ELLSWORTH — The city Board of Appeals on Aug. 24 voted to give the owners of the Maine Coast Mall a month to make their case for why the assessing department should cut the total valuation of several parcels, including the building housing T.J. Maxx and Hannaford, by 41 percent, or $7.52 million.
“This has importance to the city for a lot of money,” said Board of Appeals Chairman Jeffrey Toothaker, who asked each party to write five pages of arguments “in simple terms” outlining methods and including final figures, and be prepared to reconvene in late September.
Representatives from Union River Associates Realty Holdings, LLC argued last week that the parcels are not worth as much as city staff say they are, in part because many of the mall’s spaces have long been vacant and are no longer what retailers are looking for.
“Retail is kind of suffering these days,” said Bill McLaughlin, who conducted an appraisal on behalf of Union River Associates. While the Dairy Queen generates between $80,000 and $90,000 per year in rent and is highly visible, “The lots behind it — it’s a hard time to sell those or even attract tenants. Everyone’s kind of contracting at this point in time and it’s highly unlikely that with the lack of visibility you’re going to find any tenants in the near future to ground lease those sites,” said McLaughlin.
The April 1, 2019, assessments of six parcels, all found on Tax Map 128: Lot 4 (the land and building of the new Dairy Queen), Lot 7 (the main, 173,000-square-foot structure housing T.J. Maxx and Hannaford), Lot 7-ON-0 (the former First National Bank, now Convenient MD), Lot 7-ON-1 (Taco Bell/KFC), Lot 7-ON-2 (Aroma Joe’s) and Lot 7-ON-3 (Governor’s Restaurant & Bakery), are being challenged. The parcels are valued at a total of $18,221,400 for tax purposes, but mall officials have asked that valuation be lowered by $7.52 million, to $10,700,500.
State filings indicate Union River Associates Realty Holdings, LLC is registered by attorney Curtis Kimball on behalf of Martha Reynolds and Rebecca MacQuinn, although none of the three was present at the hearing.
The mall building and its 27.38 acres constitute the majority of that $18.2 million valuation, assessed at a total of $14.95 million ($3 million for the land and $11.95 million for the building). City records show that the company paid $281,241 in taxes on that parcel last year.
Union River Associates would like that valuation cut in half, to $7.3 million, for the mall and the land beneath it as well as the land underlying the KFC/Taco Bell, Aroma Joe’s, Governor’s and Convenient MD. “That’s what I feel the fair value is,” said McLaughlin.
McLaughlin explained that he’d used several methods in appraising the parcels, taking into account market conditions for retail, vacancy rates (more than one-third of the building is empty), what similar properties elsewhere recently sold for, the age of the building and the layout of the spaces, which he said are far too large for what most retailers are looking for these days.
“It’s outdated; you can’t lease that space,” said McLaughlin.
Mall spokesman Dan MacIntyre laid out other struggles the mall has had in attracting tenants, including that the regional market is too small for many large retailers and that “exclusives” in tenants’ contracts have prevented other stores from coming in.
“I could’ve had Big Lots! out there, they wanted to come out there, but I can’t because the deal I have with Hannaford, who’s an anchor, they have exclusives,” said MacIntyre. “You can’t sell food if you have a Hannaford. T.J. Maxx has exclusives, you can’t have a restaurant next to them, you can’t have somebody that sells over 4,000 square feet of shoes, there’s all these concessions you have to work with.”
The valuation of the property is around $98 per square foot, said attorney Ted Small, presenting on behalf of Union River Associates. “[City Assessor Larry Gardner] has assessed it to be essentially on par with the value of a property in Falmouth, which we can probably all agree is one of the best markets in Maine, that is more occupied than this property,” said Small. The Falmouth shopping center recently sold for $103 per square foot and is roughly 90 percent occupied, said Small.
The corporation is also asking that the valuation of the 4.25-acre Dairy Queen property, including the building, which is assessed at $1.36 million, be lowered to around $600,000.
But city staff and representatives argued that McLaughlin was using methods to appraise the property that aren’t typically used by city assessors for tax purposes because they could result in valuations that reward owners who make poor business decisions and don’t upkeep their properties, lowering the value and, subsequently, the taxes.
“You can’t look at actual lease payments as the measure,” said attorney Roger Huber, representing the city. “If you look at actual, you’re going to penalize the good businessman and you’re going to reward the poor business decision maker.”
“The thing the assessor has to do in any town is make sure there’s no bias, no special preference, towards anyone, so the same appraisal method is applied to everyone fairly,” said Gardner. “That’s what I have to do; that’s what I’ve done here.”
Gardner pointed to the building permit for the Dairy Queen, which estimated the cost at $650,000. On the Dairy Queen lot, he said, “You’ve got almost five acres there of prime commercial property. It’s one of the best locations in the city of Ellsworth … if you’re looking at land value in Ellsworth for downtown on High Street in that area you’re probably looking at close to $300,000 an acre, if you wanted to just buy a good, one-acre commercial land property.”
Gardner also pointed out that the owners had refused a written purchase agreement for $11.2 million in 2011 and that since then there had been roughly $7.6 million in building permits issued for the mall property, around half of which he said he had added to the assessed value.
But MacIntyre said that those improvements had been largely cosmetic, adding little value.
“Hannaford put $3 (million), 4 million into the building, but did they really do anything to the building? No, it was just dressing up their aisles and making it a little cleaner and nicer inside,” said MacIntyre. “Is there any value in that for me? Same with T.J. Maxx. They put $250,000 last year … that was mostly store stuff, to make it look more pleasant. It really didn’t change the outline of the building.”
But Gardner said he “cannot agree to just overlook $7.6 million in added value via building permits.”
“We try to stay with the market if we can,” he added, noting that he’s careful not to wait for 10 or 15 years, which could result in dramatic fluctuations in property values. “I should be very close to market value.”