The city of Mobile used a more-than-three-year-old appraisal to set the sale price for an 11,000-square-foot warehouse and almost a block’s worth of vacant land sold earlier this year downtown to renters who had also been given a right of first refusal to make the buy.
The unusual setup of the deal has raised eyebrows, and a look at comparative properties for sale nearby suggests the city could have gotten a good bit more for the property at 650 St. Anthony St.
The Courtney & Morris appraisal, which set the price for the property at $255,000, was completed in November of 2015, almost a year before it was leased to Gulf Coast Ducks’ ownership through their LLC, Activation Maintenance.
City spokesman George Talbot said the initial appraisal was done because there was interest from a buyer at that time. Talbot said the city ultimately decided not to sell the property and it was leased in October 2016.
“It’s unusual because we did receive an offer in 2015,” Talbot said of the appraisal. “We weren’t looking to sell at that time.”
When owners of the Ducks approached the city about exercising their option to buy the property, Talbot said the city’s real estate department researched it and determined that despite its age the price in the appraisal was accurate.
Lagniappe compared the city’s sale price to other property for sale downtown and found it to be far lower by comparison. For instance a 2,655 square-foot lot at 650 St. Michael Street is listed through NAI Mobile for $90,000, or $33.90 per square foot. To compare, the property at 650 St. Anthony Street was 41,650 square feet, meaning it sold for $6.12 per square foot. At $33.90 per square foot, St. Anthony would have cost $1.4 million. While a price per square foot of nearly $34 was the highest Lagniappe found, no other property examined came anywhere near the $6.12 per square foot Activation paid for the property.
A vacant 23,272-square-foot lot at 211 Jackson Street is priced at 262,000, or $11.05 per square foot. At that rate the St. Anthony Street property would’ve sold for $460,233, not counting any additional value the warehouse might bring. A vacant 20,400-square-foot lot at St. Joseph and State streets sold for $325,000, or $15.93 per square foot. At that rate the St. Anthony property would’ve sold for $663,485.
A lot at 261 Congress St. carries an asking price of $90,000, or $18.78 per square foot. The St. Anthony property would have cost $782,187 at that rate.
While several real estate experts have privately questioned the accuracy of the sale price, describing it as “low,” when reached by Lagniappe for on-the-record interviews others said it seemed about right.
Jack Conger, a broker with Stirling Properties, said the downtown market wouldn’t have changed dramatically in the three or so years since the appraisal was completed.
“A lot of properties have sold for around that price,” he said. “That building would need a great deal of work, so I’m basing it off the land. The building is not worth anything.”
While Conger admitted prices downtown have changed significantly for the better, overall, he said the area where the warehouse on St. Anthony Street is located is on the fringes of more attractive areas.
“It’s not on the corridor,” he said. “It’s a little bit off.”
Other factors the appraisers may have taken into account would’ve been that the building is not climate controlled and had really only been used for storage.
Pete Riehm, a broker from NAI Mobile, agreed the appraisal seemed accurate, despite the years between its completion and the sale of the property.
“You’ll need to put a lot of work into the property to get it going,” Riehm said. “The price is about right.”
However, the nearly city-block-sized piece of property — almost 30,000 square feet of it vacant — sits only a block from St. Louis Street, which has boomed over the past few years and is home to some of downtown’s most high-profile projects. Property just across Dearborn Street from 650 St. Anthony has also undergone a complete renovation within the past three years, and opened as Carzignment. A block away on St. Louis, Fowler Lighting and the Cheese Cottage have come online in the past couple of years, and a new brewpub is being built behind the Cheese Cottage.
The land is also in an Opportunity Zone, meaning it could offer investors some enticing tax breaks if it were developed relatively soon.
Gulf Coast Ducks
Despite the highly publicized closing of Gulf Coast Ducks at the end of last year, co-owner Scott Tindle said the group plunked down $255,000 on the building and land even as they ostensibly went out of business because the amphibious vehicles could eventually come back if the insurance market for them opens up, following a deadly accident last summer in Branson, Missouri.
In an interview with Lagniappe, Tindle said the Ducks owners are confident a National Transportation Safety Board report will blame the Branson, Missouri accident on weather and captain error rather than on the boats themselves.
While there is no timetable for a release of a final report according to NTSB spokesman Keith Holloway, Tindle said owners bought the property in order to keep the boats’ mechanics employed for when, or if, the tours come back. Tindle has advertised online a new business — Five Star Auto Care — as operating from the warehouse in the meantime.
“These ducks are so unique in what they do a typical mechanic wouldn’t know how to just come in and work on them,” Tindle said. “We had like three guys who really know what they’re doing and are very good at their job and they got a couple years of experience and an essential part of reopening the ducks would be to have those guys on the team. Not having them on the team would make it substantially harder.”
It would be “substantially harder” to re-train new mechanics, Tindle said, because when the ducks started, the mechanics trained in Branson, which may not be an option anymore.
“… Honestly, we’re still not tied in with Branson, so being able to send our mechanics to Branson for training is not an option,” he said. “I mean, it would be a very slim option, but never say never.”
Origins of the deal
Tindle said he first approached the city about leasing the space, after he found it while driving around downtown looking for a unique building to store and maintain the duck boats.
“I’m driving around downtown and I’m trying to figure out where is a building that’s got doors tall enough, (we needed) 13-foot tall doors to get the ducks in,” he said.
Tindle did some research, found out the city owned the building and contacted Mayor Sandy Stimpson’s office and former Chief of Staff Colby Cooper.
In an email message, Cooper confirmed he was involved with the initial lease agreement with Activation, along with the city’s asset management, real estate and legal departments.
“The lease request was reasonable and at the time the city remained very interested in recouping interest in some of (the) 170+ buildings and the 3.1 million square feet of property it owned by selling or leasing space,” Cooper wrote.
Neither Cooper nor Tindle remember who came up with the idea of a first right of refusal on the ultimate sale of the property. Tindle said he “would guess” the idea came from Activation.
“Honestly, I don’t deal much with the real estate side of it, but I would guess it was ours because what we wanted to do was be able to protect the fact that we’re going to have to move equipment in there, invest money to be able to set up to keep the ducks safe and then if someone were to come along and buy it, we didn’t want to get — because we knew the building was also for sale,” Tindle said.
In an earlier interview, one of Tindle’s partners in the Duck Boats, Grant Zarzour, also said he couldn’t remember where the idea of a first right of refusal was born.
Cooper, who Tindle said is a close personal friend, said he “did not give a second thought” to the right of first refusal proposal.
“The management of the Gulf Coast Ducks were making a sizable investment in Mobile and a clause of this nature is not out of the ordinary in real estate transactions,” Cooper wrote. “Additionally, because this lease would face public scrutiny via a City Council approval process, any objections to the lease had a chance to be heard and considered.”
The clause may not be “out of the ordinary” in real estate, but it may well be a unicorn when it comes to sales of city property. After weeks of being asked to show other instances where the the city has offered a right of first refusal to a renter versus putting the land up for public bid, city officials have provided none.
In this situation, Activation Maintenance exercised its option to purchase the property, and that was unanimously approved during the annual pre-Christmas City Council meeting at Old City Hall, then laid over for 12 days during the holidays. Only someone paying attention to the council meetings would have known there was an opportunity to bid on the property.
Normally, public property is sold to the highest bidder after being advertised for several weeks in a local newspaper. In other cases, a request for proposals is posted for the property. The city has not offered a reason why it would have been financially advantageous to not open the St. Anthony Street property up for a public bid where it might be purchased for more than the appraised value.
If a favorable NTSB report doesn’t come and the Ducks owners are stuck with the building, Tindle said he doesn’t know what they’ll do.
“Like I said, I’m a third of the decision making process,” he said. “As far as I’m aware of there are no ongoing plans to develop the property beyond its current use.”
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