The city of Aspen is in line to overpay by 35 percent for office space at 204 S. Galena St. it is under contract to purchase if voters pick that option in the November election over a publicly-owned site for new government offices, according to city hall-commissioned analysis.
An appraisal from Dave Ritter released Thursday for the 5,300-square-foot second-floor space formerly occupied by the Aspen Kitchen restaurant found the space to be worth $7 million. The city is under contract to buy it for $9.5 million from developer Mark Hunt.
Voters on the November ballot are faced with an either-or choice seeking their preference for a location for new city offices. Option A consists of 204 Galena and 21,400 square feet of space in a soon-to-be-redeveloped building next door at 517 E. Hopkins Ave. that the city is under contract to purchase from Hunt for $23 million. A different appraiser valued space in that building the city would buy at $18 to $20 million.
Option B would have the city build on land it owns between Galena Plaza and Rio Grande Park. Aspen City Council in 2017 approved plans to build a new 37,000-square-foot office building on the site. That building would be developed by the city and is estimated to cost $26.1 million. That plan was stymied by litigation seeking a public vote, which the city resisted until it was able to develop the alternate potential offices site.
Ritter’s written appraisal contemplated both a market value method of appraising the 204 Galena space — based on recent comparable sales — and an income approach, based on projected lease revenue the space could be expected to generate.
However, “due to the lack of recent sales and current listings of large single-user commercial office spaces [in Aspen], the [market approach] was deemed minimally applicable in estimating the market value of the subject property,” says the appraisal, which notes two comparable sales in the $1,400-per-square-foot range.
Nevertheless, using available sales, Ritter established a value range based on the comparable sales methodology of $7.2 to $7.6 million.
Using the income approach, which was deemed more valuable because there is more comparable data, Ritter determined the space to be worth $55 per square foot as a rental property. The income approach also estimated the space’s market capitalization rate at between 2.4 to 6.7 percent. Based on this methodology, the space is worth between $6.2 and $7.1 million, Ritter’s report says.
Ritter weighed these two methodologies together, with higher weight given to the income approach, to reach his conclusion of $7 million in value.
City Manager Steve Barwick released a statement with the appraisal noting that the city wants “all information that it has on the project be provided to the voters.”
“The contract was entered into with Mr. Hunt for the purchase of 517 E. Hopkins and amended to include 204 S. Galena and the remodel of the current city hall through lengthy, arms-length negotiations. The purchase was attractive to the city as it provided an alternative for the council to consider given the ongoing litigation regarding the Rio Grande property. The negotiations included a recognition of certain unique characteristics of the property including its size and location and that it provided the only known alternative to the Rio Grande location.
“ … Following the most recent court order regarding the Rio Grande location, Mr. Hunt agreed to defer the due diligence period for the city to seek direction from the voters. If the voters prefer the Rio Grande parcel the contract with Hunt can be cancelled and the lawsuits will be dismissed. If the voters prefer the Hunt project, then the council can proceed with the contract.”