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Steamboat Springs — Tom and Cindy Ptach were weighing options for their commercial building in downtown Steamboat Springs when the sales of two smaller buildings nearby caught Cindy's eye.

The buildings sold for approximately $540 and $546 per square foot she said. Those numbers made the Ptachs rethink their plans. The property, which includes undeveloped land to the west and south of the building, is on the market as a redevelopment site for $3.895 million.

"This spring, a couple of buildings sold downtown at pretty hefty prices," Cindy said. "The market has changed in the last year - especially downtown."

Cindy is a Realtor with Colorado Group Realty. Tom is a certified public accountant. They are the longtime owners of Pilot Office Supply at 1025 Lincoln Avenue. They have no intention of selling the business, they said, and will move it to a new storefront if the downtown real estate sells.

Tom Ptach, a former president of the board of Main Street Steamboat Springs, recently completed a handsome remodel of the brick building, which once housed the "modern" Steamboat post office.

The Ptachs hired a subcontractor to sandblast white paint off most of the red brick to give it a dated look. The building, which is just west of the historic Steamboat Pilot newspaper building (now an art gallery) also was given a new façade.

Concurrently, the business owners had been studying what it would take to clean up lot lines on their property and subdivide the small parking lot they own to the west of the office supply store.

When the city insisted they provide the site with its own water line by running one under Lincoln Avenue, Tom Ptach decided it was more than they wanted to take on.

The couple also considered redeveloping their real estate themselves and had gone as far as discussing that prospect with an architect.

However, when the Ptachs self-appraised their undeveloped land along with the 6,000-square-foot building, they came up with a number that made Tom decide against tackling redevelopment.

"If we can get the price we're seeking, we could realize almost the same mount of profit as we might from redeveloping it ourselves," he said. "What you don't have is the headaches and business risk."

That decision is reinforced by the difference between 15 percent capital gains tax on a real estate resale, versus up to 38 percent for ordinary income resulting from developing and selling a new building, he added.

"Even though we're a block off the 'beach front' property on Lincoln Avenue, that's changing with the construction of The Victoria (at Tenth and Lincoln)," he said. "And 60 percent of our lot is undeveloped."

Tom Ptach said his office supply business has been transitioning to more business-to-business sales and furniture sales for several years. Pilot Office Supply is doing well he said, despite taking a hit on walk-in traffic since the opening of Staples in Steamboat Crossings.

"We're doing fine," he said. "It's just no longer the highest and best use of the real estate. The business will continue, regardless of what happens with this building."

The Ptachs' re-evaluation of their real estate's potential fits in with a trend pointed out by Routt County Assessor Mike Kerrigan. When notices of property tax valuation came out in spring, Kerrigan noted that the land underneath many of the buildings downtown is more valuable than the structures. That trend is driven by redevelopment projects already under way, he said.

Kerrigan said appraisers use comparable sales to value existing real estate. When a downtown building sells and the structure is demolished the "comp" is based solely on the land. Thus, the ground beneath downtown's commercial buildings is valued at millions of dollars.

Does he regret the energy and money he reinvested in the appearance of the building?

Ptach says it was worthwhile to improve the building's appearance, even if its ultimate fate is demolition. The investment supports the price per square foot and adds value to a potential buyer who might invest in the property, hold it and lease it until they are ready to redevelop, he said.

- To reach Tom Ross, call 871-4205

or e-mail tross@steamboatpilot.com