Government and Real Estate & Retail

Indiana taps Meridian to handle surplus land: Second call put out for firms to oversee leasing

October 24, 2005

The state of Indiana has taken a first step in overhauling how it manages its real estate by selecting a local firm to sell surplus property.

Meridian Asset Development was notified Oct. 12 of the state's intent to award it a contract to manage the sale of potentially hundreds of acres of land the state owns.

A contract could be in place within two weeks, pending negotiations over the exact terms, said Kevin Ober, deputy commissioner for the Indiana Department of Administration. IDOA handles property management for more than 377,000 acres of state-owned land.

IDOA also has issued a second request for firms to submit proposals for handling leasing services for the state. The agency oversees $38.7 million worth of leases for various state agencies, excluding universities, courts and license branches.

IBJ reported in August that existing contracts for two firms to provide leasing services for the state give the state little oversight of how much it pays for real estate and how much brokers are paid. Those contracts, with locally based NAI Olympia Partners and the local office of Los Angeles-based CB Richard Ellis, expire in early November.

In seeking to replace those contracts, the state in late July asked firms to submit proposals for a broad array of leasingrelated services, including reviewing the state's portfolio of leased properties for inefficiencies. A second part of the same request also asked for proposals on disposing of surplus land, which resulted in the selection of Meridian Asset Development.

After all proposals were in, the state decided to rebid the leasing portion of the request.

IDOA on Oct. 18 issued a new, scaledback request for proposals for leasing services. The new request asks only for tenant-representation services on behalf of the state, which includes scouting for space for state agencies and negotiating lease terms with landlords. Proposals are due Nov. 4.

In their scope, the new contracts for leasing services will be similar to the existing deals with NAI Olympia and CB Richard Ellis. However, the request indicates the state still plans to look harder at the sticky issue of compensation for brokers. The current contracts allow brokers to negotiate their fees directly with the landlord. Brokers aren't required to adhere to a limit on compensation or notify the state how much they make on a deal.

Eight firms responded to all or part of the state's earlier request for land disposition and leasing services, Ober said. He declined to name the responding firms pending the completion of contract negotiations with Meridian Asset Development.

Ober said it's too soon to say exactly how much land the state thinks it will sell under the contract.

The process of selling state-owned land is governed by state laws requiring, for instance, public notice and bidding procedures. Those won't change, but IDOA officials believe they can generate more revenue from selling land by more effectively marketing it to interested parties, Ober said.

That's where Meridian will come in. Ober and Meridian Asset President John M. Bales II declined to give specifics on the firm's proposal until a contract is signed. Ober said IDOA is working on a process to streamline the required sale process and develop a pipeline of properties to be sold.

Meridian was founded in late 2003 by Bales, Chief Financial Officer Greg Rankin and principals of locally based Meridian Real Estate. Meridian Real Estate and Dallas-based Staubach Co. teamed with Meridian Asset on the state bid. Those firms both will provide services under the state contract, but Meridian Asset is the lead firm.

Meridian Asset's current projects include a renovation of Buggs Temple on the Central Canal. The firm also has worked with the Marion County Department of Community Corrections on a planned work-release facility on the neareast side.

This would be the first significant state work for the company, but Bales has a long history of working with government agencies in Marion County on leasing and development. In 2002, when he was with CB Richard Ellis, he brokered a deal for the Marion County Prosecutor's Office to consolidate its operations in 70,000 square feet at 251 E. Ohio St.


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