I recently spoke to a City Planning Official that was telling me how the Arapahoe Square area was in such need of a zoning change because nothing had changed in 20 years.  I asked him why he would say that nothing has changed?  He commented that " well if you look at an aerial photo all the buildings are exactly the same from 20 years ago". 

This reminded me of the listing I was trying to get on a building in BallPark and the Client said to me " well one of the big real estate companies office window looks out over the area and they can point to the site from the office".

The point I'm trying to make is that unless you walk the BallPark/Arapahoe Square area you can't possibly know it!  I was pretty frustrated by the City guy that the Planning Office was clueless of the businesses that are existing in these "same buildings"  Did the City Guy know that Ken's Reproductions had invested a fortune in both an interior and exterior renovation of their building?  Was he even aware that the Lobby Restaurant was the business inside the Paris Hotel now?  Do you think that he knew that Mile High Framing is the owner and business of the Old Pearl Friedman Printing Building at 21st and Curtis St? 

What about the restaurants in BallPark/Arapahoe Square?  Does the City know about Snooze, HighRise, La Popular, Marcos Pizza, Old Curtis Street Bar?  They are all in these "old same buildings". 

My second point and most important is we all need to support the local businesses in our area!  We have most everything in the neighborhood that a neighborhood shopping center has, but better.

Need Copy, Printing or special media displays call Ken's Reproduction at 22nd and Broadway.  Much better than Kinkos
Need Locksmith help, keys made, safes or anything like that, call Dires Lock and Key at 22nd and Curtis St.  Much better service than Home Depot or Lowes
Need a fabulous Burger and a great patio, go to The Lobby at 22nd and Arapahoe.  Much better than the Chains.
Craving a great smothered, green chili Burrito.  Definitely, the Old Curtis Street Bar at 21st and Curtis St.
Did you say you had a storage need.  We have a great storage facility at 21st and Curtis Street ran by David Tagief.
Have some high quality artwork or just kids awards framed.  We have the best custom frame shop in Denver at Mile High Framing.  They are also located at 21st and Curtis St.  Its not unusual to see some of the Elite Hotels pick up their framework there.

This list is endless of businesses in the BallPark area.  Lets all support them when at all possible!!!

There is a lot of negative economic news out there, but in the Ballpark Area things are heating up.  There are two sizeable projects getting close to breaking  ground in what I consider to be the BallPark Marketplace.

The first and largest of the projects are David Zucker's 2020 Lawrence, Residential High Rise Project.  I have been on the sidelines watching this development evolve over the last 5 years through perhaps the most difficult economic times in our Country.  It started with the acquisition of the first 6 lots from Judy McNutt who had bought the old grafiti'd up garage and two dirt lots.  Judy had plans for her own redevelopment but David made her and her partners an offer they couldn't resist.  David's company planned a great looking, state of the art 60 unit condo project on the site and got caught in the total meltdown of the residential condo market which I'm sure he is very glad today he pulled the plug on the smaller project.

Somehow David mustered the energy and resources to not only keep the project alive but triple its size by the assemblage of the remainder of the block.  The site now encompasses 14 lots and will support a residential rental development of approximately 250 units.  This project will anchor the BallPark Neighborhood and be a catalyst for future development in the Arapahoe Square.  Stay tuned for updates on 2020 Lawrence Street.

The second project that is in the final stages fo preparing for construction is the Salvation Army's development of the site at 21st and Champa, adjacent to its downtown headquarters.  Like 2020 Lawrence, this development has been years in the making.  It started with the purchase of the 4 corner lots from the Dimitrov Estate over 5 years ago.  The next move was to acquire the 2 inside lots from the Bonilla Family that I had sold them several years prior.  The Salvation Army Development has been held up due to typical economic issues that all new construction projects have had to deal with. The Salvation Army gave notice to its parking tenants last week that they would need to find alternative parking.

Some property owners might be getting concerned about the recent developments in the area for low income housing.  There should be no concern as these developments have all been high quality projects taht have helped the area in very positive ways. 

In 2003 I sold the Colorado Coalition for The Homeless the 10 lot parcel at 21st and Stout.  They constructed a very attractive residential development that has been very successful and a nice project for the neighborhood.

Last year St Francis demolished the rat and drug infested Alpine Hotel and constructed an appealing contemporary residential structure right on the corner of Park Ave. and Curtis.  This project has helped the area tremendously and it cleared out some crud to show developers that the neighborhood is truly revitalizing.

Both projects are great news for BallPark and The Arapahoe Square.  It is proof that the financial markets are thawing and peoples expectations are moving in the positive range.

For those of us that own commecial property in Denver, most of us feel that property taxes are excessive.  There are many examples of properties that are over burdened with ridiculous property tax liability.  Most people approach the problem with the solution of slashing government spending so that the government won't need as much money therefore reducing property taxes. 

We all know that government is bloated and wasteful, but even if there was a freeze on spending and thousands of layoffs, our taxes probably would not be affected. There are many reasons our taxes wouldn't be affected, but mostly because the majority of collected property taxes go to schools.  So unless the education budget is cut in 1/2 our taxes won't go down.  Cutting Education funding is the last thing we need.  

The solution is to get more revenue to the schools so that there can be some relief on the property owner.  So how is that possible?  It is not only possible, but the solution makes sense and it is fair.  That solution is for The City of Denver to put on its business hat and to start charging out of county users appropriate prices for the use of all of Denver's facilities.

There are hundreds of examples of where people out of Denver get the same deal as Denver citizens and the property owners are subsidizing these people through their property taxes.  Here are a few examples and although they might sound far fetched, it makes sense because Denver Citizens have paid for all these great amenities and out of county people get to use them at no additional cost.

Examples of Denver getting ripped off:

1.  Out of County Bronco, Nuggets, Rockies and Avalanche Fans have the same privileges to use the stadiums as Denverites, yet it is Denver that provides all the security, all the trash pickup, the snow removal to get to the games.  Our property taxes help pay for some of these services.  If your personal address isn't in Denver your ticket should be 10% higher.
2.  Water districts that purchase water from Denver need to step up to the plate and pay way more for all that Denver provides.  Sure this will cost the homeowner higher water charges, but if they don't pay more than the Denver property tax payers get to subsidize
3. People that visit the Libraries and Museums that don't live in Denver, need to pay way more for their tickets.  This might cut down the number of people that use these facilities, but not much.  Millions of people will still go to the Zoo, the Museums and the Downtown Library.
4. How about the Airport?  The single greatest development project ever in the State and Denver put up most of the money, effort, police etc.  If you live in Englewood, your parking ticket should be 10% higher.  Your plane ticket should be 10% higher.  Perhaps even the sales tax on items purchased should be tiered the Denver rate and the Out of County rate.
5.  Why does the City of Denver just give the Alley to a Developer if he owns both sides of the block?  A city block is 400 feet long and an alley is 16 feet wide.  This is over 6,000 square fee of land that someone gets from the City for free?  At $100/ft that is $600,000 the city should collect for that tract of land.

Denver is an incredible City to live and work in and if one takes the time to look at all that draws people to Denver there should be a charge or assessment for the privilege.  It was our Mayor and our City staff that put DIA together over a 5 year span.  I didn't see a bill going out to Jeffco for the salaries of these people to make DIA a reality.  However, the new airport has generated billions in revenues to every county in the State directly or indirectly. 

It is possible that other counties might feel that they should charge out of county users higher fees too.  Bring it on!  What County has anything like Denver?  Why not put that $5.00 surcharge on those people bringing their kids to the Zoo?  I don't mind paying an extra $5.00 for Buff tickets since I don't live in Boulder County and love to go to Buff games. 

We need to think about the fact that Denver is taken advantage of.  We need to get more money to the schools so that the burden can be reduced on commercial property owners.

The City Planning offices have spent a considerable amount of time looking at the Arapahoe Square in an effort to determine the best development plan for the area.  The planning staff, certain visionairy business leaders and our politicians have spent some time to travel and look at all the great planning strategies that have been implemented in other cities.

Several years ago, the Planning office decided to rezone portions of the B-8 zoned property to B-8A.  The "A" was to promote more mixed use and residential development while restricting density rights in the area.  The neighborhood stakeholders protested the zoning change yet it was passed and there have been exactly "0" that is "zero" projects that have occurred due to the zoning changes.  This same phenomena occurred in LoDo when the Planning office rezoned much of the area to B-7 which was a significantly restrictive zoning that has not only "not" produced one development but turned one property into a weed patch on the corner of 19th and Market.  This property which everyone has driven by has been weeds for 20 years because parking was eliminated as a permitted use in the area.  Can you imagine the amount of property taxes that have been paid on this site while it has produced absolutely nothing in revenue?  Figure an average of $15,000 per year for 20 years, or $300,000.

These are just two examples that prove the Planning Office and visionary zoning does not create development because it can't move markets.  In fact, zoning in these two cases have not only not produced development, but have restricted the opportunities in these areas.

Many of you are aware of the efforts to rezone the Arapahoe Square neighborhood which has occurred.  If you check your zoning at the Planning office none of us are technically zoned B-8 or B-8A any longer.  We are all zoned "Arapahoe Square".  What does Arapahoe Square zoning mean or allow for?  Its not clear yet what the zoning is going to provide for or prohibit against, but we should all be paying attention.  The Planning Office, with great intentions, still believes that its zoning policies will drive development when in fact, only markets drive development.

So what is the point of this blog entry?  The point is there is nothing in our current zoning that is prohibiting, discouraging or negatively impacting new development. We all need to get involved in the future of the Arapahoe Square Area to protect our property values against "utopia" zoning concepts.  Our Planning leaders need to let the markets drive Araphoe Square and they should concentrate on what the needs of the area are "structurally" to help new development, when it comes,  be successful. 

What structural improvements would help support new development?  Any type of pedestrian link from the Arapahoe Square to the Central Business District.  Something like a walkover over Broadway would be tremendous.  Trying to cross Broadway on foot is risky unless you run a 4.5, 40 yard dash and you can look three different directions simulataneously.  Another improvement would be to take the hard edge off of Broadway which bisects the Arapahoe Square. 

There are many other ideas that can be designed and "shovel ready" when the markets return.  Zoning amendments or rezones would be bad for The Arapahoe Square now!

Tax Calculation

Property Tax amounts in Denver are determined by multiplying the assessor's  value by the yearly adjustable mill levy. The assessor's value is a percentage of the actual appraised value of the property. All properties are re-appraised by the assessor's office every two years in the odd years.  We are all receiving new valuations based on 2009 value estimates.   In Colorado, the assessed value for commercial property is 29% of appraised value.  Residential property is assessed at 7.96 % of appraised value. This difference in the calculation of assessed values is why commercial property taxes are much higher than residential taxes.   The current mill levy in Denver for all properties is 65.139. An example of a tax determination calculation of a $200,000 commercial property is as follows:

Actual Value:                $200,000

Assessed Value:        $200,000 X 29% = $58,000

Tax Amount:                $58,000 X Mill Levy (65.139) = $3,778.06

An example of a tax determination calculation of a $200,000 residential property is as follows:

Actual Value:                $200,000

Assessed Value:        $200,000 X 7.96%= $15,920

Tax Amount:                 $15,920 Mill Levy (65.139)= $1,037

Why are Taxes Calculated this way?

Property taxes are calculated this way by law.  It may seem unfair to many that commercial property bears such a heavy burden.  The reason that residential property has such a low assessed value percentage is due to the belief that living expenses should be minimized to keep living expenses down.  There have been several challenges to this law called the Gallager Amendment, but they have been unsuccessful and most feel impossible to ever garner the support to change it because of the substantially higher number of residential property owners than commercial property owners.  A change in the assessment percentages would increase the residential real estate taxes which would not be supported by the majority of Denver Voters.
 
The Mill Levy is a multiplier for determining the property tax amount.  Everyone's tax bill shows a breakdown of the Mill Levy. Many years ago the Mill Levy would actually adjust down if the property valuations increased so much that the City had excess revenue.  As we all know, Government never has excess revenues so there are much greater pressures on raising the Mill Levy than lowering it.

How to challenge property tax amounts

Due to the current laws, property owners only chance of reducing tax amounts is by reducing the appraised value of the property.  Appraised value of property is generally determined by using two different methods of valuation, and then through the appraiser's expertise, extrapolating a value by combining the information obtained from the two methods.  

The first method of valuation that the appraiser uses is the market approach.  Basically, the appraisers find similar properties that have sold recently and they compile the data to determine a market value of the subject property.

The second method of valuation that the appraiser uses is the income approach.  Basically, the appraiser determines the Net income, which is the amount of income remaining after payment of all expenses, estimated vacancy and a reserve for repairs.  The appraiser then determines a capitalization rate and divides the net income by the capitalization rate which gives a theoretical value.  The capitalization rate is a percentage figure that is also determined by market studies.  The capitalization rate can be simply defined as a rate of return that a particular investor will require on his investment.  Many, many factors come into play when determining a capitalization rate which I will not even try to go into with this article. 

Understanding these two methods of valuation and are key to fighting the valuations of the properties that we are all receiving.   Everyone must understand these techniques to be successful at protesting.

Income Approach problem for valuation

In Downtown Denver the income generated from the actual real estate itself, divided by the capitalization rate, will seldom generate any valuation that has been shown from market sales.  An example is a parking lot located at Park Avenue and Curtis will barely generate enough income from parking revenue to cover the expenses.  Therefore the Net Income is zero and when divided by the capitalization rate the value is zero.  However, the appraiser is determining that property in this area is worth between $50- $90 per foot and determining the value without any consideration of the income approach.  This is typical of almost all property in downtown and especially in the BallPark, Arapahoe Triangle and commercially zoned Curtis Park properties.

Market Sales Approach problem for valuation

The market sales approach to value determination is the preferred and dominant technique used by the Denver Assessor's appraisal staff.  Due to the dynamic market that existed from 2005 through 2008 there are numerous sales to use for comparable sales analysis.   The appraisal staff does minimal research to compare property and they will take several sales of vacant land or several sales of improved property and determine a value of a property using a comparative sales analysis.  The Assessor's office has used the comparable sales to arrive at the high assessments and consequential high tax amounts.  This method of valuation does not evaluate the reasons for the sales.  In Downtown Denver, no two parcels or the motivation that created the sale are comparable.  Therefore, the market approach to determining value is incomplete and therefore not valid.

What needs to happen to get the valuations reduced so our taxes will drop?

It is impossible to change the Gallager amendment.  The assessor's office will not consider using the income approach for most downtown property.  It is impossible for the assessors office to consider any other type of method for determining property tax amount other than value and they believe value is best determined by comparative sales.  Therefore the strategy needs to focus on attacking what is truly a comparable sale.

Reasons for purchase

Over the 30 years I've been selling downtown property there are many reasons why people and businesses purchase property downtown.  The reasons for purchase have a lot to do with why a particular price is paid.  Here are the main reasons people purchase downtown:

1.  For immediate development
2.  For future development
3.  For income
4.  To add to an existing parcel
5.  To protect an existing parcel
6.  As a tax deferred exchange
7.  To improve access to one's property
8.  For expansion of a business
9.  For parking needs for employees
10.For parking needs for customers
11.For visibility
12. To erect a billboard sign
13. To change the front of a business for better exposure
14. To relocate their business
15. To block an assemblage

Location, is it comparable?

Everyone knows the old saying about real estate that value is all about location, location and location.  In Downtown Denver no two locations are exactly alike.  No two locations have all the same features.  In any dense market area, a 25 foot difference in location can make the value difference totally different.  An example is a two lot parcel on the corner vs. a 2 lot corner in the middle of the block.  For a small developer wanting to develop  a small project he can only build on a corner lot so the middle of the block parcel has no value to this developer.  On the other hand a developer assembling a block for a large development will need all the parcels to complete the site for the development so an interior parcel may have more value than the corner just based on true market principals of value is what price two people agree on for a particular property.

Another example is a building sale on a prime corner.  The building has completely unusual characteristics that a particular buyer wants.  The building may be renovated or need complete renovation.  The building may work for a retailer and not for an office user.  Consequently, this building is totally unique.  It has a different location, potential use, renovation and redevelopment issues that will be unique to it.  How does an appraiser realistically and fairly take this into account when determining value?  He can't possibly and therefore the market approach is flawed.

If we were talking about a dense industrial area where the uses are pretty similar an appraiser can be more confident he is using comparable sales.  In Downtown Denver, where which side of Broadway a property is on can effect the value by 50% or which zoning a property has can raise value by 50%.  In Downtown Denver the zoning changes in the alleys and across streets.  A property can have a totally different zoning than an adjacent property.  A property may be encumbered with a height restriction, development restriction, be in a special assessment district, not have parking, have a lot of parking, have limited access or be on a corner. 

The obvious point here is that the appraiser is not taking into consideration the true reasons for purchase an factoring in all the unique characteristics of the property.

Some properties may not benefit from consideration of all these issues because they are either so primely located and utilized or they are fully improved and leased on long term agreements. 

Most properties however, will benefit from a true analysis of these characteristics and it is on these unique characteristics  where all of us need to force the assessor's office to input into their determination of value.

Jamis has been involved in the majority of downtown real estate transactions and is familiar with what motivated the sales and how the properties compare.  We are available for consultation with the City Assessor should you be interested in filing a tax protest.  Jamis charges a flat fee for services based on 1/2 day or all day services.  We do not ask to participate in a percentage of the savings that could be obtained.






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Back in the 60's The abbreviation D.U.R.A. put fear in the hearts of all people that owned property in Downtown Denver.  The Denver Urban Renewal Authority acquired, most people called it stole, some of the finest buildings and properties in Downtown.  Most were immediately demolished and turned into parking lots.  The properties were later re-sold for profit instead of being redeveloped.

I can remember when my Father owned and operated the first of his parking garages at 18th and Lawrence Street.  It was a multi-level structure, with a magnificent masonry exterior and beautiful architecture.  Inside were hardwood and concrete floors, heavy wood ramps connecting the floors that the cars would drive over.  I can remember the tunnels from the basement that you could walk into that would connect buildings from underground.  I was always chicken to go to far into the tunnels as they were dark and damp.

I believe that my Father picked up this 40,000 square foot building on a prime corner for about $100,000.  The building needed a lot of work and clean up.  My cousin and I would sweep that entire three level structure every weekend.  I would be covered in dirt and all smelly, but for some reason I didn't mind.  To this day because of all that sweeping I love to use a push broom.  I like it so much it is actually therapeutic!

Anyway D.U.R.A. came along and made us an offer we couldn't refuse.  The offer was D.U.R.A. will give you your money back or we will just take it and give you whatever we feel its worth!  Well D.U.R.A. had just pushed around the biggest and the best including the Dikeous, the Bleckers and others.  So Dad made the deal after negotiating it up to a whopping $125,000 and we were out of there.

Oh by the way, this was The Denver Tramway Building more commonly known as The Spaghetti Factory Building.  What would it be worth today if we could have hung on to it?  Well D.U.R.A. never did squat with it and re-sold it for a profit.

So that is a prime example of why boots shake when D.U.R.A. gets excited about a neighborhood.

As most of you know D.U.R.A. is on the hunt again in the Arapahoe Square.  We all received notice last week of the soon to be performed "Blight Study".  The Blight Study is the first step in the process for D.U.R.A. to be able to put in place tools to re-vitalize an area.  If the area is determined to be Blighted, which is basically automatic if they want it to be, the area qualifies for Tax Increment Financing opportunities that are a big help to get projects out of the ground. 

Tax Increment Financing (TIF's) works by using the increase in sales and property taxes that occurs with a new building to pay the principal and interest cost of development bonds that are sold to pay for the construction of the building (s).  Without going into boring details, this is a fabulous tool to spur new development.  The developer combines the bond financing with equity and usually subordinate other financing to build new projects.

So this all sounds great!  What are the concerns?  What does this have to do with taking property from some parking lot guy in the 60's?  With the results of a successful Blight Study come immense powers of Eminent Domain aka, condemnation rights.  In the 60's the condemning authority had unlimited power to take what they wanted and on their terms.

Last week, David Zucker set up a very informative meeting with Tracy Huggins who is the Director of D.U.R.A.  David invited me and a slew of property owners over to Downtown's best meeting place, The Snooze A.M. Eatery, to find out  exactly what Tracy had up her sleeve for the area. Tracy is super classy and answered everyone's questions of which the most important one was with regard to condemnation.  Tracy explained that there has not been a condemnation in a long time and the laws have changed to protect property owners from an unfair taking.

Tracy went on to explain the purpose of the Blight Study and it was, as mentioned above, all about revitalizing an underutilized commercial neighborhood by putting in place financing tools to assist the process.  Considering today's financing environment where development money is harder to find than Bin Laden I believe this is a good thing.  A very good thing for sure.

For those of you that are doubters of D.U.R.A.'s good intentions, I know who you are (Dad), D.U.R.A. is picking a bad time to be buying cheap if that was their intention.  I've sold vacant land at over $100/ft and buildings at over $160/ft in The Square.  As I've told the doubters, be happy if D.U.R.A. would have to purchase your property!  When the condemnations were happening in the 60's, property was cheap and only a few came out ahead.  Today, we have some huge high price comparable sales out there that are recent.  Many of us wish we could be so lucky to find a deep pocket purchaser at those values.

The new D.U.R.A. with Tracy at the helm is a big positive for the Arapahoe Square and those surrounding neighborhoods as well.  Just one or two more developments on the scale of  Zucker's Solara and 2020 Lawrence projects and land prices will skyrocket, businesses will flock to the area and all of us will be better off! 

 

When I walk the streets every day in The Ballparkmarketplace I’m continually flashing back to the area when it was a consortium of small businesses, government buildings, and seas of parking lots.  In my office I’ve pictures of many of the old buildings that have been demolished over the last 50 years that with the signage that identified the businesses painted on the brick.  The Dikeou Tobacco Buildings, ML Foss, countless old hotels, service stations and other businesses.

 

I’ve been walking the area since 1967 when I would help my Dad run his parking lots and garage.  On Friday and Saturday nights we would stay downtown late and watch the cars cruise down 16^th Street.  It was at this time that I was introduced to Pete’s Coney Island restaurant on 15^th Street and looked forward every day to a Toro Pot and hamburgers smothered with the best ever chili.

 

I loved the summer because I could be in Downtown everyday.  The hustle, the business, car cruises and running lots.  That was the time that I became infatuated with being in Downtown Denver.

 

Working with my Dad I had the chance to park the cars some ofthe most successful real estate people in town. John Fuller, Hank Vanderysk, Jim Allen, Bob Sanderson, Paul Dawkins and so many others.  In my Dad’s “Master Garage” at 17^th and Welton where the Fairmont hotel stands today, I got to wash and polish their cars.  They were all driving Cadillac’s, Porsches and Mercedes. It was then at 12 years old when I decided that I was going to be in the real estate business (whatever that was).

 

After working in the residential real estate world and beingtrained by the best like Patricia Richards of Duncan and Duncan and Bill Moore of Moore and Company I formed my Downtown Denver specialty office in1980.

 

Since 1980 my small company (me) has handled the sale ofhundreds of Downtown Denver parcels.  Sale prices have ranged from 10$ per foot to my record of$789 per foot for a parcel at 15^th and Cleveland where the Rocky Mountain News Building now rests.

 

Now more focused on the Ballpark Marketplace because of the emerging and incredible opportunities that exist.  As I sit in my same office space for the last 29 years I have seen the Ballpark area slowly but surely evolving into Denver’s greatest development opportunities.

 

Not to be confused with the defined boundaries of TheBallpark Neighborhood Organization, The Ballpark Marketplace is the area around Coors field that is associated with and is a draw to and from the Ballpark.  As a business man with office space for over 25 years at 21^st and Curtis Street, I define this area to overlap into Curtis Park, Arapahoe Square and the true definition of “The Ballpark Neighborhood” which can be almost anything from 19^thSt to 30^th and Southeast of Coors Field.

 

The Ballpark Marketplace is a truly unique and spectacular area perfectly located for growth and 24 hour activity adjacent to Downtown Denver and Coors Field.  The BP Marketplace is a terrific collection of great buildings, exciting businesses, and successful condominium and townhome developments. Most interesting and significant are the remarkable investment opportunities that exist for business and future development.

Welcome to my blog. Please check back soon for new entries.