subscribe: Posts | Comments

Property owners question commission in DISD deal

The Dallas Morning Newsmhaag@dallasnews.comPublished: 07 December 2013 10:02 PM

When Dallas ISD bought 14 acres for a new middle school in South Dallas, it paid a real estate firm a 9 percent commission on many of those transactions — including some in which the firm played no obvious role in the sales, according to participants.

Neither John Collins, owner of The Collins Co., nor anyone at DISD will say exactly what the firm did to earn $343,000. Real estate experts said its commission — 9 percent on most sales and 3 percent for transactions on condemned property — exceeded industry norms.

A district spokesman defended the 9 percent commission rate, saying it was justified because the project involved 72 parcels of land, many of them worth relatively little money.

But the district’s auditor, Alan King, initiated an investigation into the deal in response to questions from The Dallas Morning News. King asked DISD’s internal investigators to determine “what happened and what, if any, action is needed.”

Some real estate experts questioned why any school district would pay commission to a private broker. “Why would we do that when we don’t have to? That’s ridiculous. We pay zero,” said Gary Hansel, the real estate manager at Houston ISD.

Others said that if commissions had to be paid, 3 percent to 6 percent would be a sensible range, not 9 percent.

“That’s very much above market and is not justifiable. The absolute most — the top, top, top — is maybe 6 percent,” said Newt Walker, a broker who has handled land acquisitions for Southern Methodist University. “There should be an inquiry for how this whole process went down.”

The land sales for the new Dade Middle School campus, which opened in August, totaled $3.4 million and involved 29 property owners. Of 13 property owners reached by The News, two remembered receiving offers for their property in a letter from The Collins Co. and one recalled negotiating with a Collins broker.

Property owner Eric Byrd said he and Collins are longtime friends, yet he didn’t know Collins was involved in the deal. Byrd said he negotiated with Phil Jimerson, who was DISD construction services executive director at the time.

For his 5 acres, Byrd got $1.15 million — and The Collins Co. received $104,130.

“Is that right? I’d like to be in his shoes,” Byrd said. “He did nothing. He didn’t. I’m being truthful about that.”

No DISD administrators would provide details of the work done by The Collins Co.

Superintendent Mike Miles, who didn’t work in DISD when the land was purchased, declined to comment. Lee Simpson, a DISD attorney who approved The Collins Co. contract, didn’t respond to interview requests. Jimerson now works for the Grapevine-Colleyville school district and didn’t return phone calls.

Administrators released real estate contracts in response to an open records request by The News. But DISD sought to keep private all its correspondence with The Collins Co. and requested a ruling from the Texas attorney general’s office. The district asserts the documents should remain private because they include legal advice and discussions about properties not yet purchased.

Saving money

Ed Levine, who runs DISD’s construction services department, said real estate brokers save the district money. Their work means Dallas ISD doesn’t have to hire staffers to do their job. However, he said, he hasn’t calculated the potential savings.

So far, the district has paid real estate brokers $1.1 million for help in the $1.35 billion bond program approved by voters in 2008. In addition to the Dade commission, The Collins Co. also collected $119,700 for properties purchased for Ann Richards Middle School and Zan Wesley Holmes Middle School.

The district is currently using Lincoln Property Co. to broker deals for the last new school to be funded by the 2008 bond program. Levine said he meets weekly with the firm, which has a contract promising a 6 percent commission on the first $1 million and 3 percent on the remaining balance for each property.

Dallas ISD isn’t the only district to use real estate agents to purchase property. For example, Plano ISD uses a broker to buy land — but the property owner pays the commission. Dallas ISD pays the commission to brokers on top of what it pays for the land.

Other districts say real estate agents are unnecessary.

In Frisco ISD, where 52 new schools have been built over the last two decades, deputy superintendent Richard Wilkinson handles the work.

“He has bought many, many sites over the years. He does consult with our attorneys on the contract wording and negotiations, but he negotiates the price based on appraisals and market value,” said district spokeswoman Shana Wortham. “We do not pay a fee, and we buy the property directly.”

Hansel of Houston ISD said one person can do the work of a real estate broker. He personally contacts property owners, makes offers and negotiates. He also writes the contracts, which are signed off on by district lawyers.

His $76,072 annual salary is far below Dallas ISD’s commission payments. “It’s more cost-effective for us,” he said.

Hansel said that school districts routinely use real estate agents to sell property. But even in those situations, he said, Houston ISD pays no more than a 1 or 2 percent commission.

This isn’t the first time questions have been raised about DISD’s payments to The Collins Co. In 1997, some DISD trustees criticized as excessive the firm’s 6 percent commission for selling a historic school in downtown Dallas. They tried to stop the payment, but that vote failed to pass.

Despite the controversy, the district’s relationship with the firm continues today.

‘Something is wrong’

When DISD administrators decided to replace the old Dade Middle School, it contracted with The Collins Co. to find properties. The district solicited qualified brokers to handle properties for new school sites in its 2008 bond program, but it’s unclear how The Collins Co. was selected because the district is seeking to withhold documents and emails about the firm’s work.

The Collins Co. contract was signed by Simpson and former Superintendent Michael Hinojosa on Feb. 10, 2009. It sets a 9 percent commission rate on every property except for those obtained through the courts by eminent domain. The commission rate for those properties was set at 3 percent.

Dallas ISD documents show that administrators initially considered another location. Though DISD bought no property at the first location, the district paid The Collins Co. $60,000 “for services provided,” according to a 2011 amendment to the company’s contract. It doesn’t mention the site’s location or what work the firm provided.

“Something is wrong,” said Walker, who’s a commercial real estate broker. “If somebody does work and it falls through, that’s the risk of the real estate world. I never got paid for deals that never closed.”

Dallas ISD settled on a site on Grand Avenue near the old Dade. It included vacant lots, a strip mall, a few homes, run-down apartments and boarded-up houses.

District staffers did the work on their own, said David Patton, the district’s former construction services director. His department identified sites, hired an appraiser and used the assessments as DISD’s initial offers.

The News attempted to contact all 29 property owners. Some received inquiries but did not respond. Others couldn’t be located.

The 13 who responded collectively owned 9 of the 14 acres DISD purchased. Most said they had never heard of The Collins Co. A few said they had some contact with the firm but their negotiations were with DISD administrators.

Marsha DiMarco, the only property owner contacted by The News who negotiated directly with the company, said it didn’t go well. It started with a letter from The Collins Co. with an offer for her rental property.

She said she had a frustrating negotiation with Cassandra Elder, a Collins Co. agent. So she went to Florentino Ramirez, an attorney the district hired to handle the real estate contracts, to get the signed contract for her property.

Others said they had little contact with The Collins Co. and instead dealt with district staff and lawyers. Still, The Collins Co. got a commission on the sale of the properties.

Brandon Johnson owned a 30,000-square-foot apartment building on Grand Avenue that vandals had burned down. In 2010, he received a letter from The Collins Co. about the district’s interest in the property. John Collins made him an offer and refused to negotiate.

“We never met him. It was all over the phone,” Johnson said. “Things went south real quick. He said, ‘You take it, and you don’t have a choice.’”

After that discussion, Johnson talked to Simpson, the DISD attorney. Johnson got $107,000, a little more than his initial offer. The Collins Co. received $9,630. “They got paid, and he didn’t do hardly anything,” Johnson said.

Dallas ISD also wanted an empty lot and a duplex from Southfair Community Development Corp., which provides affordable housing in South Dallas. Dallas ISD offered $140,000 for the sites — $50,000 less than the cost to build the duplex, said Hank Lawson, the group’s former executive director who negotiated the sale.

At the same time, Eric Byrd, Lawson’s neighbor, grew frustrated. Byrd, the area’s largest property owner, had 19 tracts of land.

“They were going to condemn the land because [DISD claimed] it had toxic soil,” Byrd said. “They said, ‘If you don’t sell us the land, we are going to condemn it and make sure you cannot use it.’”

Upset by their offers, Byrd and Lawson met with Jimerson, the district’s former administrator over construction services. Byrd received an additional $150,000, for a total of $1.15 million. The Collins Co. got $104,130 for that sale.

Lawson got $15,000 more, bringing the sale price to $155,000. The Collins Co. received $13,950.

“It was DISD talking to us, not The Collins Co.,” Lawson said. “They weren’t involved at all.”

Another property owner, Mia Hale, said she recalled receiving a letter that made it clear that DISD would go through eminent domain if she didn’t agree to a price. She said she negotiated with Ramirez, the attorney DISD had hired. Ramirez declined to comment.

“With eminent domain, I don’t see why there would be a need for a Realtor or broker involved,” said Hale, who is a real estate agent. “You already have an attorney involved.”

Crozier Tech sale

Dallas ISD has used The Collins Co. for at least 16 years. The district hired the firm in 1997 to sell the historic Crozier Tech High School downtown.

Some DISD trustees were outraged with that deal, which paid a 6 percent commission to Debra Peek-Haynes, then a broker at The Collins Co. The News reported that Peek-Haynes and her husband, Friendship West Baptist Church pastor Frederick Haynes III, were friends with top DISD officials, including the chief financial officer. Some trustees tried to stop her $366,000 commission payment, but the vote failed.

Peek-Haynes now owns her own real estate company, Quorum Commercial. It received $23,534 in commission after DISD purchased property for the new O.M. Roberts Elementary School, which opened in August.

Peek-Haynes got a 3 percent commission on properties there. She said she assembled properties for the campus and negotiated with property owners.

“In commercial real estate, you do a lot of networking,” Peek-Haynes said. “That’s business in general. There is nothing odd about that.”

Asked if her relationships with DISD officials helped her get business for the Roberts site, she responded: “Any time you get any business deals, it comes from a lot of networking and building rapport and a lot of doing free work to show that you can actually deliver.”

Low profile

John Collins, who owns The Collins Co., has long kept a low profile. State records show that The Collins Co. has six employees, but an online search found only two properties handled by the company. The company’s website says it was last updated in 2003.

Former trustee Ron Price said that Collins was once one of the city’s top minority commercial real estate brokers. In 1997, Price defended the payments to The Collins Co. for Crozier Tech, saying that the other trustees were just upset that a minority-owned company was getting paid. Both John Collins and Peek-Haynes are black.

However, Price, who advocated building the new Dade campus before he left the school board, said he was surprised by the company’s 9 percent commission on that deal.

“Either Collins negotiated a great business deal for himself or someone within DISD was asleep at the wheel,” Price said.

Leave a Reply

You must be logged in to post a comment.