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Tennessee Gov. Bill Haslam

Tennessee officials have decided not to extend real estate giant Jones Lang LaSalle's exclusive and controversial contract for negotiating leased office space deals on behalf of state agencies.

The state had the option to extend JLL's three-year contract, which expires Feb. 29, for another year.

But according to General Services Department spokesman David Roberson, officials "decided that the evolving nature of leasing needs makes a new contract more attractive." JLL is eligible to respond to the new request and to any ensuing procurement, he said.

Chicago-based JLL won the initial consulting contract with the state in 2012. It assessed some three dozen government-owned buildings and recommended closing a number of buildings.

When the company's contract was expanded by amendment to include procuring outside leases, which were previously handled by state workers, critics cried foul while Gov. Bill Haslam and top officials said it was far more effective and efficient.

The new request for information asks for responses from prospective vendors "that could handle leasing negotiations in various regions of the state," Roberson said. "This would allow us to enter into contracts with multiple vendors, rather than choose one vendor for lease negotiations throughout the state."

The idea is, Roberson said, "there may be vendors who are very knowledgeable about the real estate market in their region of Tennessee but not as knowledgeable about other regions, so we could potentially get the best expertise in each region through multiple contracts."

That conceivably could result in one broker each for East, Middle and West Tennessee. At the same time, the state says it's likely to use a broker or brokers to handle lease procurements mostly in urban markets.

According to General Services, the department's State of Tennessee Real Estate Asset Management Division has about 475 active leases active across the state. The division continues to handle a number of leases itself.

JLL continues to hold a separate, competitively bid contract to run and maintain a number of state office buildings. That won't be affected by the leasing change, Roberson said.

Haslam, meanwhile, is actively exploring outsourcing building management and maintenance for all state-owned structures, including higher education, prisons, hospitals and more. While administration documents point to a July 1 start date, state officials insist that no decision has been made.

Among the buildings JLL recommended closing were the Chattanooga State Office Building and James R. Mapp Building, both located on McCallie Avenue. They were too expensive to repair, maintain or both, the company said.

While JLL recommended leasing some buildings elsewhere in the state, in Chattanooga's case, however, the company said it would be cheaper in the long-run to build a new building to replace the two it recommended closing.

The Haslam administration ignored that suggestion, with officials saying they didn't want to be bothered with constructing a new building.

JLL earns commissions of up to 4 percent on each lease, which administration officials emphasize is paid by the building owner — not the state. However, officials concede building owners are free to up their price to compensate for the charge.

According to General Services, JLL has made $3.35 million in commissions on 19 buildings across Tennessee since May 2013 to mid-May 2015.

State records show that among them was a $665,464 commission on the 82,500-square-foot lease it negotiated with Eastgate Town Center owners in October 2013 in Chattanooga.

JLL was paid an additional $463,050 commission on the October 2013 lease it negotiated with owners of the former Combustion Engineering office building on Riverfront Parkway.

Contact Andy Sher at asher@timesfreepress.com, 615-255-0550 or follow via twitter @AndySher1.

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