HomeMy WebLinkAboutGBF Purchase Proposal To : Corby Alexander, City Manager, La Porte
From: Bob Stokes, President, Galveston Bay Foundation
Subject: GBF initial offer to purchase properties owned by City of La Porte
Background
The city of La Porte and the Galveston Bay Foundation (GBF) have engaged in negotiations
regarding three parcels of city-owned property, located between Sylvan Beach and Sea
Breeze Park (HCAD parcels 0402770000002, 0630090060001, and 0630090070001),
commonly known as the Klein Retreat and Happy Harbour properties. For the purposes of
this document, the parcels are referred to as Tract A, Tract B and Tract C (see map, below) .
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These negotiations were authorized by the La Porte City Council at its regular meeting on
October 13, 2014. The city commissioned an appraisal of Tract A (approximately 3 .68
acres) from R. C. Chuoke & Associates in August, 2014, which valued this parcel at
$ 10/square foot. GBF staff Bob Stokes and Kate Vickery met with Mr. Alexander on October
21 to begin the negotiation process. Mr. Alexander indicated that the city would like to
receive $ 12.46/square foot or $ 1,600,000 for Tract A, and would extrapolate the value of
the additional two parcels based on that price. He also confirmed that the city would be
willing to award GBF an extended option period ( 12- 18 months) so GBF could raise the
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funds necessary to purchase the property at the negotiated price. Mr. Alexander asked GBF
to bring the city "best price' in the form of an offer for the city council to consider.
The GBF board has authorized Mr. Stokes to move forward with the negotiation process
and advised staff to obtain an independent appraisal for all three parcels. Staff
commissioned a new appraisal from Bullitt and Associates and received the report on
November 21, 2014. This appraisal includes property valuation for Tracts A, B and C
together, determined to be $8.04/square foot and Tracts A and B together, determined to
be $8.00/square foot. This market value was determined using a comparison of
comparable property sales and current listings (four of which are the same as the
comparable sales used in the Chuoke appraisal) and making adjustments for size, quantity
of water frontage, location, and flooding potential.
Summary of GBF offer
Parcels: Tracts A, B, and C (7.005 acres = 305,138 usable square feet)
Price: $9.00/square foot
Closing date: June 30, 2016
Earnest Money: $10,000, paid by GBF upon signing earnest money contract
Explanation of GBF Offer
GBF staff has closely inspected both the Bullitt and Chuoke appraisals and has consulted
with GBF's board of directors. GBF would like to offer $9.00/square foot for the purchase of
Tracts A, B, and C. We feel this price is reasonable based on the following considerations:
• The appraisal commissioned by GBF indicates that Tracts A, B, and C should
command a market value of $8.04/square foot given comparable sales and listings
in the area. This data is current as of November 2014.
• GBF believes that the Chouke appraisal places the value of the property higher than
its true value. This may be primarily because there are few truly comparable
property sales in the area. Three of the four land sale data points used in the Chouke
appraisal were for properties one acre or smaller; smaller properties command
much higher per square foot values than larger properties. Indeed, the only
property located in La Porte is .4643 acres and sold for $11.86/square foot, while
the other three comparable properties were sold for between $6.23-$8.78/square
foot. The appraiser also took very minimal adjustments into account for property
size, and made no mention of the differences in water frontage among the
properties. In fact, the adjusted sales value for the comparable properties was
calculated to be $8.97/square foot.
• There is a 4.775-acre property currently for sale located at 1500 Roscoe Street
(across Deer Creek from Sea Breeze Park) for $2.25M, or $10.77/square foot. Both
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appraisals use this as a comparable listing, and it is the most similar to the city -
owned parcels because of its zoning, location, size, and among of water frontage. It
should be noted that this property's value is incorrectly stated in the Chouke
appraisal, however. The appraisal has the square footage incorrectly calculated to
be 179,729 square feet, whereas 4.775 acres is actually 208,217 square feet. Based
on this incorrect size, the Chouke appraisal states that this property is listed for sale
at $12.50/square foot, when in fact the property is listed for $10.77/square foot.
Even at this price, the property has been on the market for some time, indicating
that it may be priced too high.
• Despite the fact that we think the City's appraisal at $10.00/square foot is inflated,
and that our appraisal reflects a more accurate valuation, in the spirit of
compromise, we suggest meeting in the middle at $9.00/square foot. The offer of
$9.00 also takes into consideration a reasonable expectation of appreciation in the
value of the property over the requested option period (June 30, 2016). The price of
$9.00/square foot is a 12% increase over the estimated current value of
$8.04/square foot. This increase is significantly larger than the anticipated increase
in the consumer price index, which has hovered between 1.5 and 3.2% since 2010.
• The offer price of $9.00/square foot will realize a profit for the city. The city
purchased Tract A in 2004 and Tracts B and C in 2009, for approximately
$11400,000. At $9.00/square foot, GBF is offering to purchase the three parcels for
approximately' $2,700,000, for a $1,300,000 profit to the city.
• The property is currently zoned for medium and high -density residential use, but
demand for this type of use in the area is minimal. As stated in the Bullitt appraisal,
"Based on growth statistics in La Porte of an 8.7% population increase between
2000 and 2013 in contrast to a 28% increase in Harris County and a 27% increase in
the State of Texas during the same time frame, and considering the minimal recent
medium to higher density residential development in the city, demand for medium
to high density residential development of the subject tracts does not appear to be
guaranteed, or even likely in the near future and is not considered to represent a
feasible current highest and best use of the tracts." The appraiser went on to
conclude that single-family residential, institutional or government recreational
uses are more feasible for the tracts. Similarly, traditional commercial development
is unlikely at the site, indicating that a lower sales price is appropriate. The Chouke
appraisal came to the same conclusion.
• The City of LaPorte will realize financial and non -financial benefits from having GBF
build its headquarters on this land.
� Total purchase price contingent upon agreement on the square footage —this calculation is
based on the Bullitt appraisal's assessment of 305,138 usable square feet.
o GBF's headquarters and programming will help La Porte realize its vision of
being a "City by the Sea," articulated in its 2012 Comprehensive Plan, by
revitalizing the currently underutilized waterfront.
o GBF programming will bring 30+ full-time jobs as well as visitors, partners,
and tourists to La Porte who will contribute to the local economy.
o GBF will offer boat rides on Galveston Bay to both student groups and
tourists and will serve as a "destination" for regional visitors.
o GBF will partner with the city on programs and events.
o GBF anticipates building a facility with meeting/event space for at least 100-
200 people and will happily develop a program to make its building easily
available for community groups and the city of La Porte when it is not in use
for GBF's own programming.
o GBF is committed to making meaningful improvements to the bay shoreline,
increasing local fisheries, water quality, and scenic beauty of the area.
Needed to move forward
1. GBF and the City need to agree upon a final purchase price and the terms of an
earnest money contract, including due diligence and closing costs.
2. GBF and the City need to agree upon the usable square footage of the three parcels.
Each appraisal has slightly different total area, and there is not a current survey.
The Chuoke appraisal estimated the property size based on a 2003 survey, but did
not take into consideration more recent data or aerial maps. The Bullitt appraisal
used metes and bounds descriptions from the most recent sale transactions from
each of the properties (2004 for Tract A and 2009 for Tracts B and C). It is GBF's
opinion that the Bullitt appraisal estimates are more accurate. An updated survey
will confirm.
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