MWD brushes off Beitler in its quest for new home.

Agency directors query need for outside representation

The Metropolitan Water District last month quietly dismissed the commercial real estate brokerage that had been representing the district in its topsy-turvy search for a new headquarters, the Business Journal has learned.

MWD

MWD Director of Public Affairs Jay Malinowski confirmed that Beitler Commercial Real Estate Services President Barry Beitler was informed in a Feb. 16 letter from MWD General Manager Carl Borokay "that his services are no longer required."

The letter was sent about two weeks before the MWD's Task Force to Review Office Space and Building Sites -- which includes seven MWD directors -- narrowed its search for a 600,000-square-foot (or larger) permanent home to three "finalist" proposals.

Beitler wouldn't even acknowledge that his firm is no longer representing the district.

MWD staffers and task force members said the decision to dismiss Beitler came after directors on the task force -- in a meeting closed to the public -- questioned the need for outside representation. However, real estate sources and an MWD board member said the move reflects dissatisfaction with the work of Barry Beitler and Beitler Senior Vice President George Winters.

Beitler and Winters initially negotiated a five-year lease to temporarily house much of the district's operations at the WCT building in the Central City West district.

The MWD last spring opted to walk away from that commitment -- after $3 million worth of tenant improvement work had been completed -- when developer JGC Finance Co. Ltd. responded to its lender's foreclosure proceedings by filing for Chapter 11 bankruptcy protection.

Beitler and Winters soon thereafter negotiated another six-year "interim" lease for the MWD at the new Two California Plaza highrise on Bunker Hill. A suit subsequently filed by another Beitler broker claimed the MWD had retained the brokerage -- and kept it on board after the WCT deal fell through -- because of Winters' friendship with an MWD real estate staffer.

The suit by Beitler Vice President Danny Miller sought a portion of the commissions the firm received for its work on the two deals, totaling $1.2 million for the WCT lease and $480,000 for the California Plaza transaction.

But other brokers and an MWD board member close to the transactions questioned whether the Beitler team earned its keep.

One source noted that the district's real estate staffers and outside attorneys "had to move Beitler and Winters out of the way" to consummate the deal with JGC's representatives. And the California Plaza deal's lease rate "was pretty much at market," the source added, suggesting that the Beitler team brought little value to the bargaining table.

"We weren't well served" by Beitler, added an MWD board member who requested anonymity. "I'm astonished, even appalled that (Beitler) was retained" even after the WCT deal collapsed and the Cal Plaza transaction was finalized.

While the district had previously maintained that it was satisfied with Beitler's performance, Malinowski acknowledged that the MWD is now "investigating the chain of events (surrounding the lease negotiations) from day one."

He didn't elaborate other than to say that if the district "is owed money, it will go after it if we feel there's a high probability we can recover."

Bill Luddy, a member of MWD's board and the headquarters task force, said the task force and MWD staffers "will work with the three finalists, and we still expect to make a recommendation to the board sometime in April."

Luddy and task force/MWD board member Bob Kazarian noted that the search team will determine whether or not to replace Beitler with another outside broker until selecting a final proposal.

Kazarian said task force members told MWD real estate staffers before Beitler's dismissal that a broker's assistance was no longer necessary.

The three finalists with proposals for the MWD headquarters are Three California Plaza, the Union Gateway development near Union Station, and a highrise proposed for a Southpark district block adjacent to the Transamerica tower.