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EXCLUSIVE: Senator’s husband’s firm cashes in on crisis
The firm, known for its commercial real estate services, is to be paid monthly maintenance fees for each foreclosed property it handles, as well as commissions and incentives. The total compensation can range from 8 percent of the sales price on many residential properties to 30 percent for properties worth $25,000 or less. A smaller firm also won a slice of the work with similar terms, records show.
Most real estate agents earn no more than 6 percent on residential, even on foreclosed properties, and CBRE doesn’t have as much experience in foreclosure sales as other firms, the experts said.
“From everything I know about it, it is a very sweet deal and went to somebody who is less than qualified in dealing with foreclosed residential properties. Their expertise is in commercial real estate,” said Cynthia Kenner, a Colorado real estate agent who specializes in selling bank-owned residential properties and last year helped sell more than 600 foreclosed properties.
“There are companies that are more experienced in selling such properties than CB Richard Ellis,” she added.
FDIC and Feinstein respond
The FDIC said politics was not involved in its decision, noting the contract was awarded after a six-month competition run by career staff who determined that CBRE was “deemed to be technically qualified and their fee structure fair and reasonable.” That means the competition did not mandate the contract go to the lowest bidder necessarily, officials said.
The agency said the above-market incentives were designed to encourage quick sales of the growing number of foreclosed properties the FDIC has inherited during the recession. “The longer the asset is held, the more costly it is for the FDIC, and more expenses are incurred for the assets,” the agency said in a statement to The Times.
Feinstein spokesman Gil Duran said there was no conflict of interest between Mr. Blum’s firm getting the contract and the senator’s legislation. He said she introduced the legislation because it would help prevent home mortgage foreclosures at a time when many Californians were in danger of losing their homes.
“She was not aware of the contract before she introduced the legislation,” Mr. Duran said. “There is no evidence of any relationship or conflict between this foreclosure relief bill and the contract. Senator Feinstein complies with the rules and guidelines of the Ethics Committee.”
Mr. Duran also said Mr. Blum “is not involved in the day-to-day operations of the company, nor does he have any involvement in the company’s contracting.” Mr. Blum declined through a spokesman to comment.
CBRE spokesman Robert McGrath said the firm had $5 billion in revenues last year and was “well positioned” to help the FDIC as the nation’s largest commercial real estate services company. Its pricing was at market rates after a highly competitive bid process, he said.
“We believe the FDIC will realize significant value from all the work we perform on their behalf,” he said.
The contract process
In May, the FDIC began the formal process of looking for help to manage and market its growing portfolio of foreclosed real estate acquired from failed financial institutions nationwide. It sent letters to 33 real estate firms and received proposals from 18.
In November, the FDIC signed a contract with CBRE that could be worth tens of millions of dollars or more at a time when real estate firms are scrambling for business in the distressed economy.
About the Author
By Donald Lambro
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