To lease or not was school board's question

When the Wake School board decided it needed more space for its administrative operations, it turned to the brokerage firm of Grubb & Ellis for advice.

The firm presented four options: stay put, buy an existing building, build a new building or lease a building.

Grubb & Ellis recommended leasing as the best option, one that over 20 years would save as much as $20 million.

In 2010, the board agreed and Grubb & Ellis negotiated a lease for a central administrative building in Cary. But a year and a half later, the school system is paying rent and still hasn't sold the buildings it vacated last spring and summer.

And even if the old buildings do sell, the system is committed to paying rent that will eventually rise to $4 million annually without a lasting solution to its space needs.

"Twenty years from now, those people are going to say, 'What were we thinking about 20 years ago?' '' said former school board chairman Ron Margiotta, who opposed the deal saying the system should have invested in a building of its own. "After 20 years, we weren't going to have anything."

Rex Thomas, CEO of Grubb & Ellis|Thomas Linderman Graham, said the company's analysis was completely in the system's best interest.

"We always operate on what's best for our client, period," Thomas said. "We communicate everything to the client and it's up to them to make the decision."

County attorney Scott Warren, who was not involved in the deal until it came before the Board of Commissioners for approval, said the process that led to the lease would have been more closely questioned by the commissioners and staff.

A firm both advising and representing a tenant might be inclined to pick a more expensive deal, because the agents' commission was based on the amount paid by the tenant, Warren said.

"We would ask conflict-of-interest type questions," he said. "We would insist on knowing exactly what commission a broker acting on behalf of Wake would receive."

The company declined to disclose how much it earned in commission on the lease of the building from its owners, the pension fund for retired police and fire officers in Detroit.

Thomas, the Grubb & Ellis CEO, responded to Warren's comments: "I don't know what he's talking about other than anybody can armchair-quarterback."

Don Haydon, the school system's chief facilities and operations officer, said staff vetted the work done by Grubb & Ellis before supporting the leasing option at Crossroads.

"We went through their analysis," Haydon said. "We didn't just say, 'Gee, thanks.' The determination was that it was the best option by far."