Local government involved in shady real estate deal

  • 2001-08-16
  • Kairi Kurm
TALLINN - The city government of Tallinn and the district government of Lasnamae are planning to rent a building for the District Council for the next 10 years from the real estate company Tasmo Arigrupp without a public tender. Although the building lacks a number of necessary qualifications, the officials are happy with it.

Lasnamae is Tallinn's biggest district and the last one to be built in the 80s with Soviet-era housing blocks. Most of the population is Russian-speaking and arrived in Estonia from other parts of the former U.S.S.R.

The deal is for at least 40 million kroons ($ 2.28 million), which would be paid to Tasmo Arigrupp over the next decade. It would generate more than 3 million kroons in rent annually for Tasmo Arigrupp, whose turnover is about 12 million kroons a year.

"There's an obligation to carry out public tenders if the renting object exceeds 250,000 kroons,"said Pavel Starostin, head of Lasnamae's executive district administration. A tender should also be held among construction companies since the city is planning to invest about 5 million kroons in the reconstruction of the building.

The Lasnamae District Council also needs approval for the deal from the executive district administration, which turned it down.

According to Jaan Kurm, head of the housing department, the reconstruction costs would later be subtracted from the rent. He said that the two parties are negotiating on the renting price.

"We made two analyses before we decided to start negotiations with one bidder. First, we analyzed which price is the appropriate one for renting rooms in this area. Secondly, we observed whether there were any other vacant rooms in the district. While there weren't any of the appropriate size, we decided to abandon the tender,"said Kurm.

According to Aabram Beinenson, owner of Tasmo Arigrupp, the final price is 100 kroons per square meter after reconstruction costs are deducted from the preliminary 120 kroons/m2. The price also includes utility costs.

The building is being held together by a number of stays, which according to some experts may have to do with a weak construction. According to Beinenson the stays were placed there long ago due to ongoing blasting in neighboring construction sites.

"The building is in a satisfactory condition. The technical expertise we ordered confirmed that it would last another 100 years,"said Beinenson.

Besides the above mentioned shortcomings, the six-story building also lacks a permit from the city of Tallinn's ecological development and planning department stating that the building is safe to use.

Toomas Tauts, head of the department, was surprised about the lack of the permit.

"This is brutal. A building that offers public services should have the permit,"he said.

Safety permits came into use a couple of years ago when the roof of a shop in Mustamae collapsed. Several shops, which failed to get a permit, were closed afterward.

According to Beinenson most of the buildings built before 1993 lack the permit, and it is required only for new buildings. His lawyer Kaarel Halla said that the law was enacted in 1995 and buildings built before that are not subject to it. Beinenson, who was also one of the owners of the bankrupt EVEA Bank, hopes to turn the district into a small city, where an administration center and his trading center would be close to each other.

His company operates the nearby Idakeskus trading center, which rents out office space to several businesses and houses a huge sports center.

Starostin, who also headed the Lasnamae district years ago, is of the opinion that the city should avoid the risky renting deal and build a building of its own, which is much cheaper and more comfortable.

"I'd prefer a spacious big room, where citizens can meet all the officials. The latter wouldn't have an opportunity to fall asleep or play with their table drawers, where some like to collect envelopes."

According to real estate firms, a new building with at least 2,000 square meters would cost around 27 million kroons and could be built in 6 months.

Next year the 150 public officials will have to move out of the Lasnamae administration building, which lies in the center of town and has to be demolished, in order to make room for new development projects. The city government is to decide at the end of August whether Tasmo's building is the right solution.