Fair Trade

Fair Trade

By Sean Roth

Real Estate Editor

Seven dollars a square foot for eminent domain land on Florida's West Coast is fairly mundane. In fact, it lies just on the lower side of the medium price for a municipality: far from a steal, but not bad. So on its face the $7 a square-foot the city of St. Petersburg paid for Tangerine Avenue Community Redevelopment Area wasn't all that remarkable.

What is remarkable is how much the city was willing to contribute for it. And it didn't have to take the property at all.

Eminent domain issues have cropped up nationwide since the U.S. Supreme Court's Kelo decision in June, which found that state laws allowing land takings for economic redevelopment are constitutional. The decision stirred fear in some property owners that government could take property simply to increase the tax base; a fact not exactly backed up in the Florida constitution.

In St. Petersburg, real estate officials are taking a far gentler approach to land acquisition, but the program is still successful. Even though there has been ample opportunity, in the decade that Bruce Grimes has been director of the Real Estate and Property Management department for the city, no property has been acquired through eminent domain. At the same time, St. Pete has been far from stagnate in its redevelopment efforts.

Grimes and Michael Psarakis, the city's asset management coordinator, point to both time and community-endorsed plans as the lynch pins to the city's success. And with the most recent redevelopment acquisition, Tangerine Avenue, the city is going a step further. The city is actually buying replacement homes for displaced residents and in other cases is paying for new homes to be built on city-owned land for them.

Psarakis, who says he initially suggested the idea of buying replacement homes to the real estate and economic development departments in the city, says the basis for replacing homes came from his time in the private sector as an appraiser representing property owners.

"Property owners would get the appraisal of 50 cents a square foot" from the Florida Department of Transportation, Psarakis says. "After our appraisal, maybe we would think it's worth $5 a square foot. It's not that they are undervaluing property; its just one side of the microscope. They are looking at three hundred units at a time rather than an individual unit."

On top of the appraisal issue, with sky-high real estate values, even a premium purchase price is no guarantee that a property-owner will be able to find a comparable property. At the same time, by the very nature that a property is in a redevelopment plan working area, the chances are very high the property is in substandard condition.

"It boils down to if somebody is living in a 1920's house there is not only the deterioration of time, but also of building techniques," Psarakis says. "It may have lead paint or asbestos. We would never want to put people in a house of comparable value. We want these people to stay in the area in a safe and secure property."

A good value

The replacement plan sounds altruistic, but this is no government give-away. The budget for the plan works, too.

"Besides the PR aspects," Grimes says, "there are a lot of additional costs to eminent domain, and you get a lot of savings when you accomplish the same goal without having to take the property."

Psarakis attributes the plan's economic feasibility to increasing real estate values, which drives up property assessments.

"It's really not that big a leap," he says. "One particular property's market value, which is its value on the market today based on comparable sales, came to $80,000. The replacement value of the house ranged from $130,000 to $150,000.The city and the property owner settled on $136,760. That includes the value of the lot that will be paid back to the city. They can then contract with a home builder for the remainder."

While the new technique is helpful, it is still just part of the city's real estate negotiations. To date, only a handful of property owners have made use of the assistance and the program does not apply directly to affected businesses. Instead, the city typically covers finding alternative locations for commercial property owners and covers most of cost of the relocation. Business tenants in affected areas, most of whom are paying rent month to month, typically also receive moving costs.

"Usually when we first meet people their jaw is on the floor; they're shocked," Psarakis says. "This is just another extra tool in the negotiations that helps to break down barriers."

Grimes acknowledges his department's eminent domain drought may not last. "We are dealing with one case where the people that own the property are more than happy to negotiate," Grimes says, "but unfortunately they only have documentation to prove that they own a third of the land."

To clear the title, Grimes says "their attorney is actually recommending that we acquire the property through eminent domain."

The Tangerine Project

Total acreage to-date: 9

Purchase price: $2.8 million

The goal of the redevelopment plan was to bring a grocery store and bank to an under-served but highly-populated section of the city centered around the Tangerine and Queensboro avenues intersection. The neighborhood is a mix of about 15 single-family homes, a tavern, a garage a strip mall and several vacant lots. After about two years of work by the city and developers, construction on a Sweetbay Supermarket, in a retail strip center being developed by Larry Newsome's Queensboro 1 LLC, is nearing completion. The new grocery store is slated to open on November 5.

On the southwest corner of the intersection, SunTrust Bank is proposing to develop a branch office. St. Petersburg's Real Estate and Property Management department is still attempting to acquire two more parcels in the southeast corner of the intersection for an as-yet unknown development.

Recent St. Pete

Redevelopment Projects

Development Parcels Acquired

Dome Industrial Park 63

Wildwood Community Center 42

Enoch Davis Community Center

and Johnson Branch Library 33

Maas Bros Site 18

Tangerine Avenue Community Redevelopment Area 53