THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, October 3, 1996 TAG: 9610030366
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY ELIZABETH THIEL, STAFF WRITER
DATELINE: CHESAPEAKE LENGTH: 157 lines
The price city officials have agreed to pay for land in Greenbrier for a planned conference center is comparable to the value of similar lots, according to an analysis by The Virginian-Pilot.
The $1.2 million that developer Armada/Hoffler is charging for the 5.64-acre site - about twice what Armada/Hoffler argued it was worth for tax purposes two years ago - was among many concerns being raised by opponents of the conference center proposal.
Questions include the role of Chesapeake-based Armada/Hoffler, the state's largest commercial contractor, in advising the city on putting together a request for bidders; whether the limited process for soliciting bids gave Armada/Hoffler an advantage; whether Chesapeake needs the center; and whether the plan is a good financial deal for the city.
City officials and Armada/Hoffler are due to sign an agreement today setting out the terms of the conference center's construction and operation.
The agreement would give Armada/Hoffler a contract to build the $9 million center on property Armada/Hoffler owns in Greenbrier. The city would lease the center from Armada/Hoffler with an option to buy.
The purchase price would include the $1.2 million for the land - about $213,000 per acre.
Armada/Hoffler is basing its price on an appraisal in August by an independent firm. Armada/Hoffler's bank hired the appraiser. Armada/Hoffler and city officials agreed to abide by the results of the appraisal, said Louis S. Haddad, president of the Armada/Hoffler Holding Co. Armada/Hoffler released a copy of the appraisal on condition that the appraisal firm not be identified.
The appraisal concludes that the best use of the property, which sits behind a Holiday Inn and a Hampton Inn off Greenbrier Parkway, would be for a hotel. Hotel property is lucrative now, so prices are higher than for other types of commercial land.
Earlier this year in Greenbrier, for example, an air conditioning contractor bought a little more than an acre for $115,000. A carpet dealer bought a 1.5-acre lot for $150,000.
Meanwhile, a Georgia partnership bought a 2.1-acre lot on the corner of South Military Highway and Old Greenbrier Road for a hotel. They paid $450,000, or about $214,300 an acre.
The appraisal of the conference center site offers a study of five hotel lots sold in Greenbrier since 1988.
None sold for less than Armada/Hoffler is asking from the city.
Appraisals are based on the best use for the property - the highest profit a seller could expect to get - not what the land is being sold for, said Thomas M. Tye, a Virginia Beach-based appraiser who lives in Chesapeake.
Tye has conducted commercial and residential appraisals for more than 17 years.
Tye said he questioned the Chesapeake conference center deal initially, when he thought the property was slated for use as industrial or office space.
``If the highest and best use is a hotel, then that price seems reasonable,'' Tye said.
Daniel A. Hoffler, chairman of Armada/Hoffler Holding Co., said he believes the price is fair.
``We think that the city got a very, very good deal,'' Hoffler said.
Still, two of the nine City Council members, Alan P. Krasnoff and John M. de Triquet, have questioned whether the conference center is a good enough financial deal and whether it is a high priority in a city that needs roads, sewers and schools.
``If we felt it was a priority issue, we should have looked at ways to finance this in a much more favorable way for the city,'' de Triquet said.
The city's tax revenues on the property over the past two years have not reflected the land's high value. The city has assessed the land at $607,700 since 1994.
None of the other commercial properties sold in the Greenbrier area this year had sale prices that were so dramatically different from their assessed values.
The hotel lot on Old Greenbrier Road, for example, sold in May for $450,000, less than its current assessment of $465,500.
A state Department of Taxation report released this month shows that on average, commercial property in Chesapeake sold for prices that were within 98 percent of their assessments in 1995.
In the case of the conference center property, the difference probably is due to Armada/Hoffler's policy of monitoring assessments aggressively.
``We do that as a matter of course,'' Haddad said.
Armada/Hoffler went so far as to sue the city in 1991 over what the company charged were unfairly high assessments of property. Armada/Hoffler dropped the suits in 1994.
On the conference center site, Armada/Hoffler made three successful appeals over three years to the city's Board of Equalization, a three-member, quasi-judicial panel charged with hearing residents' and business owners' appeals of their tax assessments. The members of the board are appointed by the Circuit Court each year. Their decision on assessments can only be changed by the courts.
Armada/Hoffler's property originally was assessed at $1.36 million. The board lowered that each time the company appealed in 1992, 1993 and 1994.
``The properties were not worth what the city said they were worth,'' Hoffler said.
In all, Armada/Hoffler appealed the assessments of 34 lots during those three years, records of board meetings show. The board agreed to lower assessments on 30.
Armada/Hoffler wasn't the only company trying to lower its tax burden during those years, considered a recession for commercial property.
Appeals ``picked up when the market went south,'' said Robert M. Pollard, the city's commercial appraisal supervisor.
``It's a business decision'' when a company decides to make an appeal, Pollard said. ``They're looking at what's coming out of their pocket. I don't blame them.''
About half of the board's 204 appeals in 1992 were for commercial property. In 1993, 75 percent of the appeals were from commercial land owners. In 1994, it was 62 percent.
Armada/Hoffler, however, was among the most successful at convincing the board to lower its tax burden. In 1992, when the board considered 101 commercial lots, Armada/Hoffler got the assessments lowered on all 10 of its properties. Only 17 other lots were lowered.
The board's records show that Armada-Hoffler representatives submitted extensive documentation to justify their claims that their property was worth less for tax purposes.
Among the documentation was a 1993 appraisal of five lots, including the property now to be used for the conference center. That appraisal listed the best use as office or warehouse space - a less lucrative use than Armada/Hoffler now is billing the lots for.
Armada/Hoffler said the difference is because in 1993, the local market for hotels was dismal. It wouldn't have been feasible to value the property as if it could sell for a hotel, because it couldn't have.
Tye said appraisals can differ from year to year, depending on the real estate market.
``Basically it (an appraisal) is somebody's opinion, based upon their knowledge and their research,'' Tye said. ``It's not a fact to be found. And the highest and best use can change over time.''
Laurence Street, the city's real estate assessor, said once Armada/Hoffler won a lower assessment, his office did not increase the tax burden in later years because they did not have enough new information to justify it.
``We try to be conservative for tax-collection purposes,'' Street said.
``This is uniform with the rest of the properties out there,'' he said. ``I think it's fair. All of the properties out there can't be assessed as hotels.''
Other concerns about the project have emerged.
Armada/Hoffler was the only firm to respond to the city's request for proposals to build the conference center, after the city conducted a limited, low-profile search for developers. The search lasted less than a month.
Also, Armada/Hoffler advised the city's staff about writing the request for bids before the requests officially were offered. Hoffler said it was informal and general in nature and did not influence who would get the bid.
One of the specifications was that there be enough parking to meet the City Code.
The planned site does not have enough space. The city will have to change its own code to allow the center.
Critics also have accused the City Council of rushing the plan.
Council members and city officials who support the plan say they have discussed the idea of a conference center for several years.
Donald Z. Goldberg, Chesapeake's director of economic development, said that ever since he became director eight years ago, he's been told of a need for a large conference center.
The reason for the rush, he said, was because the city wants to begin booking for the center by next year's convention season, which begins in the fall.
``We want to go ahead and start making money if we can,'' he said. ``There's no hidden agenda here.'' ILLUSTRATION: Map
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