Appraisals differ on Dorothea Dix property value

ccampbell@newsobserver.comApril 13, 2013 

TREES04.NE.040212.ASR

The Raleigh skyline as seen from Barbour Drive on the Dorothea Dix Campus in Raleigh on April 2, 2012.

SHAWN ROCCO — srocco@newsobserver.com

— At first glance, the value of Raleigh’s lease on the Dorothea Dix property and the land’s appraised value seem reasonably close.

A Republican-sponsored bill to revoke the city’s lease for a destination park points to a 2011 state appraisal of $84 million as the land’s “fair market value.” Raleigh’s 75-year lease is calculated to be worth $68 million over the life of the contract. The city is set to pay $500,000 a year, plus 1.5 percent annual increases, for the 325-acre site.

But a financial analysis conducted by legislative staffers comes up with a different comparison figure. Using a metric called “net present value,” the report finds the lease is actually only worth $22.57 million – the value of the payments 75 years from now. That discrepancy is based in part on the effects of inflation.

Raleigh’s own analysis of the agreement arrived at a similar long-term value.

“I think looking at net present value is a good way to do it,” City Manager Russell Allen said.

But a 2012 appraisal by the city of Raleigh offers yet another estimate of the value of a different portion of the tract, making an apples-to-apples comparison next to impossible.

The differing views on the property’s value will be among the considerations as the measure to revoke the lease moves through the General Assembly to a House judiciary committee chaired by Rep. Leo Daughtry, a Republican from Smithfield who has promised to talk to both sides in pursuit of a compromise. Adopting one valuation over another could result in significant cost differences – both for the city’s park proposal or for any commercial development of the tract.

The legislative analysis – conducted by the General Assembly’s Fiscal Research Division – offers the first look at how much Raleigh might pay if the bill passes and the lease gets renegotiated.

The reports suggests that a “fair market value” lease would cost the city $1.6 million with a 1.5 percent annual increase. That’s more than three times the current lease for total payments of $219 million and a net present value of $72.24 million. That estimate covers the entire property. Under the bill, the state would keep a portion of the land for Department of Health and Human Services offices.

But all of those figures are based on the 2011 appraisal, which values the land based on its “highest and best use,” and that’s not as a park. The appraisal suggests the “best use” is a mix of shops, offices, hotels, multi-family residential communities and apartment complexes.

That designation has prompted outcry from park supporters who say the bill is just a ploy to sell Dix to the highest bidder and build condos. Republicans counter that they support the park idea and just want Raleigh to pay its fair share for a state asset. The bill requires the state to offer Raleigh the right of first refusal on a new lease.

But the 2011 appraisal isn’t the only valuation available. Raleigh has its own appraisal conducted in April 2012 – also for Dix’s value to developers – and came up with vastly different figures.

Here’s how the appraisals compare:

What the 2011 state appraisal estimates Dix is worth: $84 million for 259 developable acres

What Raleigh’s 2012 appraisal estimates: $36.45 million for 251 developable acres

How the reports differ: The state’s estimate includes the 8-acre site of the State Farmers Market, which Raleigh is not leasing for its park. The reports also vary on the value of the Dix hill that fronts Western Boulevard and Rocky Branch. The state’s report indicates that these acres are available for development, saying only that the acres “could require terracing.” Raleigh’s appraisal rules out development in that 27-acre section, pointing out the “significantly difficult topography” and calculating its value as open space only.

The state’s appraisal notes that the $84 million figure assumes “a fully rebounded market and a return to previous ‘peak’ market values within the next two to three years.” Given the real-estate market conditions of 2011, Dix is worth only $58 million, the report says. Raleigh’s appraisal doesn’t have that caveat.

Both appraisals factor in the cost of the state razing all buildings on the property. Raleigh’s lease gives the city the buildings, allowing it decide which ones to keep.

Campbell: 919-829-4802 or twitter.com/RaleighReporter

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service