ANT BITE -- The BMC HypoAppraisal

The long awaited BMC "appraisal"—sort of---has been released by the City. Initially, upon reading the newspapers last week,Aspenites were comforted by the assurance that the value was only $1.45 million less than the $16.8 million paid in December, 2007. But upon further examination of the appraisal, and discussions with real estate professionals, the City is once again being challenged with the outrageous spin they put on the so called, “appraisal.” (Reminds us of the bogus press releases issued after the Burlingame audits.)

Turns out the “appraisal” was a very nonstandard valuation based on “Extraordinary Assumptions” and “Hypothetical conditions”---not what a reasonable buyer would pay!! And one any bank would laugh you out of the room for presenting.

John McBride, one of the most respected developers and businessmen in the valley, who knows this property like the back of his hand, called the public’s attention to the bogus appraisal in a guest column this week. (His columnis both linked and printed in full below.) And from there, the rocks are being uncovered.

We are not ready to write the Ant article on the issue yet, but given the attention it is getting and the blog entries we have received, we want to make as much information publicly available as possible.

Here’s a link to the Aspen Times article:

http://www.aspentimes.com/article/20090313/NEWS/903139970&parentprofile=search

And the City’s Press Release:

http://www.aspenpitkin.com/apps/news/news_item_detail.cfm?NewsItemID=1042

John McBride’s Column “Fantasy Economics” : (also reprinted in the comments below)

http://www.aspendailynews.com/section/columnist/133284

Mick Ireland’s Rebuttal to McBride:

http://www.aspendailynews.com/section/letter-editor/133319

A copy of the “appraisal”: (large file takes VERY LONG TIME to open):

http://www.aspenvotes.org/storage/HypoAppraisal.pdf

Fair Warning At the Time of Purchase:

http://www.aspentimes.com/article/20071129/NEWS/71128041&parentprofile=search

City Documents at Time of Council approval. (Explanation of $450,000+ per unit subisdy!)

http://www.aspenpitkin.com/pdfs/depts/38/cc.res.097-07.pdf 

See the comments below posted initially under issue #28 of The Red Ant “Land Banking Needs a Bailout.” We stand by our conclusions!

Stay tuned.We know that there is much more to learn. The Ant has been asking for a copy of the appaisal every few weeks since late summer, and the City always had some excuse as to why it was not complete. But the long awaitedreport was even more creative than we could have imagined!

Feel free to leave a comment below.

Comments

[Andrew Kole]

The Art of the Bad Deal

In support of John McBride’s claims as to the “real” value of the BMC parcel, I would like to weigh in.
My credentials include being a partner in a mortgage business in New York in the late eighties. During my experience we made a number of land loans – none without a minimum of two market value certified appraisals. Now, the circumstances were a bit different as we were acting as a private bank, but not foolish enough to think we would put a dime into a deal without knowing the “real” value, and factoring in the “downside” of the property.
The argument made by Mayor Mick in his response to John McBride, was that this was different as no bank was required, the city was going to spend its own money. Except it was OUR money - the taxpayers.
Another incomprehensible argument was the land had more value to the city than to an ordinary purchaser – thus we should pay more than fair market value. A basic concept in real estate is to “buy low - sell high”, and if the city could take advantage of the land for whatever reasons, all the better for us.
Those that assert another legitimate buyer was in the wings that would over-pay for the property based on the possibility of re-zoning are delusional.
The claim that because the city was the buyer the asking price was going to be higher, demonstrates a lack of common sense business experience. When a high profile buyer is interested in property one strategy used is to send in a “dummy” buyer – someone in with the specific purpose of establishing the best price and terms of the deal.
If you factor in that the person hired to advise the City in this deal, and prepared the market value “analysis” was getting a Brokers fee, the only conclusion possible is that the “dummy” in this deal was the city.
The City also claimed this purchase would free up some acres land-locked, making this a smart deal. Not so smart, as the city could have asked for an easement, or if refused, condemned the property for market value.
The fact Mayor Mick is defending this deal shows him to be naive and lacking real experience when it comes to business.
Negotiation is a skill. Having a law degree doesn’t make you a good negotiator; it makes you a person with a law degree.
It is obvious the city needs to hire someone who knows how to negotiate, someone who is working for the city only.
In tough economic times, we need to be SMART about our money, not live in a “hypothetical” world.

Andrew Kole