District seeks to dump posh offices
Detroit school board wants to rent out space
April 18, 2007
About five years after Detroit Public Schools sold its headquarters and committed $57 million to buying and leasing swanky offices in the New Center area, the cash-strapped district has decided it can't afford all the space.
And now taxpayers could face a big hit as a result.
The district is hoping to rent out some of the space.
But the rent for much of the 70,000-plus square feet of space DPS leases in the Fisher, New Center One, Albert Kahn and Lothrop Landing buildings are on the high end of what the current market will bear, leading real estate experts to say DPS would either have to eat a portion of the rent to sublease the space or pay $9 million over the next seven years for offices that it cannot afford.
In either event, the leases -- signed when the district paid more for five floors of the Fisher Building than the Farbman Group, a developer, paid for the entire building the previous year -- would be an added expense for the district that has shuttered dozens of schools in recent years to help balance its budget.
"We did not make those decisions, but we have to undo some of them because they're not serving the district," said Joyce Hayes-Giles, the Detroit school board's vice president and finance committee chairwoman.
The last of the leases runs out in 2014.
Detroit school board members, all of whom took office last year and were not involved in the purchase or leases, said the district needs to move offices into one or more of the schools that are closing.
In a memo obtained by the Free Press, board member Marie Thornton listed the prices for the leases -- all with the Farbman Group -- and wrote that she was "appalled." The district pays between $4,120 and $63,784 per month to lease the office spaces -- or about $12 to $19 per square foot -- Mark Schrupp, deputy chief of facilities maintenance and auxiliary services for DPS, confirmed last week.
There's no word on what will happen with the space that the district bought in 2002 in the Fisher Building. DPS spent about $39 million to buy and improve floors nine, 10, 11, 12 and 14 -- about 130,000 square feet -- using money from the $1.5-billion bond voters approved in 1994, Schrupp said. That was more than the $30 million the Farbman Group paid to buy both the 26-story Fisher Building and the Albert Kahn buildings in 2001.
The DPS administration offices moved during the 2002-03 school year into the New Center area spaces after the administration of former Chief Executive Officer Kenneth Burnley sold the former Schools Center Building and four other properties to Wayne State University for $9 million.
Burnley and the district were criticized after local news media reported on the pricey furnishings in the new offices.
Schrupp said the plan to move offices is still developing, but if approved, some administrators could be moved to the all-girls International Academy building on Woodward or the facility that houses Barsamian alternative school after those students move into other buildings this fall.
But that's if anyone wants to sublease the space. The asking price for office leases in the greater downtown Detroit area is $17.78 per square foot. And there is a 26.5% vacancy rate, the highest in a decade, according to an online report by CB Richard Ellis Inc., a multinational commercial real estate firm with offices in Detroit.
The $18.70 per square foot to lease the 18th floor in the Fisher Building was probably more than should've been paid, considering DPS leased major space, said Steve Morris, managing partner of Newmark Knight Frank, a firm with offices in Farmington Hills.
He said DPS may only get $12 per square foot on subleases because landlords typically make standard improvements to lure tenants to office space.
Parent Joseph Williams said as children are uprooted from 34 schools this year to try to save money, it is only fair that the administrators move out of their nice offices.
"Would anybody in this city give their house away and go rent? That's just showing how everybody is taking advantage of our children," said Williams, who is president of the Local School Community Organization at Redford High, which will close this year.
As for the move from rented offices and into schools, he said, "I'll believe it when it happens."
Contact CHASTITY PRATT at 313-223-4537 or cpratt@freepress.com
Copyright © 2007 Detroit Free Press Inc.
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