The Gwinnett County school district spent nearly $9 million more for three properties than the price developers and investors had paid for those parcels just a few months earlier, an Atlanta Journal-Constitution investigation has found.
And in a fourth transaction, the district paid $12.5 million for land about a year after investors bought it for $6.5 million, the AJC found. That property became the school system’s new headquarters.
In at least two of the purchases, the real estate groups got the land under contract after — or around the same time — the school district expressed interest in the property, documents and interviews show.
The four deals, which occurred between 2005 and 2007, cost the district a total of nearly $42.6 million. Had the school district acquired the property for the same prices the real estate investors paid for it, taxpayers would have saved $14.55 million.
“This is something the school board cannot afford to let fester. They need to address it immediately,” said Sabrina Smith, chairwoman of the taxpayer watchdog group Gwinnett Citizens for Responsible Government. “If there was anything that was not above board, they need to expose it immediately and ensure that it never happens again.”
Dr. Robert McClure, chairman of the school board, said the board will look into the matter.
“Anytime anyone raises a concern about what we do with the public’s money, I’m concerned about that,” he said. “We will certainly investigate it.”
In fact, the school district is about to propose several changes in its land-acquisition procedures as a result of the AJC’s inquiry. (See accompanying article.)
Gwinnett’s school system has grown at a breakneck pace, adding nearly 50 new schools in just 10 years, and is now the largest school district in the state.
These four transactions offer a window on how a school system with a massive building program does business. With its enrollment growing by more than 50,000 students since 2000, the district has a voracious appetite for property in a county that also has an aggressive development community. In eight cases the AJC has documented so far — the four in today’s article and four others detailed by the newspaper in March — the investors made hefty profits, most in short periods of time.
In a phone interview, Gwinnett schools Superintendent J. Alvin Wilbanks said developers might beat the school district to a piece of property because school staffers must thoroughly review the land before they buy it.
“We’re not in the habit of putting a piece of property under contract until we know that it’s suitable for what we want,” he said. “Someone else can go purchase it or they can do whatever. We don’t have any control over that.”
Being one step behind the developers and investors, however, has cost taxpayers dearly.
Neighboring school districts in Fulton, Cobb and Cherokee, all of which have experienced rapid growth, said they have not seen the kinds of transactions that the AJC has documented in Gwinnett.
“We have not had a developer or investor put land under contract around the same time we were looking at that parcel,” Cherokee schools spokeswoman Carrie Budd said in an e-mail. “We also have not had land under our consideration be purchased by a developer or investor while we had interest in it.”
Gwinnett schools Chief Operating Officer Jim Steele, who is in charge of buying land for the district, said Gwinnett schools are at the mercy of shrewd real estate investors.
“We have no choice but to deal with the person having legal control of the property,” he said in an e-mail. “During the period of rapid growth in Gwinnett County, the most suitable parcels and good real estate had interest from many developers and investors.”
Steele defended the purchases, saying the school district got two appraisals on each property, and the purchase prices all fell below the higher of those two appraisals.
Steele declined to grant an interview to the AJC. He also declined to allow any of his employees who handle land purchases to talk to the newspaper. Instead, he only agreed to answer questions by e-mail.
The numerous developers and investors involved in two of the deals, including former Grayson mayors and city councilmen William “Stacey” Britt and Doug Wilkerson, did not return calls seeking comment.
‘Not ... in our back pocket’
The two other deals involved the same Atlanta-based real estate company, Solution Property Group.
When reached by phone, Solution Property Group’s co-founder, Eben Hardie, said his company did not go into either of the purchases planning to sell the land to the school district.
“We did not have the school system in our back pocket when we bought them,” said Hardie, who runs the company with partner Malvern Hill. “We had not discussed the deals with them in any way, shape or form.”
Solution Property Group’s two deals with the district were the most profitable of the four. The group grossed $6 million in one and $5.8 million in the other.
In the first deal — the property that now serves as the school district’s headquarters — Hardie and Hill teamed up with Wayne Mason, a one-time Gwinnett commission chairman and one of the most prominent real estate investors in metro Atlanta.
It was in these two cases that the investors got the properties under contract after — or around the same time — the school system had expressed interest in the land to real estate agents, according to school district records and interviews.
Mason did not return a message left at his home seeking comment.
School system loses out
One of the deals involved a 34-acre tract in a business park near Suwanee.
On Jan. 18, 2007, the school district contacted the property owner’s real estate agent, records show. The agent, Adam Richards, invited district staffers to take a tour, and several did on Feb. 9, 2007.
A school district document indicated that the sellers were asking $19 million for the property, which includes a nearly 500,000-square-foot manufacturing facility — two-thirds of which is warehouse space.
But Hardie and Hill beat the district to the punch, records show. On the same day as the tour, Richards sent an e-mail to school officials about another investor in the mix.
“We are very close to going under contract with a local investor,” he wrote. “In fact, a contract is currently being negotiated.” (Richards did not return messages from the AJC seeking comment.)
Hardie, Hill and a third investor, J. Brad Smith, got the land under contract soon after that and then bought it for $17.2 million on May 9, 2007, property records show.
Hardie said his investment team’s acquisition of the property was a matter of expert timing.
“The key in my business is to be the guy standing there the day they decide they want to sell,” he said.
Two days after the sale, the school district made its first offer on the property. The district bought the land for $23 million — nearly $6 million more than the investors paid for it four months earlier and around the peak of the real estate market.
The land’s location in the heart of a sprawling business park prompted criticism from other owners in the park who called the decision “unwise” and “unsafe for the children,” district records show.
Steele, in an e-mail, called the remarks “absolutely absurd.”
“This is not a typical enclave business park,” he wrote. “It has ample safe and easy cross-street access points. Our schools’ start and dismissal times will not coincide with the heavy traffic use times of the other facilities in the area.”
The property does not yet house any schools, though the district is using some of the warehouse space. School officials plan to fill it with an elementary and middle school in two or three years.
New appraisals
In 2005, the school district bought a piece of land near Duluth that would eventually become Ferguson Elementary School.
It’s not clear whether the real estate firm that sold the land, the Columns Group of Alpharetta, got it under contract before the district became interested in it. Columns Group President Curtis Hicks Jr. did not return calls seeking comment, and public documents obtained by the AJC offer contrasting time frames.
In the deal, the school district paid $1.05 million more for the land than the Columns Group spent on it four months earlier.
Given the appraisals obtained by the school district, Steele was authorized to pay as much as $3.55 million for the property.
But the actual sale price for the property was $4.3 million, records show. The AJC’s investigation showed that Steele’s staff had the land reappraised three months after getting the original appraisals.
This time, one of the appraisers came back with a valuation that was $1.1 million above his first appraisal — a 34 percent increase.
Steele says his staff reappraised the land because they believed they would have to take the land through condemnation.
“We thought we were headed to court and in order to be properly positioned to condemn this land, we needed a current updated appraisal,” Steele said.
District policy provides that staff obtain two appraisals of property, and Steele is barred from paying more than the higher of the two appraisals without the board’s authorization.
In this deal, the district’s two appraisals were for $3.35 million and $3.55 million.
Both fell in line with the sum that the Columns Group paid for the property three weeks later, $3.25 million.
In negotiations, the Columns Group refused the school district’s “top offer” — presumably $3.55 million — and wanted $1 million more, records show.
When asked what the school district’s top offer was, Steele said he did not know.
District policy states that if a property owner refuses the top offer, “the board decides if it wishes to increase the offer or exercise the right of eminent domain.” In its vote to pursue the land, the board authorized Steele to use eminent domain if necessary. But executive session minutes detailing the vote say nothing about authorizing the district to offer more than the appraised value.
Regardless, based on the revised appraisals, the district paid $4.3 million for the land.
In a phone interview, Lee Nelson, who handled his company’s sale of the land to the Columns Group, said he thought he got market value for the property.
When told how much the school district paid for the land four months later, he said: “Oh shoot, don’t tell me that. Now I feel bad. I thought I was getting a good deal on the land back then.”
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