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Report: Outsourcing real estate puts Postal Service at risk
Inspector General sees financial conflict of interest in deal
Question of the Day
The money-losing U.S. Postal Service has put itself at financial risk by outsourcing its vast real estate sales and lease brokering to a company that can represent parties on both ends of deals, according to a new watchdog report.
CB Richard Ellis, the company that does the Postal Service’s real estate negotiations, also can represent those looking to lease and buy postal property, according to the service’s inspector general, who said the practice should be stopped.
The so-called dual representation has already happened in eight lease agreements and two sales since CB Richard Ellis received the postal contract in 2011, according to records.
“We do not believe allowing the arrangement is in the Postal Service’s best interests,” Michael Magalski, deputy assistant inspector general, wrote in a management alert.
In most real estate deals, agents stay at arm’s length from each others’ interests,
But postal officials say dual representation isn’t uncommon and that it already exists under CB Richard Ellis’s arrangement with the General Services Administration, which oversees much of the federal government’s office space.
“By allowing dual agency agreements, the Postal Service can obtain wider exposure to interested parties,” she wrote in an email.
“Commercial and governmental entities have likewise concluded that they benefit from dual agency agreements and that is evident by the fact it is common practice in the commercial real estate industry,” she wrote.
The postal watchdog acknowledged the arrangement is legal at the federal level, but said there’s no consensus among the states.
“When representing the Postal Service, it is important for CB Richard Ellis to be focused on maximizing revenue when negotiating sales and leases of postal properties,” the inspector general report concluded. “This focus is compromised when it is also representing the interests of the buyer, lessee or lessor.”
Company spokesman Robert McGrath wrote in an email that it’s common practice in the industry for the selling broker to bring buyers to the table.
“Indeed, sellers of properties expect this of us,” he wrote.
In cases where the company can represent both the buyer and seller, Mr. McGrath added that’s always disclosed to the Postal Service, which has a chance to consent.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Jim McElhatton is an investigative reporter for The Washington Times. He can be reached at email@example.com.
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