Local residents have been watching in alarm as Martinez goes on a real-estate binge on the public's future nickle to make his dream come true. Some of the questions concerning his purchases are shared below )By Juan Montoya
Abraham Galonsky, owner of the Casa Del Nylon property purchased by the City of Brownsville for $2.3 million, said that four years ago City Traffic Director Robert Esparza approached him with an offer of $3.4 million for the same half-city block parcel fronting the new bus terminal on Adams Street.
Now Mayor Tony Martinez and the city commission face growing criticism for the binge of real-estate purchases in the last two years totalling some $3.24 million to be paid partly through the issuance of $13.06 million Certificates of Obligation.
Martinez has stated in the past that he planned to entice local property owners to sell the city the and as part of a package convince the University System to remain in the downtown area after the UTB-TSC separation. But with the UT System's announcement that it was combining its operations with the administration headquarters going to Mcallen, that assumption may prove to be mistaken.But that's really no skin off Galonsky's nose and we really can't blame the savvy businessman with connections to local movers and shakers for getting the most bang out of his real estate holdings. ¿A quién le dan pan que llore?
Martinez and Esparza based their purchase of the Galonsky properties upon the pre-purchase appraisal performed by Lauro Leal of Rapid Appraisal Services of San Benito as justifications for the purchase. We requested a copy of it and the pre-purchase appraisal performed on the property next to the Cueto Building (1355 E. Madison) as well for which we are paying $90,000 rent over three years ($2,500 a month) with an option to buy at the appraisal rate of $155,000 in 2015.
Then the total will be the asking price which the owner wanted to begin with and the city will circumvent the pesky restrictions in the Government Code prohibiting the city from speculating in real estate.
That appraisal was done by another company, Landmark Appraisal Company, of Browsville.
Several people who we have shown the appraisals to have voiced skepticism on their assessment and assumptions in the documents. In the case of the Casa Del Nylon, even though Galonsky is right in that it consists of six lots with the main building having improvements that consist of a first floor of 34,000 some square feet of commercial space and a second storage area of 18,000 feet, for a total of 52,586 square feet. Those improvements, according to Galonsky, were made using quality steel and brick construction with a block interior.
This was evident when we toured the site at his invitation and we have no qualms about it. What we and others who saw the appraisal of the property do have some doubts is the methodology used to arrive at the $2.3 million figure.
Appraisers use at least three methods to arrive at a number. There is the cost approach, the income approach and comparable sales approach. They then combine and average, make adjustments, and come up with an appraised value.
This is where the problems begin for some who saw the Casa Del Nylon appraisal.
In the cost approach category of the Casa Del Nylon property, the three comparisons for site valuations involve no properties in the downtown area. They are:
1) On Alton Gloor Road: 37,024 square feet valued at $5.40 a square foot.2) Off Alton Gloor Road: 25,500 square feet valued at 11.22 per square foot
3) Frontage Road south of Boca Chica: 8,640 square feet valued at $13.89 per square foot
Based on these comparisons, the appraisers set the value of the land at $15.00 a square foot= $540,000
The income approach (from rent) also contains improbable assumptions. The appraisers compared Galonsky's site to:
1) 700 E. Levee, circa 1984, 23,302 s.f. leased at $1.35 per foot.
2) 647 E. St. Charles, circa 1876, 2,180 s.f. leased at $165 per foot.
3) 1033 E. Adams, circa 1925, 5,900 s.f. leased at $0.55 per foot.
4) 444 E. 8th, circa 1950, 3,950 s.f. leased at $0.55 per foot
In the Levee St. site, the owner said the appraisers had gotten the square footage and the rental cost per foot
wrong. The E. St. Charles site is a historically restored residence. The Adams St. site is the one-story Elizondo Second-hand Store, and the E. 8th St. site is the tiny two-story building in the parking lot of the Wells Fargo Bank.
La Casa del Nylon site would need major (and costly) improvements in both the ground floor and the second empty storage space of 18,000 before it could ever rent office space. Nonetheless, the appraiser said that renting the 52,586 total square footage would get the owners at least $0.50 per s.f. and gave it a potential of $126,400 in rental income a year.
In the sales comparison approach, Galonsky's property was compared to three previous real estate sales, only one of which was downtown. They were:
1) 1220 E. Adams, 17,000 s.f. (two stories) sitting on 9,000 s.f. sold in June 2010 for $750,000 averaging $44.12 a s.f.
2) 942 Wild Rose Lane, 4,028 s.f. building on 26,800 s.f. of land sold on Nov. 2010 for $250,000 averaging $62.10 per s.f.
3) 1225 N. Expressway, a 4,900 s.f., one-story building sitting on a 10,739 s.f. lot averaging $67.35 per s.f.
Based on these "comparable" sales, the appraisal set a value of (52,586 s.f. x $45.00) = $2,370,000 on La Casa del Nylon property.
After performing a "reconciliation," the value of La Casa del Nylon properties were set at the $.3 million price tag the city paid Galonsky.
Local Realtors we spoke with say downtown sales have been lagging in the past half a decade as can be witnessed by the boarded up store fronts along downtown city streets. However, they said that one cannot blame the seller for the price the buyer sets through his appraisal, as the city is required to do.
If the city wants to build a parking spot there, the cost per space averages about $5,000 each, an additional expense.
Would the city commission and the citizens of Brownsville have accepted this bargain?
Galonsky said that residents should consider that his family had donated the Capitol Building to the city that has become the site of the annual Latin Jazz Festival and was now investing in reviving the downtown area.
"We feel that this city has been good to us and we feel we should do something in return," he said.
As far as Martinez's law partner having represented him in the sales of the property, Galonsky said that he and Barrera have been neighbors for decades and that both served as members of the board of the First National Bank in the past.
"Horacio has been my friend for years," he said. "He never negotiated on my behalf. The city made and offer based on their independent appraisal and we took it even when they had offered us more than a million more less than four years ago. People shouldn't read more than that into that."
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