Council Questions Taylor's Choice in Jones Lang LaSalle for R/E Services

[DowntownNow]

As reported today in the Tulsa World

size=10pt]Council: Too little bang for big bucks [/size]

by: P.J. LASSEK World Staff Writer
Saturday, March 28, 2009
3/28/2009 3:08:03 AM

Some city councilors think the city hasn't benefited much from a Chicago real estate firm that was hired to market publicly owned land in and near downtown.

"I'm so tired of the city paying big money and getting little to no response," Councilor Bill Christiansen said.

At the urging of Mayor Kathy Taylor, the Tulsa Development Authority entered into a $330,000 contract in 2007 with Jones Lang LaSalle to be the exclusive marketing agent for the sites.

The firm also receives a 4 percent commission on the gross sales of any of the five sites it's marketing.

Councilor Rick Westcott said he doesn't know what the standard is in real estate, "but it seems excessive to pay a percentage on top of a base rate."

Westcott said he is surprised that no serious offers have come on any of the properties.

"I would have expected to have seen more activity," he said.

At Tuesday's committee meetings, Chief Economic Development Officer Mike Bunney told councilors that the firm was paid $292,000 by Tulsa for premarketing services, which included a brochure, Web site and requests for development proposals on three of the five sites.

The remaining $38,000 of the $330,000 was for expenses, he said. The premarketing tasks were completed and have been paid for by the Tulsa Development Authority.

"I found it really bizarre that this company was suppose to be so great, yet nothing has happened," Christiansen said later. "The proof is in the pudding."

He said he knows that the economy is tough right now, "but it shocks me that we didn't use a Tulsa real estate firm or one in Oklahoma. That is just more money going out of state."

The more the city can spend money locally, Christiansen said, the better off it will be.

The sites Jones Lang LaSalle are marketing include the former City Hall site, the former Towerview Apartments site at Third Street and Denver Avenue, the East Village, Evans-Fintube and an area on the west bank of the Arkansas River.

Requests for development proposals have been distributed for the City Hall site, Evans-Fintube and the Third and Denver area.

Bunney said the Third and Denver site, which is across from the BOK Center, is the only property that has received two proposals, but nothing came of them. Still, there continues to be interest in that site, he said.

The city received no bids on the Fintube area, and the bids for the former City Hall site are due at the end of the month, he said.

The contract with Jones Lang LaSalle expires in December. The council was told that the company bought the Staubach Co., which was involved in the city's purchase of the new City Hall building.

A number of things have always disturbed me about this arrangement:

• Obviously the lack of interest generated by JLL on the RFPs that have been issued
• Why was TDA pressured into contracting with JLL by Taylor and Co?  In open meetings, the TDA even questioned after signing why they weren't being informed of progress by JLL and why they had to be fed info from Mike Bunney - all while being the responsible party to a contract and paying out of their operational funds for this.
  

• Why does this adminstration continue to believe that there are no qualified individuals or companies within Tulsa to perform these kinds of services?
  
• Why wasn't there a joint commission agreement spelled out in the JLL contract that would have incentivized local real estate broker participation?  As it stands now, any broker bringing a willing party to the table has to find their own commission in the arrangement, most likely from the Buyer.  While not without precedent, it does little to encourage the local R/E broker to participate immediately.

• How many Tulsa area R/E businesses could have benefitted from a $330,000 contract and kept the money in our city?  $292,000 spent for a brochure, web site and RFPs?  I've known companies to produce better marketing brochures for $10,000, similar websites for anywhere from $1,500-$10,000, and the RFPs?  Could have used the TDA's boiler plate RFPs at no cost than filling in the information.  The RFPs collected by JLL are looked over by JLL but ultimately studied and decided upon by TDA and City's Economic Development.  Nice fat payday to JLL.
• JLL is surprised even by the lack of interest in these parcels.  Was it a lack of understanding the Tulsa market?  An inflated appraisal establishing the Fair Market value?  A lack of direct marketing on the part of JLL?  What efforts have they made outside of handing out a few brochures at the Vegas ICSC convention last year and the website?

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I'd have to take issue with Mike Bunney's comment that nothing came of the two proposals received on the Third & Denver site.  One proposal, which Gaspar is very familiar with, was Raskin's convention hotel development.  I don't think Tulsa will be the site for a four star hotel anytime in the near future but according to Raskin they are still pursuing it. 

The other proposal was the Hamton Inn proposal by CSK Hotels.    http://www.tulsaworld.com/news/article.aspx?subjectid=11&articleid=20081008_11_A1_Amilli456813&archive=yes 

TDA originally offered this site for $1.75 million then later JLL offers it at $2.4 million.  The hotel developer offered the original $1.75 million (approx. 4x what American Residential is paying for the site for Tribune II in the Brady btw) had a project and funding ready to go, an aggressive timetable for completion and yet it was shunned, now the property sits there.  Before Mike Bunney became Economic Development Director, Don Himelfarb was.  He stated repeatedly that because of the new arena, the City wanted to see mixed use that would include an ESPN Zone...talk about dreaming.  There are only 9 in the country and the tenth sure isnt going to be Tulsa.  Their locations include major metropolitan areas:  Anaheim, Los Angeles, Las Vegas, Denver, Chicago, New York City, Baltimore, DC, and Atlanta.  If the City is still keeping this in mind and blocking all other development in lieu of, time to slap em in the face and throw some reality in their way.  The Hampton hotel, if designed right, would have been a terrific addition to the area and supported further surrouding development, something sorely lacking right now.  It would have also addressed a critically needed price point for hotels in the downtown area.

And IMO, the City should find a developer willing to design and support the established goals of the City as for the kinds of development wanted and GIVE these properties to the developer as an incentive. Any ad valorem or sales tax generating development is better than none...right now the City loses money to maintain the properties..oh and pay JLL.

[DowntownNow]

Correction: 

When the TDA began marketing this site in 2006, the original RFP stated a Fair Market Value of $1.6 million..that Fair Market Value would have already taken into account the BOKCenter Arene across the street. 

So, just how did Jones Lang LaSalle establish a Fair Market Value 33% higher just 2 short years later?  TDA is required under certain cirsumstances (such as having used CDBG funds to acquire property) to sell a parcel at Fair Market Value...not inflated value.  This clearly seems to be what JLL has done here.  There was no other major development or land purchase during this same period that justified that kinds of jump.

[TheArtist]

I thought the Hampton project was a perfectly suitable option for that area. Just get some cranes in the air and something around the arena. There are other sites nearby to do more later. But you need to keep the energy and momentum going and show that there is activity happening.  Downtown Tulsa cant be that picky. As long as the development looks good, makes accommodations to be pedestrian friendly and hopefully has some mixed use components, imo, thats a good start that wont hurt anything. As for an ESPN Zone,,,, just make some fun sports decor, 2story with balcony level, with perhaps an over the top, retro deco twist, lots and lots of flat screen TVs, great burgers etc. and Voila,,, "Tulsa Zone" lol

Ya know, if there is one thing we should have learned by now, is that if we cant attract it or get it to move here,,, start our own thing and make it even better. Look at D-Fest, Tulsa Tough, Mc Nellies, etc. Who needs a chain or a big event, when we can create something unique and better. That other cities then want and vie for to boot. Isnt there now a Mc Nellies in OKC? Didnt OKC also try to take D-Fest from us?  I would rather have things that are great and uniquely Tulsa than chain. That will make our city more attractive. The chain stuff will follow soon enough.

[sgrizzle]

JLL was brought in to market the project Nationally and have done that. The brochure (which was more of a small book) was of good quality and I'm sure printing/mailing was a large cost of it. The economy, and Kanbar, have nearly killed the downtown real estate market. National firms (which JLL was hired to market to) are not buying or building anything right now. There are currently about 10 construction projects going on in downtown Tulsa and you'd be lucky to find that many going on in ANY downtown in the country.

I'm not saying JLL was the right choice, but to me it's like complaining right now that someone hired the wrong stock broker because their investments tanked.

[Double A]

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Apparently Taylor the Tryant's BRIDGE program has turned out to be a bridge to nowhere. Just another bureaucracy to give the appearance of doing something until the next election cycle is over.  It's disgusting how fast da Mare can work when she is doing the bidding of the kleptocracy, but when it comes to resolving problems like this, she needs six months to study the issue and report back. Same goes for the disparity study or her new development task force. These issues were being raised before she was even elected and there has been no real progress made. Her majesty has ignored them or payed lip service to meaningfully doing something to resolve these problems, proving yet again if you ain't in the Queen's clique, you get the short end of the stick.

[DowntownNow]

Actually Grizzle, myself and several others complained to the TDA before the contract was signed with JLL.  There were several interested local brokers that also could have projected nationally just as JLL can, and would have done it with a standard broker's fee attached...no need for upfront marketing fees. 

The TDA even questioned it but was basically told they were going to do it by the City.  Its not a matter of crying over spilled milk...its a "told ya so."  Especially in light of the fact that downtown developments that are happening now are being driven by local entities.  We can and should rely on our own talented and resourceful citizens than farm out contracts like these to out of state firms devoid of any real knowledge of our market.

To give you an example, I was contacted by JLL reps during the study phase of their marketing.  I suggested they contact downtown property owners and developers like David Sharp, Michael Sager, Jamie Jamison, Micha Alexander, as well as residential/rental property American Residential, PhilTower and Central Park owners to get a better understanding of their market since they were looking for numbers.  They failed to contact a majority of them, instead relying on general industy information than hard facts presented by those really in the know.

If a firm isnt going to bother to do the due diligence to support the effort, then whats the point?  It wasnt a study or effort worth the $330,000 that could have been put to better use.

[DowntownNow]

Its also funny that you say Kanbar and the economy have killed the downtown market when you sit there and adamantly support the ballpark and its efforts to revitalize the very downtown you say has been killed.  So you say we're spending $39.2 million today on a folly?  Actually I suppose $60 million when you consider the total investment...cause some IDL property owners would have been just as happy to keep their assessment money when the original one ran out if the market is dead.

What about the efforts of the Courtyard Marriott, Micha Alexander's planned loft development (See this week's Urban Tulsa and if you missed the booth at the Home and Garden Show, great rendering), Kaiser's Mathews Warehouse, Tribune II...?  Yes, I can see your point, the downtown has been killed, someone must have forgotten to tell them.

It is the continued short-sightedness on the part of our city leaders to think that there are not viable, well respected and talented professionals and developers here locally already.  That same mentality has been seen again and again over the years from the City and its associated entities - East End Wal-Mart and housing with Tom Seay from Arkanasas, East Village with Global Development from DC, but in the end, its the locals doing it all and now.  Today, we have numbers of East and West coast property buyers and developers looking at our downtown area since we have been able to weather the storm of the national economiy while other markets are sinking.  But deals don't happen over night.

But more to the point, if JLL were such marketing geniuses, why would they have put out an RFP for a piece of land that was appraised at Fair Market Value less than 2 years prior for 33% less?  That shows a level of creativity by a national firm thats well...unprecedented...and unfortunately didnt pay off.  Well, we spent $330,000 to find out...I guess on to the next idea and out of state marketer.  Believe it or not, when that dollar figure is worked into the feasability study for a project, a $600,000 differential can have a significant imact in today's credit market.  It wouldnt take them 2 mins to research what that property was offered at before.

[DowntownNow]

And on a final note, if no one screams of the mistakes made today and does so to force others such as yourself to question them then we are simply doomed to repeat them.

[sgrizzle]

Its also funny that you say Kanbar and the economy have killed the downtown market when you sit there and adamantly support the ballpark and its efforts to revitalize the very downtown you say has been killed.  So you say we're spending $39.2 million today on a folly?  Actually I suppose $60 million when you consider the total investment...cause some IDL property owners would have been just as happy to keep their assessment money when the original one ran out if the market is dead.

What about the efforts of the Courtyard Marriott, Micha Alexander's planned loft development (See this week's Urban Tulsa and if you missed the booth at the Home and Garden Show, great rendering), Kaiser's Mathews Warehouse, Tribune II...?  Yes, I can see your point, the downtown has been killed, someone must have forgotten to tell them.

It is the continued short-sightedness on the part of our city leaders to think that there are not viable, well respected and talented professionals and developers here locally already.  That same mentality has been seen again and again over the years from the City and its associated entities - East End Wal-Mart and housing with Tom Seay from Arkanasas, East Village with Global Development from DC, but in the end, its the locals doing it all and now.  Today, we have numbers of East and West coast property buyers and developers looking at our downtown area since we have been able to weather the storm of the national economiy while other markets are sinking.  But deals don't happen over night.

But more to the point, if JLL were such marketing geniuses, why would they have put out an RFP for a piece of land that was appraised at Fair Market Value less than 2 years prior for 33% less?  That shows a level of creativity by a national firm thats well...unprecedented...and unfortunately didnt pay off.  Well, we spent $330,000 to find out...I guess on to the next idea and out of state marketer.  Believe it or not, when that dollar figure is worked into the feasability study for a project, a $600,000 differential can have a significant imact in today's credit market.  It wouldnt take them 2 mins to research what that property was offered at before.

If you're not going to bother to read, I won't bother to reply.

[DowntownNow]

Oh I read what you wrote, but perhaps you're confused.  In the same paragraph you reference the killing of downtown at the hands of Kanbar and the national economy and then turn around and say that our downtown is the only one doing anything.  Which is it?  To make an argument you have to choose one and stand by your convictions. 

If you're making the arguement that JLL was solely responsible to market those properties on a national level then you join the crowd of the naive that contracted with them in the first place.  JLL should have been marketing to local, state, national and international interests...anyplace/anyone where they could find a buyer.  Simple fact of the matter is that a big national firm essentially chose to ignore the local market and its potential, thats my argument - well really that the adminstration chose to ignore the local market and talen pool (since that was one of my original arguements you failed to address in this post).

By your argument then, JLL pushed a couple brochures to some national prospects...maybe more of a list of known developers they blindly mail out to on a consistent basis, none really expressing an interest in downtown Tulsa per se, but are in the database.  By doing so then, they are entitled to their fee leaving us saying "well, we tried, best of luck Tulsa...and if you need us to do this again, we'd love to!...Just make the check out to Jones Lang LaSalle first."  No need to question the business decision made to first employ them or set a level of expectations for the expense and provide reason and rationale to them.

[RipTout]

Downtown adrift.....

Draw Carver and Washington into the Downtown district.

The only way you get your kids in there is by living or working in that district.

Insure the best teachers remain. Continue to make these Schools America's finest.

Same for early learning centers in the area.

Tax the churches.

Something must happen aside from entertainment features to make downtown livable, affordable, and desirable.

[sgrizzle]

Oh I read what you wrote, but perhaps you're confused.  In the same paragraph you reference the killing of downtown at the hands of Kanbar and the national economy and then turn around and say that our downtown is the only one doing anything.  Which is it?  To make an argument you have to choose one and stand by your convictions. 

Again, I said Kanbar and the economy "nearly killed" downtown real estate. There is a 100% difference between killed and nearly killed since "nearly killed" means that downtown real estate survived despite the economy and Kanbar.

Kanbar's buying up of 1/3rd of available property, making grand announcements, and then sitting on the property was a major "buzzkill" to downtown. Money that could've gone to another developer (like the tribune lofts money) was awarded to Kanbar (then later returned) and other things like the Mayo/5th street plan left many waiting as well. They have torn down two properties and may still tear down more. The only Kanbar property to improve was the Atlas Life building, and that is because someone bought it off of Kanbar. Kanbar's has been decent citizens (through things like the collaboratorium) but they have done nothing significant to further downtown and by sitting on all that property, they make it very hard for anyone else to do it either.

And quit jumping me for JLL. I never said they were a good choice, I just said it's hard to judge their results in current economic climates. They said they would market downtown properties on a national level and they did that. I never said they did it well.