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Tetra/Lake House Summary of Appraisals - Side by Side Analysis

2010 Appraisal 2015 Appraisal Observations/Comments
Initiation. Initiation. Comments:
● Members feel RA needs to ensure business deals are more closely managed by RA staff and Board
Commissioned by: Prepared for: members. In this case, it appears the appraisal was managed solely by RA’s land use attorney. If
Mr. Milton Matthews Reston Association there was direction or authorization by staff, committees, or the Board, it is not on record.
CEO of Reston Association c/o John McBride Questions:
Odin Feldman Pittleman, PC ● Who chose the land use attorney as the POC and not the CEO?
● At the Jan 22 Board meeting land use attorney McBride says he commissioned the appraisal before
Prepared by: Robert Paul Jones and Prepared by: W. Scott Gudely and the project was presented to the full Board. Who authorized this? Board or staff? When?
Kathleen Moist Kathleen Moist ● Who was present at the appraisal?
● Reston Now reported that, “According to documents released by RA, the board signed an appraisal
Date: March 18, 2010 Date: January 23, 2015 agreement with The Robert Paul Jones Company in December 2014 that said the appraisal would be
Delivered: April 22, 2010 Delivered: February 4, 2015 performed by Jan. 12, 2015. The fee for the appraisal would be $5,000.” Where in the process was
this documented? Who authorized this? Who approved this expenditure? Why is there no mention
of this in the minutes? Did the full Board know that staff had already commissioned an appraisal
and committed these funds?
● The appraisal was released on February 4, 2015, after the January 22, 2015 meeting. How could so
many decisions about this property be made (e.g., decision to move on a referendum, decision to
develop a letter of intent (LOI) with a purchase price and terms before the Board had an idea of
price as they hadn’t seen the appraisal?
● When did each member of the Board receive the appraisal? When were they given an opportunity
to read it?
Instructions. Instructions. Comments:
● The 2010 appraisal estimated the value of the property based on several scenarios. This gave the
Estimate the market value of the Estimate the "as is" fee simple market client a range of values depending on use, and a basis for making a decision for purchasing. The
property under three different value assuming that restaurant uses are appraisal provided the value of an office ($1.17M) and of an expanded restaurant ($2.76M). The
scenarios: permitted and that any deferred 2010 appraisal noted that there were “differences in opinion” on whether the property could be
maintenance is corrected. used as a restaurant
(i) "as is" fee simple market value, ● The 2015 appraisal was different. The appraiser was only instructed to “estimate the ‘as is’ fee
assuming continued office use; simple market value of the subject assuming restaurant uses are permitted.” RA already knew
(based on the 2010 appraisal) this would result in a higher appraisal price.
(ii) fee simple market value as a ● The December 4, 2014 engagement letter signed by RA’s CEO does not instruct the appraiser to
restaurant pad site, assuming expansion assume deferred maintenance is completed. The document states that any changes to the
into Lake Newport;
assignment “shall necessitate a new Agreement.” It is not clear if this occurred.
● The ‘as is’ instructions in the cover letter of the 2015 appraisal differ from the language when the
(iii) "as is" fee simple market value of
the excess land, assuming no additional value provided which includes deferred maintenance. Additionally the report states, “[a]ccording to
development is permitted on the parent our client instructions, a restaurant would have the potential for extending out into the lake and
parcel and the land is subdivided. that the GBA would be 6,930 feet.” These instructions do not appear in the December 4, 2014
engagement letter or cover letter of the report.
● The highest and best use of the property was consistently identified as an office (both in the 2010
and in the 2015 appraisals) and valued in the $1.2 - $1.4M range. This is very close to the 2010
appraisal ($1.17M), and very close to the County assessment on the property which was about
$1.2M, and based on 100% of the estimated Fair Market Value of the property. The 2010, 2015, and
current County assessments placed the value around $1.1 - $1.4.
Questions:
● Why was the appraiser instructed to value the property as a restaurant when its intended use was to
continue as an office and/or community facility? Did staff or Board members know that these
instructions were given to the appraiser?
● Why would the client direct the appraiser to value the property with restaurant uses given the
attorney encouraged the Board to take a position on the County’s Comprehensive Plan for that
building, and ask that the use be changed from “office use” to “office and/or community facility”
which the Board did in its February 9, 2015 Board meeting
● Were the implications of these instructions ever documented by the RA board or its land use
attorney?
● Were the variations in the two appraisals explained to the Board? Were the variations in value
(office vs. restaurant) explained to the Board? If so, when and by whom?
● Was the Board aware the appraisal value would not reflect highest and best use?
● To RA members, it appears that this process resulted in the highest price for the owners and did not
serve the best financial interests of the RA members.
● Was the role of the RA’s land use attorney in this transaction appropriate?
● Was there a conflict of interest or appearance of a conflict from the attorney’s actions/inactions?
Appraisal. Appraisal. Comments:
● 2010 appraisal provides a range of uses and values, provides an analysis of earlier (2003) discussion
The "as is" fee simple market value of The “as is” fee simple market value of the on permitted uses (see Appendix for correspondence between the seller’s attorney and the county),
the property, assuming it continues as subject, assuming that restaurant uses and noted confusion over permitted/restaurant use.
office space (including the excess land are permitted and that any deferred ● 2015 appraisal provides value for restaurant use, but does not note any confusion/disagreement over
valued at $69,000): maintenance has been corrected, as of permitted use/restaurant use, nor does it include the any of the land use determination
January 23, 2015, is: correspondence.
$1,170,000 ● The 2015 appraisal notes that “Mr. Bill Lauer, the property contact, reports that there is no limitation
$2,650,000 on the amount of restaurant FAR he can do, but that the office FAR cannot be expanded. However,
this may apply to just the existing building.”
The fee simple market value of the
● The 2015 appraisal notes: “property owner, Mr. Bill Lauer, reports that the property has not been
subject as a restaurant pad site,
assuming potential to expand into the listed for sale, and that two (or more) restaurants have expressed interest and then decided not to
lake with a total FAR of 7,000, make an offer on the property. He tells the appraiser that he has had discussions with Mr. McBride
supporting land for the restaurant us of and the Reston Association about the Association’s potential acquisition of the subject. He reports
40,000 sf and including excess land that his asking price is $2,700,000 and that he would not be interested in selling unless his price is
value of $59,000: met.” This seems to occur either before the appraisal was requested, or as the inspection occurred.
● The 2015 appraisal notes that the “The subject is designated as a Convenience Center in the Reston
$2,760,000 Master Plan.”
● Both appraisals note that the highest and best use of the property is to continue as an office, with
Notes highest and best use (where the an estimated range of $1.17M in 2010 and $1.45M in 2015.
owner would get the greatest value out Notes highest and best use (where the Questions:
of the property) is as an office. owner would get the greatest value out
● Why did the 2010 appraisal contain correspondence regarding FAR and permitted use and the 2015
of the property) is as an office.
appraisal did not? Shouldn’t this have been addressed by RA’s land use attorney?
● Why didn’t the appraiser check to see if Mr. Bill Lauer (the owner) was accurate in his statements
about FAR? Why didn’t the RA’s land use attorney address this issue?
● Why doesn’t the 2015 report include the statement that the appraiser discussed the current market
for commercial properties with sellers, buyers and real estate agent in 2015 as it did in 2010? (see
page 6/149 of 2010 appraisal) Did he?
● Why would RA ask the appraiser to use a methodology that would yield a higher value?
● Why would RA bid a price for a restaurant knowing it would not be able to generate that level of
revenue as a community center?
● When did the RA Board discuss whether it could afford to purchase the property at this value?
Condition. Condition. Questions:
● Who instructed the appraiser to appraise as if all deferred maintenance was corrected?
Appears to be well-maintained given Appears to be reasonably well- ● How did RA assess the cost of deferred maintenance identified by the appraiser?
the age of the building. The building is maintained given the age of the building.
an above-average quality office building However:
in average to above-average condition. ● roof and all wood surfaces clearly in
need of attention
● HVAC is scheduled to be replaced
● foggy appearance in three windows
● conference room exhibited a musty
odor.
Encumbrances. Encumbrances. Comments:
● Both appraisals note the existing encumbrances, and while there are restrictions, the
The property is "encumbered with a The property is "encumbered with a restrictions would not prevent the parcel from being developed, but would likely result in higher
floodplain and storm drain easement" floodplain and storm drain easement" development and redevelopment costs.
● Both appraisals note that limitations in parking may restrict build-out (FAR) - in essence, if there
"According to Fairfax County "According to Fairfax County Chesapeake is not enough parking to accommodate the expanded capacity, the owner would have to limit
Chesapeake Bay Resource Protection Bay Resource Protection Area (CBRPA) the expansion
Area (CBRPA) maps, Lake Newport is maps, Lake Newport is shows as a ● Both appraisals note that all the ingress-egress issues, location in a protected area, proximity to
shows as a Resource Protection Area Resource Protection Area (RPA) and the the dam, and easements will make development a challenge and more expensive
(RPA) and the property directly abuts property directly abuts and extends into ● The 2010 appraisal includes documentation from the Department of Public Works and
and extends into or over it.” or over it.” Environmental Services that stated if the property is developed a PRC and site plan would be
required to determine if it was in compliance with RZ-79-C-032 and the Chesapeake Bay
Preservation Ordinance.
The restrictions would not prevent the The restrictions would not prevent the
● The 2015 appraisal stated that “the subject is encumbered with a floodplain and storm drain
parcel from being developed, but would parcel from being developed, but would
easement” but does not include correspondence. A Chesapeake Bay Resource Protection map is
likely result in higher development or likely result in higher development or
included in the appendix.
redevelopment costs. redevelopment costs.

Questions:
The presence of the non-exclusive The presence of the non-exclusive
● Why wasn’t there any mention of the March 27, 2003 Zoning Administrator’s comment included
parking easement and the nature of the parking easement and the nature of the
in either appraisal, that, “If the location of a structure is within the floodplain is proposed, the
ingress-egress must be taken into ingress-egress must be taken into
application would be subject to Sec 9-606 of the Zoning Ordinance which pertains to Special
account when planning the size of any account when planning the size of any
Exception approval. . .by the Board of Supervisors.”
potential project. potential project.
● What are the implications of the Chesapeake Bay Preservation Act upon this property?
● Did RA’s land use attorney or RA seek any land use determinations during this process?
The proximity to Lake Newport, The proximity to Lake Newport, ● Did the owner provide any proof that there was recent buyer interest in this building?
floodplain, RPA and dam spillway may floodplain, RPA and dam spillway may ● What development plans and correspondence did the appraiser use in writing the appraisal that
result in above-average development result in above-average development or were not attached to the appraisal?
or redevelopment costs." redevelopment costs."
Restrictions, Use and Site Plans Restrictions, Use and Site Plans Comments:
● 2010 appraisal notes that there is confusion/disagreement over permitted uses while the 2015
Contains extensive information about Appraisal lacks zoning determination appraisal relies on the word of the owner.
the property’s permitted use and zoning documents as present in 2010 appraisal. ● The 2010 appraisal includes background information on the zoning discussions while the 2015
restrictions. appraisal includes none of these appendices and does not provide any assurances that the value
The subject is designated as a which is given is for a use that is currently permitted.
The appraiser notes, "...a difference of Convenience Center in the Reston Master ● In 2015 the appraiser says the highest and best use to continue operating the existing building
opinion existed concerning the Plan. The new draft Reston Master Plan as an office following maintenance and to proceed with expansion of the property with a
development potential of the property. Special Study recommends that the commercial use (Note: they do not say restaurant use) once a lead tenant or owner-user has
. .we have attempted to prepare the subject be planned for “…office use at the been secured and when the market permits (indicating that the market will not support a
appraisal consistent with Fairfax existing built intensity to maintain its restaurant at this point). Again, typically a retail use would provide the highest return to the
County's determinations to the extent current character.” land. (retail - office or restaurant) – there are a lot of “IFs” here.
possible.” ● The 2010 appraisal was conducted in a 1-month window, the 2015 in a 2-week period.
The appraisal notes that the property Questions:
In 2003 the county concluded “that the owner reports “There is no limitation on ● Why wasn’t the fact that restaurant use would require substantial renovation and possible
FAR for the conversion of the sales the amount of restaurant FAR he can do, demolition included in the 2015 appraisal as it was in the 2010 appraisal?
center or a second or expanded eating but that the office FAR cannot be ● Why did the “client” instruct the appraiser to assume that a restaurant would have the potential
establishment, is limited to the FAR of expanded.” The appraiser notes, “This for a 6,930 expansion?
the initial construction. . .adding an may apply to just the existing building.” ● Why didn’t the firm include restrictions/county zoning docs in second appraisal?
eating establishment to the site ● Why weren’t the 1981 plan documents mentioned in the appraisal, titled “Reston Visitor’s
unrelated to the sales center would not Center and Restaurant” as prepared by Doug Corkern, Architects, Inc.,” included in the packet?
The appraiser provided an estimate
require an amendment to the “assuming the Additional Building
development plan or proffer. An eating Improvements Could be Expanded into
establishment would require approval Lake Newport”
of a PRC plan.”
“We have been asked to assume that,
“We have assumed that the subject will according to our client instructions, a
require substantial renovation, restaurant would have the potential for
including gutting and perhaps extending out into the lake and that the
demolition in order to accommodate a GBA would be 6,930 feet.”
restaurant use.” (page 25)
Building plans from 1981 indicate it was
Highest and best use “if vacant” is to possible to extend out into the lake
hold for development with a further with construction of a restaurant
commercial office or retail project to building. Parking spaces have already
the maximum density allowed once a been provided to support such expansion
lead tenant or owner-user has been and utilities appear to be available.
secured.
Highest and best use “if vacant” is to
hold for development with a commercial
Highest and best use “as improved” is use to the maximum feasible density
considered to be continuation of the allowed once a lead tenant or owner-
present use as office until the market user has been secured. Typically, a retail
warrants expansion or redevelopment commercial use would provide the
of the site. highest return to the land.

Highest and best use “as improved” is to
continue operating the existing building
improvements as an office use with
correction of deferred maintenance and
proceed with expansion of the property
with a commercial use consistent with
the existing zoning once a lead tenant or
owner-user has been secured and when
the market permits. “Again, typically a
retail use would provide the highest
return to the land.”