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Tetra Building’s Appraised $1M+ More Than Tax Assessment

by Karen Goff February 13, 2015 at 9:00 am 12 Comments

Tetra Building in Reston/Courtesy of Tetra The independent appraisal and the Fairfax County tax assessment of the Tetra building that Reston Association seeks to purchases are more than $1 million apart.

The Reston Association Board said on Monday that the appraised value of the 3,200-square-feet set on 3.47  acres near Lake Newport is $2.65 million.

The 2014 county tax assessment for the property, which was formerly the Reston Visitors Center and currently is office space for Tetra Commercial Real Estate, is $1,248,370. The county values the land at $845,840 and the building at $402,530, according to county tax records.

RA announced last month it is seeking to buy the property, which sits amongst other RA properties such as Lake Newport Tennis and Brown’s Chapel Park. The board discussed at a meeting on Monday financing terms and borrwing up to the full purchase price of $2.65 million.

However, the community will ultimately decide wether the purchase goes forward. There will be a member referendum on the subject in April. The referendum will cost about $20,000, RA sources said.

In residential real estate, it is common practice for a home buyer to bid about 25 percent above the assessed value in a home purchase.

However, that is not typically the case when it come to commercial property, said area commercial real estate appraiser Thomas Kirchner. Kirchner is not involved in the appraisal of the Tetra property.

“There are so many factors that go into a commercial property, you can’t just say a certain percentage amount in a bid,” he said. “It doesn’t matter what the assessor says whatsoever. All they are assessing is a piece of property.”

Factored into an appraisal, rather than the purchase, is the “highest and best use of the property.” When you appraise a four-bedroom, 2 1/2 bath home, for instance, it will be used as a residence, so the value is pretty standard.  With a commercial property, the limits are much different, says Kirchner.

“It is what is legally allowed [for the property] and what is economically feasible,” he said. “you can have two identical buildings next to each other, but one is a hotel and one is a condo and they can be appraised with millions of dollars difference.”

Also, complicating matters for this property is the Tetra building has not been sold in more than 10 years and there are no comparable nearby sales since it is an unusual piece of property.

The building is currently used for office space. RA CEO Cate Fulkerson said RA will get input from members at public hearings Feb. 26 and March 26 to determine the best uses of the property.

Some of the suggested uses could include holiday and break camps, after school programs, event and meeting rentals, extended child care for camps, art and fitness programming, all of which would bring in revenue for RA.

The building is in the current Reston Master Plan as a convenience center, which means it could be used for a variety of purposes, including retail and restaurant.

The original plans for the building approved years ago include a second story addition that could make a 6,930-square-foot restaurant, RA officials said. The restaurant would also be allowed to construct up to 50 feet into Lake Newport.

RA is working to remove the convenience center designation under the ongoing Reston Master Plan Phase 2 draft process. RA attorneys are recommending the plan designation be changed to limited office and community use whether RA purchases the property or not.

RA said it will not make the appraisal public until it has a ratified contract for the property.

  • Terry Maynard

    The value of the property “as built” for RA purchase purposes–about $1.4MM–is probably about what the County has assessed it at. That’s the price RA should pay if it buys it. My personal experience is that the County’s appraisals are fairly near the market price mark at the time they are made (Jan 1).

    Indeed, the notion of “appraising” the value of property on what it COULD BE versus what it IS is a somewhat mindless notion. Indeed, my home property could be worth several times its current value if someone wanted to tear down my home and put a mansion on my lot. And my decade old Nissan could be a new Ferrari, but its not. Imagine what our property assessments COULD be???

    Moreover, if the owner–Tetra or potentially RA–wants to put another structure on that property to achieve the +$1MM extra value, they would first have to tear down and then construct a new structure at a cost of much more than the +$1MM gain in the property’s potential value.

    In short, it would be unwise for RA to pay more than the County’s assessed value of the property at the minimum. Moreover, as we go to a community referendum, we need to think about whether the added hundreds of thousands if not millions in costs of renovating or redeveloping the property would be worth the initial multi-million dollar investment.

    As of yet, we don’t even know how RA intends to use the property so we really don’t know if any investment in it would be worthwhile. Indeed, County referendums routinely state the intended application of the funds it seeks to borrow subject to County approval.

    Without a clear, specific, and justified use of this space for the community complete with all the relevant financial details (including future reno/redevelopment costs), its acquisition by RA appears to be unwarranted. If a reasonable justification can be provided (other than “we want it”), Restonians can then judge the proposal on its merits when they vote.

    • Guest

      Could this be a back door way to build that RA indoor tennis center? You know they’ll never give up. Inquiring minds want to know!!!!!!

      • Karen Goff

        doubt it. Not big enough.

    • GB

      Hi Terry,

      I generally agree with you, but not on this one. The only reason that the land has value is because of what could be built on it. Everybody assesses value to things based on how they could use them. Generally that’s how they are currently being used, but not always. For example Washington Mutual bought Reston National because they thought it could be residential. I’m hoping they are wrong, but I’m sure that factored into their offer.

      • Terry Maynard

        Yeah, GB, but re RNGC: They PAID ~$6MM for it–the price of its value “as built”–which was about its County assessed value, not the multi-billion dollar price of a (hopefully forever non-existent) 166-acre housing development they hope it COULD be.

        • GB

          Well yeah, because they were the only ones who thought it could be residential. So they only needed to pay more than everyone else who thought that it could only be a golf course.

        • GB

          If it were widely known/thought that the land could be residential. They would have paid much more.

          • Constance (Connie) Hartke

            Just to clarify the majority owner of RN Golf Management LLC is Northwestern Mutual. Clearly they thought they were getting one over on Reston when they bought 166 acres for such a low price in 2005.

          • Reston Weight Watcher

            It would be great if RA bought the golf course; hopefully Northwestern Mutual will want to unload it after seeing that the community and the County has no appetite for changing it to residential.

        • Reston Southie

          GB is correct–the Tetra property has zoning that will allow for some development, not much but some. We should all hope that RNGC continues to be zoned as open space, which has little value; then maybe RA can figure out a way to buy it. I for one would love to see the Tetra deal work out, it could serve as a model for the acquisition of RNGC.

  • Ed Cacciapaglia

    Some things don’t seem right with this proposed acquisition. The proposed price based on an appraisal far in excess of assessed value seems like a sweetheart deal for the seller. And why do they want to move so quickly on this? What is the proposed usage of the building? Why is RA considering buying this when they don’t even have a definitive plan as to how they would use this building?

  • Constance (Connie) Hartke

    The first public hearing on this possibility is next Thursday at 6:20 pm at RA HQ. I’m looking forward to learning more.
    http://reston.enterprise.localist.com/event/public_hearing_on_referendum_question_for_purchase_of_tetra_property#.VOZEuLDF_iQ

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