NEWSLETTER | December 1st, 2020
HOW WE DEAL WITH ISSUES: COLINGTON ISLAND
An OP-ED by North by Northwest’s Executive Assistant, Lisbeth Northcott
Colington Island on the North Carolina Outer Banks is synonymous with the dream vacation. The ocean, the sea breeze, warm wind in your hair and the fragrance of salt water, who doesn’t love the seashore? Yet, living there and appraising property there, as mentioned previously, poses some serious issues, not the least of which is that this entire project was in a flood zone.
In this last edition of the story, we discuss the appraisal issues that required the use of skills we had, and skills we gratefully learned along the way.
Issue: Water views and depth
Water. You’ve scored that summer rental with water views, and can’t wait to use that paddle board. It was a bit more expensive than other rentals in the area, but worth it. The reality is water views and water depth are worth a lot. With this project along Colington Rd, the subject parcels were not in a subdivision. Project parcels included commercial properties. Many had limited water views and shallow water depth. But most of the recent sales were in the gated, newer residential subdivision of Colington Harbour, which was densely built. Buildable land is at a premium on the island. Colington Harbour had better views, better water depth, and more water frontage than the parcels being appraised along Colington Rd. Comparable sales were difficult to find.
Issue: Scarcity of buildable land
Land (or lack thereof). Most of the land on Colington Island is a greater percentage marshland than buildable land. While it’s not uncommon for appraisers to encounter land in flood plains, it is uncommon to find land with this extent of marshland. Finding comparable land sales, including the percentage of buildable land on the parcel, was quite a challenge. Comparable commercial land sales added another layer of challenges for valuing the commercial properties along Colington Rd.
Issue: Septic systems on an island
Sewage. Because of the extensive marsh land on the island, there is no public sewer system. The septic systems are carefully placed in the available land areas, which as discussed, are at a premium. If the roadway project impacted the septic system on a property, there may be no way to relocate it. Similarly, if the roadway project were to impact a condominium complex with a community septic system, the operation of the entire complex could be put at risk.
One Solution: Allocation of Buildable land
With buildable land at a premium, appraisers were faced with valuing parcels of land that were partially buildable and partially marsh land. If the roadway project impacted buildable land, and such land is at a premium on the island, how did we give it proper value? The answer was to value only the buildable land for price per acre, by separating out the buildable land from the marsh land on the parcel.
Learning Curve: bulkhead
Finding comparable sales for properties along a water front also meant finding the presence or absence of a bulkhead, or rip-wrap. If present, a bulkhead or rip-wrap’s quality, material, age, and condition affected the value of the property. The absence of these on properties fronting the water would certainly affect value, leaving the property open to erosion and flooding. Finding knowledgable brokers who could discuss the bulkheads was very important in finding the comps.
At the end of the day, it was great to sit back and relax with those water views, warm breezes, and the fragrance of salt water while sitting in our favorite coffee shop. Ahh, the seashore…
THE VALUE OF GRAFFITI: ASHEVILLE’S RIVER ARTS DISTRICT
Asheville’s River Arts District is one of our favorite places to be given an assignment. We have been lucky enough to appraise old industrial buildings that have been creatively repurposed. This creates and houses a dynamic artistic community that flourishes off of preserving the structures from bygone eras. It’s a bit oxymoronic to consider that some of Asheville’s most progressive communities are the one’s most interested in conserving. But sustaining, and re-using older buildings has the outcome of being proud of preserving something historical. At the same time, it’s good to adapt the space to the needs of a modern community.
At North by Northwest, we have seen the adaptive re-use of a quonset hut located in the River Arts District. Today, it is used as the White Duck Taco Shop and the tacos are on-point.
Moreover, we are proud to say we appraised the an entire River Arts District development five years ago. Then it was just as colorful but completely vacant. Now, it has a brewery (of course), a restaurant, and the obligatory coffee shop. It’s hard to say what the graffiti has done to the value of individual buildings. However, there is no denying the added art has made it a destination. Today, Asheville’s once rotting and empty River Arts District, is now a conglomeration of tagged and necessarily cool buildings. And all of them are repurposed for arts and brews.
So How Did We Go About The Project?
When we appraised the site there was relatively limited data for land tracts this size in a similar area. Though there had been the nearby sale of a 16 acre plot with the New Belgium Brewery facility. This land was also in a flood zone and thus provided guidance. There was also one additional sale and one listing which were used to support the two RAD land sales. Ultimately, NxNW appraised the site for a little over 2MM, but deducted over $410k for demolition. We concluded just shy of 1.7MM. When we sent the appraisal in we didn’t hear anything. Then the property sold for 1.3MM, which was a lot less than the 2007/2008 asking price of 3.9MM.
However, there were other factors at play that we needed to have taken into account. One being that the transaction appeared to have some duress. Secondly, there was the uncertainty of the site contamination. In 2018, the brownfield report was published by NCDEQ. This site was a former tannery and some dubious practices had been allowed to take place. To our pleasant surprise, and to the joy of the community of artists in the River Arts District, the new owners did not raze the buildings but instead began renovating them and finding tenants.
The new buyers then began the River Arts District Transportation Project (RAD TIP). The project’s main goal was to rebuild Riverside Dr. and Lyman St. to modern standards. The first roads in the RAD had been build over 100 years ago. Along with these goals, there was the need for access and safety for cars, pedestrians and bikers. All access types were projected to increase with the redevelopment. A two-mile-long stormwater management system and three constructed wetlands were added to protect the French Broad River. There were also recreation opportunities like greenways and interactive public art added along the riverfront. The eventual plans will complete the French Broad River Greenway West and several other greenways. The site will connect the French Broad River Park to Asheville city’s greenway system.
Projections for the Future
Several public art installations, including the now-installed Trash Trout, a sculpted quote from local artist Cleaster Cotton, an interactive community table, a swing, murals and more and all planned for the area. Today, the site includes the Wedge Brewery, Summit Coffee, a clothing store, an indoor skate park, several other restaurants, still vacant space of some 55,000 SF, and lots of graffiti (with rules). Shop owners report a lot of tourists and increased foot traffic. It is truly a destination.
There is a growing body of evidence that areas with street art sell for a premium. Well known artists on buildings will increase its value. Banksy is a great example. Banksy is a world-famous street artist from Bristol, England. Today, Banksy’s work sells for millions at auction houses around the world. You can learn more about the way Banksy has helped transform the reception and commercial value of street art by watching the documentary “Exit Through the Gift Shop.” Banksy is known for his satirical, anti-establishment, and thought-provoking street art. Today, Banksy street art tours exist in cities where his work is still on display. The same trend is obvious in Asheville, and even in our own backyard of Hickory, where dedicated street art can draw in tourists in its own right.
Shoutout to our data and research teams who boldly go where no appraisal firm has gone before. NxNW utilizes a massive amount of data services. We have the data you need with 28 data sources and counting.
NxNW has developed a dataset of rent comparables that demonstrate the relationship between gross profit and rent. We do this for convenience stores appraisals, for instance. Or the above mentioned Asheville River Arts District project. We have developed detail production comparables for use in situations when reliable production figures were unavailable. And we invest in industry publications and data sources. By doing this, North by Northwest has shown that investing in data sources and research really does pay off. We utilize reliable data sources. Examples include: the annual NACS State of the Industry Report, Oil Price Information Service (OPIS), and IBISWorld Reports, CoStar and Multiple Listing Services (MLS’s).
MLS’s are a key component of the substrata of data underlying the real estate industry. Basically, they are databases that store the accumulated sales information from real estate brokers in any given area. The dissemination of this data among appraisers is a significant step in maintaining a market that is both equitable and profitable.
Hazards of the Job
In our November Newsletter we discussed CEO Anthony Alderman’s near death experience from a bee sting while doing yard work in July. Surviving that experience led Anthony to value carrying an epipen on appraisal assignments. Since many of them are in remote and rural environments and can be quite isolated. Of course, such situations could lead to a number of other instances. It is important to be prepared and cautious while on an assignment for any worst case scenario. And safety should always be the main concern. One such potentially treacherous environment is Kudzu.
Every Carolinian knows about Kudzu. It’s the unsightly import from Japan and China. Originally meant to be a shady vine that would decorate houses. Today, it is a weed that we all wish had never darkened our doorways and ruined the foundations of so many buildings and landscapes. Nonetheless, in August, Anthony, found himself in need of wading through a dense patch of Kudzu. He needed to find a creek and proposed sewer easement that ran halfway through it. Of course he brought his epipen but also, on such assignments it’s useful to have a dedicated set of clothes. A thin zip-up jumpsuit treated with permethrin can be the best defense against ticks and other bugs.
Beyond Kudzu, appraisers often walk around abandoned buildings where rusting metal or old nails can be plentiful. Being mindful of the environment and preparing adequately can go a long way. It could mean the difference between just another day on the job to an unplanned trip to the emergency room.
Featured Artist: Tommy Frank
Tommy Frank is a Sculptor and Potter based in Kansas City, Missouri. We commissioned Tommy Frank to design North by Northwest’s custom branded coffee mugs.
In a conversation with North by Northwest, Frank told us he’s been making pottery and art in general since 2000. And he told us he loves to collaborate on projects like the one he’s done for our firm.
Frank explained that the original design for the mugs was a collaborative process with a design partner Chandra DeBuse. Frank would create the form and Debuse would make the surface. In this way there would be what Frank called a “surface language or vocabulary” and distinct style. On this project, Debuse wasn’t available so Frank was in charge of making both the form and the surface. He found this challenging but exciting and he aimed to take their past collaboration as inspiration.
“I love the project and find it really fun to collaborate with North by Northwest and I’m so grateful to Melissa [Melissa Alderman – Chief Advisor to the Board] for arranging the collaboration. Capturing North by Northwest’s urban rustic aesthetic in a subtle and sophisticated way, was the goal. I also wanted to echo the real estate and appraisal work they do. This was achieved by the zigzagging lines as a way to indicate the market change as well as the peaks of houses and it really was as simple as that.” Needless to say that NxNW will definitely be looking to collaborate with Frank again with Frank saying the prospect of another collaboration excited him. “I like to keep my designs fresh every year,” he told us.
Not only did the mugs in fact make our coffee taste that much better, they’re also beautifully crafted art. Frank is the founder of FrankArts.com and offers virtual workshops on his website to help you pursue your artistic goals. He also offers a wide array of beautifully crafted ceramic mugs on his Etsy site.
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Written by Angela Carlton and Lisbeth Northcott