A Second (or Third) Opinion
Baton Rouge appraiser Tom Cook knows Lafayette well enough to understand the dynamics of its real estate market, and he's perplexed over the methodology used to appraise attorney James Davidson III's Girard Park property, part of the proposed property swap deal involving UL Lafayette's former horse farm ("Horse Play," Oct. 19). At the very least, says Cook, the Davidson property should have a second appraisal.
In order to acquire property closer to his campus, UL President Ray Authement is planning to swap 36 acres of the horse farm on Johnston Street with local businessmen Dan Menard and Jerry Brents of BRE-ARD LLC. They will buy the Davidson property and then exchange it with the university for the horse farm land.
Authement claims the two sites are equal in value, $3.25 million. (In a still unexplained caveat, BRE-ARD will return six acres back to the university.)
In December 2003, Authement hired appraiser George Parker to determine the market value of Davidson's 4.1-acre site.
The now-retired Parker and attorney Davidson are longtime associates, having teamed up when Davidson did expropriation work for the city, as well as other projects in more recent years. "Our relationship has been more of a business relationship," says Parker.
The appraiser set a price tag of $3.25 million on the property, which is zoned for single-family residential use, saying he based that valuation on the "highest and best use" theory. "It is part of the Heymann Oil Center. The context for the use of that property is commercial," Parker says.
While Authement says he wants the property to expand the university's nursing school or for student housing, he also claims he'll use the two homes on its premises for faculty housing. So Parker gave the property the benefit of both commercial and residential uses, appraising it at a whopping $18.20 per square foot ' among the highest priced real estate in the Lafayette market.
"It can't be both," says appraiser Cook. "It's basically not proper appraisal theory." Cook says if the highest and best use is commercial, Parker should have deducted the cost of razing the buildings, even if the university plans to use them in the interim. If the long-term plan is to keep the residences intact, then the property should be appraised at its current residential classification. (Residential property typically sells lower than commercial.)
Cook also says even though the university is exempt from local zoning, a commercial valuation would have to factor in the price of getting the property rezoned, including legal fees and the cost of fighting residents who are likely to oppose the reclassification as they have in the past.
"The seller is benefiting from the university's municipal exemption, and that doesn't seem reasonable. It's not worth [$3.25 million] to anyone else in the market, so why is the university paying more than anyone else would? It sounds to me like the university is leaving a lot of money on the table, and that's not good for the taxpayers of the state," suggests Cook.
Real estate professionals and opponents of the land swap also question the low market value placed on the horse farm the university has owned since 1920, when it purchased the land for $11,800. Appraised by Russ Wilson of Lafayette, UL's centrally located property is also at the heart of a contentious rezoning classification from residential to business, scheduled for a Planning & Zoning Commission hearing Dec. 5. Wilson valued the first six acres based on their potential commercial use, the 18 acres just beyond the concrete coulee at $1.30 per sqare foot and the remainder of the 100-acre tract at $1.03 per square foot.
Cook, who has more than two decades of experience in real estate appraisal, says the problem with discrepancies in values of the two properties could have easily been avoided. "I would have thought on a transaction this size there would be two appraisals on each tract," he adds. The university then takes the average of the two if they are within 10 percent of each other; if not, a third appraiser may be called in. At any point, however, the parties can sit down to negotiate after two appraisals. "When there is a significant difference in value, usually there is a difference in highest and best use determination," Cook says.
Depending on which appraiser is hired, the Davidson appraisal would cost $2,000-$4,000, and the horse farm $3,000-$5,000.
Both Cook and appraiser Edward Ware of Rayne say while there is some science to the appraisal process, including such factors as sales comparables, two evaluators may not come up with the same conclusion, even when all criteria and assumptions have been clearly communicated to them. "Two appraisers using the same data will have a different opinion most of the time," Ware says.
Based on what it viewed as valid appraisals, the Board of Supervisors for the University of Louisiana System approved the land swap on Aug. 26. Advertising and public bid processes are not required for land exchanges, but they are required for land sales. By law, Authement could have put the property up for sale and used the proceeds to buy land closer to campus, but he never sought the board's approval to do so.
With so many unknowns at the Johnston Street site, appraiser Ware says there is only one way to determine its value. "The market is the true test for what something's worth," he says. "That's the ultimate test."