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Sale price of former Herald property raises questions

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By Jim Davis
The Herald Business Journal
@SnoCoBizJournal
Published:
EVERETT — The former Daily Herald offices and property sold for millions less than the assessed value, according to real estate transaction records filed with the state.
The owner, Graham Holdings, and the purchaser, Skotdal Real Estate, told the state that the “true and fair value” of two city blocks with water views in downtown is $2.7 million, a third of what Snohomish County valued the property.
Graham Holdings is a remnant of the Washington Post Co., formed last year after it sold its namesake newspaper. Skotdal Real Estate is one of the largest developers in Everett.
What does the sales price matter?
As a result, Graham Holdings paid nearly $100,000 less in real estate taxes than if the property had been sold at the assessed value.
And Skotdal Real Estate has used the price to argue that the company’s future property tax burden should be reduced.
The state examined the deal, but public records law prohibits the release of its findings, said Kim Schmanke, a Department of Revenue spokeswoman.
Craig Skotdal, president of the real estate arm of his family’s company, declined to go into detail about the sale.
“It was an arm’s length transaction between a willing buyer and a willing seller given a reasonable length of time,” Skotdal said. “From our perspective, it meets the definition of a fair market sale.”
Ann McDaniel, vice president of Graham Holdings, declined to talk about the agreement.
The purchase price for the property was low enough to raise concerns among Snohomish County officials.
The deal was “framed strangely compared to other transactions that we see, and we see all the deals,” said Rod Reed, a commercial appraiser for the county’s Assessor’s Office. “This one is a strange animal even in terms with what documents got recorded.”
Since obtaining the property, Skotdal Real Estate told the county that the property will be used as a warehouse and not newspaper space. They revealed soil contamination on part of the land.
The Assessor’s Office lowered the value starting next year to $6.3 million from $8.2 million — but that’s not as low as the $2.7 million sales price. The new valuation was based on the change of use in property and the soil contamination, Reed said.
“I’m not giving the sale (price) a whole lot of weight,” he said. “It’s inconsistent with other Everett market activity.”
Skotdal Real Estate is appealing.
The Washington Post Co. bought The Daily Herald and the property at Grand Avenue and California Street in 1978 and operated the newspaper until early 2013. That’s when the company sold The Daily Herald to Sound Publishing Inc. Later in the year, the company also sold the Washington Post itself.
All that the company retained in Everett was the property near the waterfront.
Skotdal Real Estate acquired the property on April 3, obtaining 4.39 acres divided into four parcels on Grand Avenue and W. Marine Drive with an 83,537-square-foot office building and warehouse and some smaller buildings.
The transaction was made through purchase of stock in a third company set up by Graham Holdings.
The county assessed the property at $8.2 million. Real estate excise taxes for a sale of the property valued at that amount would have been $145,960. At $2.7 million, Graham Holdings paid $48,060 in taxes — a difference of $97,900.
With most property transactions, the seller pays these real estate excise taxes, but it’s negotiable between the parties. The state receives most of the money while the rest pays for local roads, schools and other services.
Snohomish County treasurer Kirke Sievers said he hadn’t seen a deal like it when it was filed, but his office didn’t raise concerns to the state.
“If we have one where we feel they’re trying to do a two-shoe shuffle on us, we flag it,” Sievers said. “We didn’t do it with this one.”
The state relies on buyers and sellers to tell them how much money exchanged hands in property transactions, Schmanke said.
Company representatives need to certify that the information provided is true and correct, under penalty of perjury. In an affidavit filed with the state, the two companies were required to list the property exchanged. The companies listed the assessed value for only one of the four parcels, a parcel assessed at $5.43 million.
The county attempted to reflect the true market value when it assessed the property, said Linda Hjelle, chief deputy with the county’s Assessor’s Office. She said that her office has seen property sold for far less than what the county values it.
“I couldn’t give you a specific examples,” Hjelle said. “It seems like when this happens there are extenuating circumstances.”
It’s hard to compare The Daily Herald property sale with other downtown Everett transactions, because other deals in the past couple of years have been for land only or for property where the buildings were to be torn down.
When comparing land prices alone, Skotdal Real Estate appears to have gotten a good deal.
The Daily Herald deal included 184,927 square feet of land for a price of about $15 a square foot, said Reed, the county’s commercial appraiser.
Trinity Lutheran College paid $299,500 for a 9,000-square-foot parking lot at the corner of Oakes Avenue and California Street on Oct. 31, 2013, for new student housing. At that price, the college paid $33 a square foot.
Developer Lobsang Dargey of Dargey Enterprises bought a city block at Wall Street and Hewitt Avenue that included buildings he tore down for redevelopment. The deal came about in two transactions.
Dargey paid $750,000 for 17,021 square feet — or a price of $44 a square foot — on July 3, 2012. He bought 14,400 square feet for $1.25 million on Sept. 4. That comes out to $87 a square foot.
The Daily Herald property’s sales price of $2.7 million was middle to low for the Everett market, said Tom Hoban, CEO of The Coast Group of Companies, which represented Graham Holdings.
He said that site has some advantages, including being a full city block already consolidated. It has drawbacks, one of the chief ones being the unproven and depressed downtown market.
“We had a $7 million price tag on it,” said Hoban, who writes a column for The Herald Business Journal. “It was out there on the market for a month or two months and not a nibble, so clearly it wasn’t worth $7 million.
“The market spoke and clearly it was not worth what the county said it was worth.”
In the long run, new development at the old Herald site will benefit downtown, Hoban said.
“We would hope that their plan might include developing more market-rate, downtown apartments to add to the stock that’s being developed today,” he said. “That and attracting some non-government employment is all that’s missing for creating a more robust downtown economy.”
Story tags » Economy, Business & FinanceTaxes

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