City sometimes pays inflated price for property

A review of the city’s purchases of property during the past six years shows that it sometimes pays far more than the assessed value for properties it’s buying, particularly for large city projects in the downtown area.

However, city officials say assessed value is only one factor in the eventual purchase price. Others can include an independent appraisal, the number and length of leases that have to be terminated, how many tenants the owner has to move and how much income he’s receiving from the businesses or residents in the buildings.

“Assessed value can be a factor,” Deputy City Manager Patrick Roberts said.

He said the city works to respect property rights by avoiding acquiring property through eminent domain. Also, the city has in the past walked away from property that it didn’t need when the price wasn’t right, he said.

The purchase prices listed in available online data also sometimes are misleading without more information, Roberts said.

For example, one of the biggest overpayments the city has made in recent years appears to show Suffolk paying more than $1 million for a property that was assessed at only $83,500, according to online data.

The property, located at 321 W. Washington St., was owned by N&N Land Co., whose principal is Ralph Nahra, until January 2014, when Suffolk purchased it as part of the plans for a new downtown library.

However, Roberts said the land purchase included several properties with multiple buildings, including others owned by Andy Damiani. The properties were negotiated as a group, and Damiani and Nahra decided for themselves how to split the $1.5 million proceeds, Roberts said. Damiani took $450,000, and Nahra received $1.05 million.

At one time during the negotiations, Nahra had 11 tenants in place. One of Damiani’s properties had six years remaining on its lease, with a purchase option clause. All of those factors were taken into consideration, Roberts said.

The third owner of property purchased for the library, WER Rental, received $105,000 for a property assessed at $58,900. Roberts said the difference was based on comparable rental properties and the income history on the property. The owner also had the responsibility to relocate the tenant.

“The city does not want to relocate those tenants,” Roberts said. “We’ve made it clear we’re not going to do that.”

Owners of properties purchased for other downtown projects also received more than the assessed value of their properties, but similar factors inflated the prices the city paid, Roberts said.

Six properties purchased in 2012 for the new city hall were in such a situation. The city paid between 1.84 and 3.1 times the assessed values, but other factors were taken into consideration.

At 432 W. Washington St., the city paid Ballard 3 LLC $185,000 for a property assessed at $59,800.

Roberts said the sales price was based on the percentage increase based on average appraisals on other property in the area versus the city assessments, as well as the fact that the owner had two leases he had to terminate and two tenants to relocate.

Five other properties had similar situations, Roberts said. Appraisals and tenants that needed to be relocated resulted in higher prices for the following properties:

• 440 W. Washington St., purchased from Kalathil Sankaran for $389,000 but assessed at $177,100
• 438 W. Washington St., purchased from Legacy Property Assets for $498,650 but assessed at $180,300
• 436 W. Washington St., purchased from Suffolk Virginia City Employees Federal Credit Union for $340,000 but assessed for $184,800
• 428 W. Washington St., purchased from Sue Parker Burton for $375,000 but assessed at $156,300
• 420 W. Washington St., purchased from Theodore R. Drake Jr. for $185,300 but assessed at $60,100

City projects not in downtown also can see inflated prices. At 886 Carolina Road, the city paid $170,000 for a property assessed at $74,600 for a property that has become part of a land switch with the federal government.

The Army wants to expand from its 1LT Richard T. Shea U.S. Army Reserve Center on Bennett’s Creek Park Road. It plans to do so at the Carolina Road location, while the city intends to renovate the Bennett’s Creek location into a recreation center.

The city initially planned to use the Carolina Road location as a utilities operations center but has since decided that putting utilities on the site would be too expensive.

Roberts said the most recent purchase used the same price per acre as when the city purchased a larger adjacent parcel.

The purchase responded to concerns of local residents hoping for a buffer between the site and other properties, Roberts said. The city now controls the land, so it can plant trees or do anything it determines is needed, he said.

“We felt really strongly about the value,” Roberts said.