Testimony focuses on disparate appraisals
Last Updated: 15:49 December 13, 2013
Or is the 94,000-square-foot store and seven acres surrounding it worth less, like the $3.03 million arrived at by an appraiser hired by the Longmont Urban Renewal Authority that plans to condemn the property to move forward with redeveloping the Twin Peaks Mall?
That was the common thread in testimony as attorneys for Dillard's Inc. (NYSE: DDS) and the Longmont Urban Renewal Authority faced off for a second day in a Boulder District Court courtroom presenting evidence to a three-person board that will decide the preliminary price for the store.
The proceeding is scheduled to last through Friday. The three-person board is expected to set the Dillard's store's preliminary legal value so that the store's title can be transferred to the Longmont Urban Renewal Authority and an $80 million redevelopment project can start at Twin Peaks Mall. A five-day trial to decide the store's final value is slated for April.
The $6.3 million appraisal was based on the "income approach" of valuing property, witnesses said. However, the Longmont Urban Renewal Authority attorneys argued that the Dillard's average annual sales per square foot couldn't support the $6 per-square-foot lease price that was used in the appraisal. While Dillard's owns the store, the lease rate "income approach" is one of three common approaches used in such real estate appraisals, witnesses said.
"(Dillard's) couldn't have a $6 lease, because under that scenario they wouldn't make money," said Don Ostrander, an attorney for the Longmont Urban Renewal Authority.
Most big-box stores pay $8 to $14 per square foot on leases, depending on where they're situated, said Larry Stark, president of National Valuation Consultants in Denver, who came up with the $6.3 million appraisal price. During later testimony, Stark said he thought the property would sell for less than $6.3 million if it was unoccupied.
A "sales comparison approach" and a "cost approach" also are common ways to value properties in appraisals, and testimony also focused on those areas. Attorneys and witnesses also discussed "functional obsolescence," the idea that a property can come to the end of its useful physical and economic life. Building obsolescence can be cured through renovation, however, Stark argued.
Stark said Dillard's invested $600,000 recently to reroof the store in Longmont, and that the store features a modern interior that would help it function well at the Flatiron Crossing mall in Broomfield.
Allen Ginsborg, principal in the company NewMark Merrill Mountain States LLC, the owner of the mall, said the Twin Peaks Mall area cannot handle any new department stores. Ginsborg said he asked Macy's Inc. to consider opening a store in Longmont but was turned down because of the department store company's other stores in the region, including one in Boulder and another in Westminster.
"There's sufficient demand for the plan we want to build, but we're 'over-stored' in terms of department stores," Ginsborg said.
The Village at the Peaks redevelopment project is to be anchored by a Sam's Club, a Whole Foods Market grocery store and a renovated movie theater.
The proceeding is expected to wrap up Friday, although the three-person board is expected to visit the Dillard's store in Longmont Saturday, according to William Gray, the person chosen to chair the board. Gray did not say when the board may issue its price decision.
Gray, a lawyer at Purvis, Gray LLP in Boulder, is joined by J. Marcus Painter, a lawyer at Holland & Hart LLP in Boulder and B. Scot Smith, a real estate broker at Colorado Group Inc. in Boulder on the board.
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