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Legislature wants to dump real estate firm after botched property analysis

Erie County legislators want to fire the real estate firm that was looking for better office space for more than 400 Social Services employees who provide child protection and support, foster care and adoption services to thousands of children.

They contend CBRE Buffalo botched its role in soliciting and evaluating proposals. That resulted Carl Paladino making accusations of fraud and bid rigging. Paladino currently leases the old Hens & Kelly department store building to Social Services.

"They did it improperly, by their own admission," said Legislature Majority Leader Joseph Lorigo, C-West Seneca, said of the real estate firm.

The  Legislature Thursday repealed its April agreement to work with the brokerage firm and asked the county attorney to determine whether any commission CBRE would normally receive from the landlord could be recouped by the county.

Erie County spokesman Peter Anderson said the county attorney will review the legislature's decision, as well as the contract between Erie County and CBRE, to determine what, if any, action can be taken.

The 478 Main Street location has been a sore subject with county employees, who complain the building has been poorly maintained, and with Paladino, who said his Ellicott Development company made every effort to address concerns.

Maintenance problems were overshadowed by errors acknowledged by CBRE in its cost analysis. The analysis was supposed to determine whether the county would save more money by remaining at its current location after a complete renovation, or by moving into higher-class office space at 10-12 Fountain Plaza, managed by Ciminelli Real Estate.

The county Comptroller’s Office released an analysis stating that a lease with Ciminelli would cost the county $3 million more than if Social Services stayed where it is.

But a contrary analysis by CBRE showed it would be cheaper, in the long run, for the county to move to the Fountain Plaza location.

It was later discovered that CBRE used incorrect square footage figures to compare Paladino’s bid to Ciminelli’s, making Paladino’s bid look more costly. That led Paladino to accuse CBRE of bid rigging.

Michael Clark, the director of retail tenant services who did the analysis, later told the county that he wrongly referred to the incorrect documents, and as a result, came to incorrect conclusions.

Clark said the faulty analysis was the result of an innocent mistake. But Paladino said it's no coincidence that CBRE receives a larger commission by recommending the Fountain Plaza property over his.

Clark previously estimated the brokerage fee to be $441,933 for the Fountain Plaza location, and $420,302 for the existing location.

County Executive Mark C. Poloncarz said the county hired an outside broker to handle the request for lease proposals for Social Services space because his own staff doesn’t have the expertise. However, he blamed CBRE for the headaches now associated with the project.

CBRE subsequently reissued a clarifying proposal to all bid respondents, which will push back the timetable for any decision by Erie County.

"We respect the decision of the Erie County Legislature to revisit the County’s agreement to receive brokerage services," CBRE Marketing Manager Daniel Nesselbush stated in response to the Legislature action.

He also pointed out that Clark, who worked with the county to develop a viable list of office locations, did the work free of charge to the county and taxpayers.

"Per standard practice in the commercial real estate industry, a broker only receives compensation from the lessor upon execution of a lease agreement and an accompanying commission agreement," Nesselbush stated.

 

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