GTH land deal 'surprised' Highways appraiser; calls it 'an outlier'
GTH purchase is ‘the exception to the rule,’ says Peter Lawrek
The man who appraised the controversial Global Transportation Hub land for the Ministry of Highways says he was "surprised" when he learned how much the government-owned agency paid for the property.
On March 3, 2014 the GTH bought the 204 acres of land on the west side of Regina for $103,000 an acre.
It paid that price even though in Oct. 2013 Peter Lawrek had appraised the land for the Ministry of Highways at $30,000 to $35,000 an acre.
"Look at what I appraised it at. Then you tell me it sells for $103,000?" said Lawrek. "Why wouldn't you be surprised?"
The sale at $103,000 an acre doesn't line up with the rest of the market.- Peter Lawrek, appraiser for the Ministry of Highways
Lawrek has been appraising real estate in Regina for more than 30 years. According to a summary of his career highlights contained his appraisal, he has done work for the provincial government, municipalities and many local and national companies. He's also served on national committees of the Appraisal Institute of Canada.
In his appraisal of the land that the GTH ended up purchasing, Lawrek examined 27 other recent sales around the city of Regina, looking for comparables. He said that's how he arrived at his $30,000 to $35,000 an acre valuation.
"The sale at $103,000 an acre doesn't line up with the rest of the market," Lawrek said.
He said his job is to determine the market value of a property. He explained that this means he has to find the most likely price that land would sell for on the open market, assuming a willing seller and a willing buyer.
"I can't point to any other purchases for raw land for industrial use at that level ($103,000 an acre). I guess that's clear enough, right? This is the exception to the rule."
Premier defends GTH purchase
Premier Brad Wall and his office have been defending the GTH land deal.
On Feb. 17, in an email to media outlets, the premier's office defended the deal by pointing out that "an experienced commercial real estate [broker] has publicly stated that the GTH did not overpay for the land."
The government has consistently argued that the GTH had to buy the land on the open market for an interchange on the West Regina Bypass, which would allow trucks to flow into the government-owned industrial and logistics park without traffic lights.
Lawrek said he stands by his $30,000 to $35,000 an acre valuation of the GTH purchase.
"I can't explain the $103,000 [an acre]. I really don't understand it. If someone could give me a good explanation I'd be willing to naturally listen. But gee, it doesn't really match. It's not my fault. I'm just reporting the way the market is," said Lawrek.
"I'm not going to say there was some sort of huge mistake. I'm just saying it doesn't match up with what the development community would pay in general."
"It's an outlier."
Lawrek excluded GTH purchase from recent appraisal
In Dec. 2014, Lawrek appraised land immediately north of the property purchased by the GTH.
That land, owned by Rudy Balzer, is similar in many ways to the GTH land; Both parcels are in the city of Regina, were zoned Urban Holding, and were designated for future industrial use.
In his appraisal, Lawrek didn't consider the GTH purchase at $103,000 to be a comparable sale, despite the similarities and despite the fact that the sale happened in March 2014, just eight months before Lawrek's appraisal.
"It's not a good market indicator is the simplest explanation," Lawrek said.
Property changed hands 3 times in just over a year
In fact, Lawrek argued that none of the recent sales of those 204 acres that eventually wound up in the hands of the GTH were good market indicators.
In just over a year, the land changed hands three times:
- Feb. 26, 2013 – 139 Land Corporation out of Alberta paid the Sisters of Our Lady of the Missions $55,000 an acre for the north parcel and it paid McNally Enterprises $45,000 an acre for the south parcel.
- Feb. 26, 2013 – On the same day, 139 Land Corporation sold both parcels to a Regina company owned by Anthony Marquart and Harold Rotstien. It paid $84,000 an acre for the north portion and $71,000 an acre for the south.
- March 3, 2014 – The GTH bought 204 acres from Marquart and Rotstien for $103,000 an acre.
In Lawrek's view, all of those sales are outliers and he said he doesn't understand why the prices were so high.
"I didn't get an explanation that would explain why the dollar amount was as high as it was," said Lawrek. "Those prices didn't match everything else that was going on."
And Lawrek said local developers he's interviewed agree with his assessment.
In his Oct. 2013 appraisal of the land the GTH eventually purchased he said he interviewed six Regina land developers about the price Marquart and Rotstien's firm paid for the land. The appraisal says "none said they would pay this price even if it was fully accessible for development."
3 appraisals, 3 very different conclusions
Boyd said that appraisal indicated the land was worth $125,000 an acre. He said that's why the government decided against having the Ministry of Highways expropriate the land at a lower price.
"So there's a pretty big risk to the taxpayer, I would say, that if we expropriated that it would be challenged at some point in the future in a court," Boyd explained. "That appraisal would be presented at that point and we could lose."
According to Boyd, there were three appraisals on this land, which yielded three very different results.
- In Oct. of 2013, Lawrek concluded the 204 acres owned by Marquart and Rotstien were worth $30,000 to $35,000 an acre.
- Also in Oct. 2013, the Canadian Resource Valuation Group (CRVG) from St. Albert, Alberta appraised that land and found it was worth $51,000 to $65,000 an acre.
- According to Boyd, Marquart and Rotstien also obtained an appraisal on this land. He says it concluded the property was worth $125,000 an acre.
Lawrek said "it's not a good day for the Appraisal Institute of Canada when you see that sort of thing happening."
And he said it's likely that the public is asking, "Well who is right? They can't all be right. There's too much variance."
It's not a good day for the Appraisal Institute of Canada when you see that sort of thing happening.- Peter Lawrek, appraiser for the Ministry of Highways
The government has publicly released Lawrek's appraisal for the Ministry of Highways and the CRVG appraisal for the GTH.
But it hasn't released the $125,000 an acre appraisal obtained by Marquart and Rotstien.
In an email, a government spokesperson said the document wasn't released because "we didn't have formal approval from Marquart. And we did not have approval from the appraiser." The government told CBC recently that it still does not have those approvals. The spokesperson said even it if did have the approvals it wouldn't provide the appraisal to CBC because the provincial auditor is currently reviewing the transactions.
"We anticipate she will ask for the appraisal as part of her review," the spokesperson said. "We will provide the appraisal."
2 publicly available appraisals compared
The two publicly available appraisals, which considered the land that wound up in the hands of the GTH, were both dated Oct. 2013.
The CRVG appraisal considered six properties in Regina and valued the land at $51,000 to $65,000 an acre.
The owner of the company, John Wasmuth, told CBC's iTeam, "the area where this property is located, it's an area where and particularly at that time period, it's an area where it's not the easiest area in which to pinpoint a value."
He said that's because there weren't a lot of comparable properties.
"Appraising future development lands such as this is very different than appraising, say appraising a residence in a new suburban subdivision around Regina, where you've got a bunch of houses that are basically the same and you've got a number of comparables to choose from and the comparables tend to sell in a relatively tight range."
By contrast, Lawrek's appraisal considered 27 properties in the Regina area and concluded the 204 acres of land were worth $30,000 to $35,000 an acre.
He said he was surprised that the CRVG appraisal only considered six sales.
"[It] might have been good to add a few more sales don't you think?" Lawrek asked.
Why the difference?
Part of the reason for the gap in valuation is because of the six sales the Alberta-based appraiser considered, three were rejected by Lawrek as outliers. Those three sales were the highest-priced transactions CRVG considered.
For example, CRVG said that a sale involving a 94 acre piece of property in the RM of Sherwood for $97,914 an acre was "a bona-fide arms length sale" based on his research.
However, in his appraisal, Lawrek said the transaction "is an unreliable sale due to financing by the seller and motivation by the buyer." Lawrek also pointed out that at the time of the sale the land in question was under water, which he said significantly devalued the property.
CRVG also considered the Feb. 26, 2013 sales from 139 Land Corporation to Marquart and Rotstien for $71,000 and $84,000 an acre as comparables and "bona-fide arms-length sale(s)."
Lawrek concluded they were outliers. In his appraisal of the land, Lawrek said the price paid by Marquart and Rotstien were above market value and "there have been sales of superior land for less per acre than the $71,681 and $84,020 per acre paid."
The appraisal went on to say that Lawrek interviewed six Regina developers and asked them if they would have paid the price Marquart and Rotstien did and he reported that all of them said no.
Marquart told CBC he bought the land because it's located beside the GTH and will be next to a bypass.
"In my mind, I was absolutely shocked why no one would look at this opportunity. For me it made complete sense."
Pipelines criss-cross the GTH land
One of the concerns Lawrek raised in his report is the fact that pipelines crisscross the northern portion of the property.
"If you've got pipelines on your land you've got a problem," Lawrek said. "It's extra money, is what it boils down to."
In his appraisal, Wasmuth also addressed the issue of the pipelines.
"It is relevant to note that in determining the market value of the properties we have not considered any discount or adjustment relative to those lands encumbered by registered pipeline rights of way."
When asked to clarify, Wasmuth said "we're saying the pipelines were not a consideration in the determination of the market value that we established."
Alberta-based Wasmuth said it's not surprising to him that his valuation came in higher than Lawrek's.
"We have completed appraisals on various properties that Mr. Lawrek has appraised over the last five years," Wasmuth said. "And in the work that we have done for the clients that have hired us we have found that after doing proper due diligence and considering all of the facts that our values are often different than Mr. Lawrek's."
He followed up by saying "different" most often means "higher."
Wasmuth explained that hiring an appraiser outside of your community can be helpful because "they're coming in with a whole fresh mind and looking at it."
Regina-based Lawrek argues that his appraisals are based on his knowledge of the local market, established over the decades he's worked in the community.
"The answer to that would be 'Yeah, but who knows the market better?'" Lawrek said. "The guy that drops in periodically or — I read the paper every day. I talk to realtors every day."
Both Wasmuth and Lawrek said they haven't seen the $125,000 appraisal and don't know who did it.
Without seeing that appraisal, Lawrek questioned, "how can you even comment on that one?"