Town undervalued Maple Tree Place by 145 percent

By Tom Gresham
Observer staff

The Maple Tree Place development sold for approximately 145 percent more than its tax valuation, possibly indicating the town missed out on several hundred thousand dollars in revenue.

Town assessor Bill Hinman expressed astonishment at the $103.3 million purchase price in the sale of Maple Tree Place from Connecticut-based Starwood Ceruzzi to Inland Western Retail Real Estate Trust of Illinois. The purchase was closed on May 20.

“That number is definitely a surprise,” Hinman said. “I’m very surprised it was that high. That’s much higher than I’d anticipated.”

Theresa Knight of the property valuation and review division of the Vermont Department of Taxes said she believed the sale price was the largest for a non-utility commercial property in state history.

The appraisal of the property was updated this spring at $42.2 million. Experts in property valuations said it is too early to tell whether the chasm between the sale price and the town’s appraisal was the result of a major undervaluation or if other factors were involved.

“We are supposed to be showing in our crystal ball that this is what the property would be selling for on April 1 each year,” said Todd LeBlanc, the town assessor in South Burlington. “That’s the goal, but this is by no means an exact science and there are many things that can go into a sale.”

It is difficult to measure the property tax revenues the town might have missed out on if the property was actually undervalued by such a large margin. For instance, the sale price was based on the current Maple Tree Place, while property taxes this year were paid on last year’s appraisal of approximately $36 million, which did not include construction at the site over the past year.

However, a reasonable estimate of the difference in property taxes for the current fiscal year, which concludes July 1, exceeds $700,000.

LeBlanc, Hinman and Knight cited a host of reasons why the sale price would be significantly higher than an accurate appraisal, though Hinman conceded they might not entirely explain such a stark difference.

Among the possible factors that could lead to an inflated sale price e are the structure of the financing of the purchase and the leasing agreements within the development, LeBlanc said. Hinman said sometimes a sale that involves special contingencies beyond a simple real estate transfer bears little relation to the market price.

Rick Fox, a spokesman for Inland Real Estate, was unaware of the details of the transaction. Fox indicated he would investigate the possibility of contingencies, but he did not respond by the Observer’s deadline.

Hinman said he will begin to work with Inland Western in the next month to investigate the specifics of the purchase agreement. He is confident the deal will indicate the town’s appraisal was not such a small fraction of the property’s true value.

“I know what these properties were worth,” Hinman said. “There is no way that we missed Maple Tree Place by that much.”

Hinman said the sale price for Maple Tree Place will not immediately increase the appraisal for the property.

“That’s a sticky point,” Hinman said. “Eventually, it will, but it probably won’t between now and the next appraisal, because you can’t appraise based on the sale price.”

As a comparison, Hinman said homes in Brennan Woods have been selling for $100,000 more than their appraised value from two years ago, but the town cannot reappraise Brennan Woods because the market in the neighborhood has grown so fast.

“I cannot go out and selectively prosecute somebody and raise their (appraisal) unless I find something substantial that I missed,” Hinman said.

Knight agreed it is difficult to tell what kind of impact the sale would have on the appraisal of Maple Tree Place, but she said it would definitely not affect the property’s value over the next year. She said the grand list values are based on values prior to April 1, so the sale cannot be considered.