Unbuilt land factors prominently in worth of Steamboat’s downtown commercial property
October 31, 2012
Steamboat Springs — When it comes to valuing downtown commercial properties like the city of Steamboat's police and fire stations on Yampa Street, the amount of undeveloped land attached to the overall property can make a substantial difference.
Steamboat Springs commercial appraiser Kevin Chandler said Wednesday that downtown buildings that don't cover their entire lot can bring with them the advantage of on-site parking, possibly the opportunity to expand on site, or even the ability to sell off a piece of land to defray the cost of the building.
"You can look at commercial buildings on a price-per-square-foot basis, but just like if your house is valued at $200 per square foot on 1 acre or 5 acres, you'd want the same house on 5 acres," Chandler said. "I would pay more for (the city's police and fire building) than I would for (a building) that covers 80 or 100 percent of the site."
Steamboat Springs City Council is in negotiations with the owners of Big Agnes and Honey Stinger to sell them the downtown emergency services building at 840 Yampa St. for $2.1 million. That number is well below the city’s appraised value of $3 million. The building houses the police and fire departments, and the property includes two surface parking lots.
City officials have characterized the tentative sale as the key to accomplishing several goals, including helping to finance a new police and fire station at another site, providing economic development for a local business that has grown to international stature, and stimulating the adjacent commercial district where it parallels the Yampa River.
KC Wilson, who owns the Old Pilot Building at the corner of 11th Street and Lincoln Avenue about three blocks west and one block north of the police and fire station, is up to date on the value of vacant downtown property. He is negotiating for the purchase of a vacant city lot next door to his office building.
He noted that the city's property comprises parts of six city lots ( a detail confirmed at the Routt County Clerk and Recorder's Web page).
"If you take the vacant lots, which are 50 by 130 or 140 feet — let's say they're worth $50 a square foot — you could probably pick them up for just under $400,000 a lot," yielding $2.1 million for the land alone.
"If I could buy a half block in downtown Steamboat (with a large building on it), I'd be all over it," Wilson said.
Chandler, who recently appraised the Old Pilot Office Building for a refit, said the last comparable land sale in downtown Steamboat was in 2008 when a parcel sold for $150 per square foot.
"Back in 2006, it was $75 per square foot," Chandler said. "So it changed that much in two years. My guess is it's $50 to $75 per square foot today. But I don't have comps to prove it."
Chandler said that appraisers look at downtown buildings and their lots in terms of their floor area ratio — the building size divided by the land size.
The 7,000-square-foot Chief Plaza Theater at 813 Lincoln Ave., which just sold for $1.45 million, or $207 per square foot, has a floor area ratio of 1.0 — it covers its entire lot.
In contrast, the Oak Street Plaza commercial center, which sold within the last year for $1.2 million, or $140 per square foot, Chandler said, has a desirable floor area ratio of 0.46 on the 17,500-square-foot site.
The Chief Plaza Theater is in a three-block stretch of Lincoln that affords it the highest foot traffic in the downtown commercial district, Chandler said. But Oak Street Plaza is able to provide parking on site.
City officials have described the emergency services building on Yampa Street as offering 11,000 square feet of building space, but referring to the County Clerk's Web page, Chandler said its size is given as 13,200 square feet. The clerk's Web page says the total site measures 0.788 acres, or 34,000 square feet. And that includes the parking lot at the corner of Eighth and Yampa streets.
The building relative to the site yields a floor area ratio of 0.388, meaning it covers less than half the site.
"That's very low," Chandler said.
Translation? Using the city's appraised size of the building at 11,000 square feet and the proposed selling price of $2.1 million, the price of the building is $191 per square foot — easily below replacement cost. And if the new owner someday wanted to expand the building, the cost basis in the land for the new addition would be quite low.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com