S.O.S. on managing city real estate Offer of help: Baltimore should take advantage of private-sector experts to save money.

April 23, 1996

PRIVATE INDUSTRY DOESN'T have the answer to every problem facing big cities. If it did, the public might use the Fortune 500 list to select its mayors. There are, however, instances where the experiences of business could benefit a city government desperately trying to stretch tax dollars. That especially applies to Baltimore City and its real estate portfolio.

Two years ago, the Colliers Pinkard commercial real estate firm offered to analyze the city's real estate portfolio and make recommendations as to how Baltimore might save money. So sure was Colliers Pinkard that it could do a better job managing city property that it asked for no fee, instead taking 25 percent of the savings derived from its management of any four city buildings in this a 15-month test.

Mayor Kurt L. Schmoke rejected this offer. That was a mistake. The mayor ought to look at New York City, which has admitted it can't manage a fortune in real estate with non-expert city officials. The Giuliani administration has asked four commercial real estate firms to analyze 22 million square feet of city-leased space, determine actual space needs, renegotiate less expensive leases where possible and receive commissions on the new leases as payment.

Comptroller Joan M. Pratt said that her recently departed real estate officer, Julius Henson, had discovered tenants in city buildings without leases and deals where the city is paying operating costs to tenants who pay minimal rent. Who knows what someone with a trained eye might find? It has already been reported that the operator of a city marina was given a sweetheart deal -- an 8-year lease, with no rent due the first two years, to settle a court fight over back taxes and rent he owed.

Mr. Schmoke is reluctant to involve private industry in the management of city real estate. The profit motive for commercial real estate agents can be at odds with the city's best interest. But that doesn't mean such a relationship is impossible to forge. Safeguards can be built into the arrangement so the people of Baltimore benefit. That should be the bottom line.

Savvy management of the city's $3.2 billion real estate portfolio could be the difference in the city having the funds to avoid closing library branches or recreation centers. If the mayor won't seek help to manage property assets wisely, perhaps the City Council should -- for the sake of this city and its taxpayers.

Pub Date: 4/23/96

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