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But in a series of non-arm's-length transactions, CBRE has sold 20 percent of its postal portfolio to its own clients and/or business partners. In Boston, it sold a parcel at a large discount of its assessed value to a developer with whom it was partnered. And it sold another Boston parcel to one of its largest shareholders, Goldman Sachs Group. Real estate industry ethics require agents to get the best deal for their clients (in this case, the US Postal Service), not for their business partners and owners.
CBRE kept the entire seller/buyer commission of up to 6 percent in 34 of 52 transactions. In the majority of these deals, CBRE appears to have represented the interests of the buyer as well as those of the seller, even though CBRE was originally contracted to represent only the interests of the Postal Service.
Astonishingly, CBRE's contract was amended in 2012, at the request of CBRE, to allow it to negotiate on behalf of both the Postal Service and prospective buyers.
To be fair, CBRE need not shoulder all of the blame for the $79 million in lost revenue. In his June 2013 audit, the post office's inspector general reported that executives running the Postal Service Facilities Division were not properly monitoring the CBRE contract.
Williams found that:
• the dollar amount of the contract was improperly open-ended and posed a risk of runaway costs. The original $2 million budget had unaccountably tripled.
• Facilities Division officials improperly paid CBRE invoices without checking for fraud. At least 227 invoices worth $1.7 million were paid without proper oversight — "present[ing] an increased risk of fraud [and] pos[ing] an increased risk to the Postal Service's finances, brand, and reputation."
In short, the normal checks-and-balances mechanisms for preventing conflicts of interest and contract fraud have been missing in the monitoring of CBRE's performance by Facilities Division officials. Given the ethical norms at play on the top floors of the Postal Service's headquarters at L'Enfant Plaza in Washington, DC, this is not surprising. The inspector general has also reported that high-ranking Postal Service executives have charged home mortgages and European vacations to their government credit cards.
And Facilities Division expense reports reveal that staffers have purchased hundreds of thousands of dollars worth of expensive dinners, online gift cards, books, and even toys with their government-issued credit cards. The division's chief, Samra, has billed the deficit-ridden Postal Service for flying first class to Europe, even though he personally is worth as much as $98 million.
The Postal Service was given a list of the key facts and analysis reported in this investigation. Through his spokesman, David Partenheimer, Postmaster General Patrick Donahoe declined to comment.
The Boston Seaport Deals
CBRE is a major player in the development of a brand-new neighborhood in downtown Boston called the Seaport District. The mixed-use district is slated to revitalize 1,000 acres of abandoned railways and crumbling docks that surround the Boston Convention Center. The linchpin of the giant redevelopment project's design is the upscale Channel Center, which will sport expensive residences, office buildings, and grassy parks. A portion of the project is sited on Postal Service land that has been sold by CBRE to the developers.
In Boston, during 2012, while acting as the Postal Service's agent, CBRE sold real estate at less than its assessed value to a group of developers called Commonwealth Ventures LLC, with whom it was partnered in a redevelopment project. CBRE also sold a valuable parcel in the same development project to one of its largest stockholders, Goldman Sachs Group. These and a host of similar transactions around the country raise questions as to whether CBRE improperly benefited from selling postal properties to its clients and business partners.
According to the Channel Center developer, Commonwealth Ventures LLC, CBRE is a member of its development team, which provides real estate services to the project. Commonwealth Ventures is also partnered with AREA Property Partners, which has collaborated with CBRE on other real estate ventures. Another CBRE client, the real estate arm of General Electric Corporation, is also a member of Commonwealth Ventures' Channel Center team. In what appears to have been a conflict of interest, CBRE has acted as the broker for both the Postal Service and the Channel Center development partnership, which is composed of its clients.
In September 2012, AREA Property Partners paid the Postal Service $10.3 million for a parking lot on which the company planned to construct the Channel Center parking garage. The Postal Service was represented by CBRE in the sale, even though CBRE is also the agent for the Channel Center developers, Commonwealth Ventures, and AREA.
According to the Boston Assessor's property database, the parking lot was valued at $12.4 million in 1991. This key piece of real estate in the Channel Center project was sold by CBRE for 20 percent less than it had been valued more than two decades before. In addition, because CBRE is also a member of the development team, the sale raises questions as to whether the company stands to reap additional profits from the Channel Center project.
Remarkably, the invoice that CBRE submitted to the Postal Service's Facilities Division for the sale of the Channel Center parking lot to Commonwealth Ventures did not contain an address for the property sold, only the notation "0 Square Feet." Under "value," someone wrote, "?" Nowhere on the undated invoice does the purchase price appear. Nor does the invoice reference a contract number, nor any form of payment authorization. It demands a "flat fee" of $377,500 for negotiating the sale, even though the CBRE contract does not allow for flat fees. Nonetheless, the incomplete invoice was paid by Postal Service facilities executives.
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