I have several major concerns about the proposed RA purchase of the Tetra Property. These include: The price for the property based on the appraisal report and RA’s rush to purchase without full information being made available to members and the RA approach on this matter.
The appraisal is said to be the source of the price of $2.65 million for the Tetra Property. The report actually has three different appraisal prices, using two different appraisal methodologies.
The $2.65 million price assumes the so-called highest-and best-use (retail, commercial) and further assumes that a restaurant of some 6,900 square feet would be built over a portion of the property that is under Lake Newport.
These assumptions favor the seller, not the buyer.There is no basis offered in the appraisal to support the feasibility of such assumptions.The basis for the restaurant assumption is the carefully phrased statement: “Building plans were prepared in 1981 indicating that it was possible to extend out into the lake further construction of a restaurant building.”(Report, p. 13)
While it may have been possible in 1981, it is not legally possible today. The proposed area of restaurant construction is within the Resource Protection Area under the Chesapeake Bay Protection Act, where nothing can be built. (See the corresponding map of the site, Report Appendix.)
So, how can this approach serve as a basis for the price? The use of this assumption as a basis for the $2.65 million in the face of these facts in my opinion is outrageous.
Other statements are presented in an effort to bolster the $2.65 million price. One is that the seller will not accept less than $2.7 million.Another is that the present owner claims two restaurants looked at the property as a possible location. What is not stated clearly is that they both walked away.Moreover, there is no claim that a restaurant is currently considering the property.
Also not noted in the report is that at one time in the past, a restaurant was
proposed to be built at the same spot and the Lake Newport residents successfully defeated it in court.
The appraisal considered the property as if vacant (no restaurant, but projecting use as a retail commercial center with the highest density possible) using the sales comparison approach and the income approach. The first of these yielded a value of $1.45 million. The second produced an estimated value of $1.09 million. Fairfax County’s assessed value for the property for 2014 was $1.25 million.
One should keep in mind that the RA has an easement over the property for parking and there are some 93 parking spots located on the property. Thus, the RA does not need to spend one penny to avail itself of the parking. Since the parking easement covers a very large portion of the property, that portion cannot be otherwise developed. Additionally, part of the property is under water.
Finally, the spillway for the dam of Lake Newport runs across the property and covers just about all of the property, except for the building itself. Nothing can be built within the path of the spillway. These factors do not appear to have been taken into account with the $2.65 million value or any other appraised value and no negative monetary value was assigned to these factors.
Thus, the development of the property to its highest possible retail commercial value is also, in my opinion, a complete fiction.
Other concerns related to the deteriorated state of the building, including a conference room at the center of the building which “exhibited a musty odor” (Report, p. 11) are not considered in the appraisal valuation.
There is no justification that I can see for the $2.65 million price. In fact, there appears to be overwhelming justification for a considerably lower price. The report’s even lower range of $1.09 million to $1.45 million is questionable.
While the County assessment of $1.25 million, which by law is required to be 100 percent valuation, may be reasonable for some potential buyers, for RA the price should be lower, because it already has the use of the parking spaces and should not have to pay for them again. So why has the RA agreed to pay $2.65 million? I can see no basis whatsoever for RA to pay this price.
Why has the RA rushed to have a referendum on the purchase, while preventing members from seeing the appraisal and contract? Why did RA not release those until after public hearings were concluded?
RA may argue that they were in negotiations and sharing this information would have impaired the negotiations. I think they would have impaired the negotiations, but not by giving the seller information it did not already have. The seller already knew of the condition of the building and also was well aware of the impediments to the development of the property. The
appraisal does not disfavor the seller.
The contract, of course, was well known to the seller. Had members been allowed to see the Appraisal Report before the two public hearings, undoubtedly they would have raised the questions I raise above, as well as others, and would have pressured the RA to stop the deal from going forward.
The simple facts of the manner in which the RA has gone about pushing through this deal should raise questions. The proposed acquisition was dropped into the laps of the RA Board (the majority of whom were unaware of the consideration of the matter before then) on Jan. 22. At that time, they were presented with a sales pitch as to why this was a good deal, without any
time for reflection, and asked to vote on a schedule for presentation of the project to the membership, along with a schedule for a referendum.
Although the vote was unanimously in favor of the schedule, many stated that they wanted more information and were clear that they were not thereby expressing their final approval. Even the subsequent vote on the Letter of Intent (LOI), without having all of the documentation available, was based, at least in part, on the fact that the LOI was not binding.
That the facts have not been clear and disclosed up front, is a further indication of the rush with which this proposed deal has been carried forward.
Finally, the so-called RA fact sheet on the Tetra Purchase is now in its 11th version. This seems to
be an evolving project, not well thought out with regard to the presentation of the purchase itself or the end use of the property. The fact of the rush and the lack of a clear plan presented at the beginning of the affair with all of the information does not engender a high level of trust and confidence that this is something on which the RA should spend $2.65 million of your
dollars, plus the financing charges and building maintenance and repair costs.
At this date, with the contract signed, there are two options remaining. Under the contract, RA can terminate the contract at any time up through April 25, 2015, without penalty and with the return of its deposit, upon its determination, in its sole discretion, that the property (including the improvements) and the personal property are not suitable for RA’s intended use. (See, Paragraph 3 of the Agreement.) It should do this without further ado. This will save the expense of holding the referendum — not insignificant — and avoid the disaster of overpaying for a property it does not need and for which it has no real plan.
The second opportunity is the referendum. This is obviously a more uncertain method for stopping the purchase. However, every person who reads the appraisal and the contract can arrive at no other conclusion than that the proposed purchase should be defeated and that he/she should vote against it.
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