 2013 11:37 PMUpdated: 09 December 2013 11:54 PM

Dallas ISD trustees said they want administrators to explain why the district paid a real estate broker 9 percent commission on properties purchased for a South Dallas middle school.

Several current and former board members said Monday they were unaware of the rate paid to The Collins Co., which real estate experts said exceeds industry norms. The firm received $343,000.

“If it had been mentioned, I might have said something,” trustee Lew Blackburn said. “I just don’t recall the conversation about 9 percent.”

Board member Nancy Bingham said, “We probably do need to review the process on how we do this.”

The Dallas Morning News reported Sunday that DISD has paid more than $1.1 million in commissions to brokers for the new schools sites in the 2008 bond program. Of the three companies used, only The Collins Co. got a 9 percent commission. For land obtained through the courts by eminent domain, the firm received 3 percent.

The deal with The Collins Co. is now under district investigation. Internal auditor Alan King launched an investigation after The News raised questions about the commission rate and what Collins did to earn the commission. Some property owners said they were unaware of any work Collins did related to the sale of their properties.

DISD spokesman Jon Dahlander said that the district will review the use of real estate brokers in the future. “If and when there is another bond program, the district will review its processes and determine whether the practice of using real estate brokers will be used,” he said in an email. “Recommendations will then be made for approval by the board of trustees.”

Neither the company nor anyone at DISD has detailed what The Collins Co. did to earn the $343,000. John Collins, the company’s owner, didn’t respond to a voicemail message left at his office Monday or repeated attempts to talk to him in recent weeks.

Commercial real estate agents said that a 9 percent commission rate is high and that firms usually give nonprofits, such as school districts, a break on fees. Industry standards are between 3 percent and 6 percent, they said. And many school districts said they acquire land without using brokers.

Dahlander said in an email Sunday that The Collins Co. received the rate because many of the 72 parcels were of low value, had multiple owners and were behind on taxes. He also said the trustees had approved the 9 percent commission.

When asked for clarification Monday, he said, “The board was kept up to date throughout the process of acquiring property for this location and approved all land acquisitions.”

Trustees were first informed of the use of brokers at a December 2008 board briefing. According to a board document, the firms would be paid a “reasonable commission.”

Dallas ISD doesn’t log minutes for board briefings, and a video recording of the December 2008 meeting isn’t posted online. Board members approved using the brokers later that month on the meeting’s consent agenda.

“I don’t remember trustees raising questions about commissions whatsoever,” said Leigh Ann Ellis, who was a trustee at the time. “If it was on the consent agenda, it would lead me to believe there wasn’t a discussion about it.”

On Feb. 10, 2009, Dallas ISD attorney Lee Simpson and then-Superintendent Michael Hinojosa signed the contract with The Collins Co. The contract doesn’t specify a commission or the properties the company would help acquire. But an addendum to the contract, signed that day by Simpson and Hinojosa, specifies the 9 percent commission for Dade Middle School.

That contract and addendum did not go before the board for approval or discussion, according to a search of meeting agendas for 2009.

However, when trustees approved the purchase of individual properties for Dade, the resolutions state that “it may be necessary” to pay closing costs and fees that are “estimated to be approximately nine percent.” The resolutions do not name The Collins Co.

Blackburn said Simpson and Phil Jimerson, the former construction services executive director, often updated trustees in closed session about land acquisitions. But he said that when the negotiations were discussed in private, the company’s 9 percent commission didn’t come up.

“We are taking the assumption that the rates are within the norm. In residential, the norm is 6 percent,” Blackburn said. “Why would they be justified with more than 6 percent?”

In the closed-door discussions about land purchases, Blackburn said, administrators inform trustees about the efforts to buy properties and the challenges they may face. “We don’t spend a lot of times talking about the fees,” he said.

Neither Simpson nor Jimerson has responded to interview requests.

Dallas ISD spent $3.4 million on property owned by 29 people to assemble land for Dade, which opened in August. Of the 13 property owners contacted by The News, only one said she negotiated with a Collins broker. The rest said they negotiated with district officials or an attorney DISD hired to handle the contracts.

Some property owners agreed to sell early, while others held out in hopes of receiving a bigger offer. Dallas ISD had an environmental firm test for contamination on some properties. The results indicated that they contained toxic materials, property owners said.

Bingham said she recalled district officials telling her about the challenges in buying some sites at Dade. “Some had environmental issues, and there were multiple owners and a lot of back taxes,” Bingham said. “Not every piece of property is easy. I do remember that was a difficult piece.”

Bingham said she didn’t recall the 9 percent commission being mentioned several years ago.

Blackburn said the district faced no more challenges at Dade than it did for the new O.M. Roberts Elementary School or for the future Joe May Elementary School.

At Roberts, several homeowners spoke out against the tactics the district used to buy properties, which included threats of eminent domain. The district has spent years trying to assemble properties for Joe May in northwest Dallas.

The brokers for those school sites — Lincoln Property Co. at Joe May and Solender/Hall at Roberts — collected 6 percent on the first $1 million and 3 percent on the remaining amount on each property, according to their contracts with DISD.

“There was nothing about Dade that seemed extraordinarily different from the others,” Blackburn said.

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