A proposal to sell a city-owned building at the Santa Fe Railyard received a tepid blessing Monday from the Public Works Committee, which endorsed the proposed sale contingent on a second appraisal or a higher asking price.
Though the warehouse is decades old and doesn’t meet code, the proposed $150,000 sale of a building on a prime piece of real estate just outside of downtown has generated public criticism and questions from city councilors about why it wasn’t put out to bid and whether taxpayers are getting a bad deal.
“I’m not opposed to this transaction except I don’t think we’ve done enough to convince even the taxpayers and the people in our community that we have their interest in mind,” City Councilor JoAnne Vigil Coppler said. “This is just a little bit too much of a fire sale when downtown isn’t on fire.”
Vigil Coppler said she believes the appraisal by Hippauf Dry & Connelly, a Santa Fe-based real estate appraisal and consulting firm, is flawed. She questioned why the firm’s appraisal was about $187,000 lower than one by the Santa Fe County Assessor’s Office and said the comparables used in the appraisal aren’t in the downtown area but on Bisbee Court “way out by Rancho Viejo close to Highway 14.”
“I think that the city needs to look further into getting more opinions on value, and when we feel like we have a just appraisal — ‘just’ as in ‘fair’ — then we should take another look at it,” said Vigil Coppler, who works in real estate. “I just don’t have any confidence in this appraisal.”
City Councilor Renee Villarreal echoed a similar sentiment.
“The comparables seem skewed to me, and I’m not even in the business,” she said. “I felt there was not enough due diligence done on our part to really kind of look at the options.”
Assistant City Attorney Andréa Salazar emphasized that the proposed sale is solely for the building, not the land underneath. However, she said the city also had initial “concerns” about the appraised value, prompting the city’s former asset development manager, Kevin Kellogg, who is an architect, to look into it more closely.
“We talked about it a lot, and [Kellogg] went and checked out the site to see what is going on,” she said. “When we sat down and evaluated what the appraisal stated, he felt comfortable that this had accurately appraised the building because it did evaluate and appraise the building at a higher amount at first.
“It’s around a $500,000 building,” she said, “but when you take the renovation costs and the code enhancements, that’s what brings it down to the $150,000 value.”
The proposed deal between the city and Luna Capital Advisors of Santa Fe didn’t start out as a sale.
Luna, which was involved in the purchase of the Market Station building in the Railyard, had been negotiating a ground lease on the 10,242-square-foot building formerly occupied by Santa Fe Clay at 545 Camino de la Familia. But the business advisory firm wants to remodel the building and says it needs to purchase it from the city to secure the capital necessary for the work. “It’s really about leverage for us in the building,” Kris Axtell, the firm’s CEO and founding partner, told the five-member Public Works Committee. “We’ve given the client equity of over half a million dollars for their project, and we’re going to invest additionally in the project as well, over $1 million, so we need some additional capital for leverage. We have many, many millions in the Market Station building already.”
Adding to the complexity of the proposed deal is that the property is managed by Santa Fe Railyard Community Corp., a nonprofit that manages the leases and implements the master plan of the Railyard, as well as the Baca District, which are both owned by the city.
“Both the building and the ground are leased by SFRCC, meaning that they have full discretion under the lease and management agreement to decide who is leased the building and the premises; we don’t have any say in that,” Salazar said.
The nonprofit didn’t market the building for sale, she added. “They solely marketed it to lease it out, and then when they received someone who was interested in leasing it, that individual, or Luna Capital, explained that they couldn’t make the renovations because they were so costly unless they owned the building. That is why we’re in this scenario right now.”
If a sale is approved, the unspecified project in the building is projected to generate $5.2 million in ground rent over an 80-year agreement. It also is projected to generate $25,000 a year in property taxes, $3 million in gross receipts taxes and 60 jobs in 10 years.
Public Works Director Regina Wheeler told committee members to keep in mind the proposed deal “isn’t just a matter of, like, selling a house for the best price that you can get.”
“We need to find a buyer who has money to invest $3 million in the property,” she said, along with a tenant that has a viable business plan.
Asked whether Luna Capital Advisors was willing to pay more for the building, spokeswoman Tiphini Axtell said in an email after the meeting that Kris Axtell, her husband, wasn’t ready to commit to a firm number before consulting with his investment partner.
“The goal of Luna Capital is to be fair and transparent while still making a smart financial decision for our client and investors,” she wrote. “The bottom line is, while we are deeply committed to creating a vibrant and thriving community at the Railyard, Luna is poised to invest — and subsequently risk — a significant amount of capital to see this project through.
“Luna Capital understands and appreciates the concerns of the City Council members and public but unfortunately the project and potential sale are more complex than they appear at first glance,” she continued. “We hope that through the process of the upcoming council meetings things will become more clear to all involved and we can reach a fair and logical agreement.”