Taking a brief break from suburban studies since the dear old Arcade is so much in the news.
There is some interesting discussion about what local government can do to smooth the way toward restoration. One of the suggestions floated by Dayton Most Metro was a tax abatment, which also got some attention at the Dayton Daily News opinion blog (along with the usual dunderheaded comments).
Which does raise some interesting questions about what was going on with the pricing of the Arcade.
Here is the most recent property valuation from the auditors website (including some additional charges for things like the conservancy district):
At a value of $2.3M one can see why Tony Staub was asking for, I think, $3M. Staub appeared to be asking for the assessed value of the property, land + improvments ("improvements" being the Arcade complex buildings), plus a bit more. It's doubtfull the buildings where worth that much even as scrap or salvage. And the land was worthless with the buildings on it. Deduct the demolition cost and then the land might be worth something. One suspects that even the demolition cost would have been more than the land was allegedly worth.
Looking at the "value history", the Arcade property was actually increasing in value during the years Staub (dba Brownfield Charities) owned it. Given that maintenance was being deferred and the buildings deteriorating this makes no sense.
As we know from press reports the new owners made a $700K bid on the property via E-Bay. This was actually a bit less than the improvements value.
And the property sold for $615,106, without competetive bidding. This is the "market signal" for the value of the Arcade in it's current state.
So one has to ask was the property valuation ever realistic? And should the owner be paying taxes on $2.3M, when the property sold for only $615K?
I don't think so. I think the property needs to be down-valued to the sales price until restoration is complete and the property leased. Then maybe the property will be worth $2M.
The value history does raise the larger question as to the real worth of old downtown property. This is real estate that can't be rented, won't sell and who's buildings cost too much to tear down. Are downtown property values being held unrealistically high?
Wednesday, March 25, 2009
How Much is the Arcade Really Worth?
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4 comments:
Thanks for the great information. This is the first I've heard that the Arcade was put on E-Bay. You write, "It's doubtful the buildings where worth that much even as scrap or salvage." What something is worth is as interesting question. In a competitive market, worth is determined by the market. Something is worth what someone is willing to pay, and for the Arcade, in March, that was $700K on E-Bay.
But, I've not been paying enough attention. Missing from your article is an explanation of how that amount become $615,106 and how that price came about without competitive bidding.
I've always been confused an the supposed value of a lot of space in the downtown area.. it seems to go against common economic sense of supply and demand. If there is little demand for space, why on earth does it cost so much? If you can't make your available space appealing (whether it's your own fault or other circumstances), then aren't you losing money maintaining empty residence?
And Mike, I believe the majority of that 615,106 was back taxes and other fees owed on the property.
Brian is correct. The sales price was the cost of the back taxes, mostly.
There was competetive bidding. The Arcade was sold at auction. But there was only one bidder thus the high bid was the opening bid, at the price of the back taxes.
Why no other bidders? No one else wanted to buy it.
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As for the value of downtown property, I suspect there is some inertia involved.
As one can see how things are different in suburbia, where property is recycled instead of staying vacant or being demolished for grass. In the suburbs property does have a market, thus some value.
In downtown Dayton, no market, so one would expect property values to decrease, rather than increase as with the Arcade example.
Brian, It never reached the reserve price during the ebay auction.
http://cgi.ebay.com/Historic-Dayton-Arcade-Complex_W0QQitemZ180319708690QQcmdZViewItemQQptZCommercial?hash=item180319708690&_trksid=p3286.c0.m14&_trkparms=72%3A1205|66%3A2|65%3A12|39%3A1|240%3A1318|301%3A0|293%3A1|294%3A50
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