Lot Sells For 35 Times City-Appraised Value

Yale New Haven Hospital purchased the above-pictured Legion Avenue surface parking lot and one beside it for over $4.5 million. The city taxes it as though it’s worth just over $126,000.

The purchase was among the latest real estate deals documented on the city’s online land records database. (See chart below for all recently recorded local sales.)

On Oct. 27, Yale New Haven Hospital, Inc. bought the surface parking lots at 8 and 28 Legion Ave. from OP Riccio Owner LLC for $4,550,000.

The city last appraised those two lots as worth a combined total of $126,600.

The parking lots take up around 0.6 acres at the southwest corner of Legion Avenue and Howard Avenue. They’re immediately adjacent to Hill Regional Career High School. They abut a 0.86-acre lot at 912 Howard Ave. that YNHH acquired through a land swap with the city’s housing authority a decade ago. And they’re less than two blocks away from YNHH’s Smilow Cancer Hospital and main York Street campus.

YNHH Senior Vice President Vin Petrini told the Independent Wednesday the hospital plans to keep using the newly acquired lots as surface parking for patients and employees.

“It will remain on the city’s property tax rolls,” he wrote in an email response.

The gulf between the lots’ recent purchase price and their official appraised value — which ultimately determines how much a property owner pays in local real estate taxes each year — raises questions about how New Haven values prime real estate.

Why did YNHH pay so much more than the city’s appraisal for these properties?

Or, to reverse that question, why does the city value these properties so much less than do private real estate players dealing in the open market?

Should this valuation gap be viewed as a de facto tax break for landlords who can sell high after (legally) paying relatively little in taxes for years?

Or should asphalt-capped stretches of open land indeed be cautiously appraised, even if they are located in development-rich parts of town?

While the parking lots recently sold for over $4.5 million, they’re slated to contribute just $3,888.66 to the city’s tax coffers this fiscal year based on their current appraisal.

Prices Rise; Appraisal Doesn’t

According to the city’s online land records and assessment database, these two parking lots have been increasing in market value — at least in the eyes of those who own them — for the better part of two decades.

In 2005, a holding company called Marvin Gardens LLC, which is controlled by John Schmid of the Hartford-based parking management company ProPark, purchased the two lots for $1.7 million. In 2007, the ownership company changed its name to Marvin Gardens of CT LLC.

A decade later, in April 2015, Marvin Gardens of CT LLC sold the two lots for $3.8 million to another holding company, OP Riccio Owner LLC.

On the same day that that property transaction took place, the new owners took out a $3.15 million mortgage with People’s Bank on the two Legion Avenue properties.

Who exactly controls OP Riccio Owner LLC is a bit more difficult to decipher from public records.

The Secretary of the State’s business database clearly lists Schmid as the principal owner of Marvin Gardens of CT. That same database describes OP Riccio as a foreign limited liability company, and lists its principal as a Manhattan-based shell company called OP Holdings JV LLC.

That company’s business address is West 57th Street in New York City. It’s also registered in Delaware, a state protective of shell company secrets. Such as: who exactly owns that company.

The local $3.15 million mortgage and $3.8 million warranty deeds for the Legion Avenue lots, however, do offer a clue as to some form of continuity between the the 2005 and 2015 buyers.

Both documents list David Schmid, the chief investment officer at ProPark, as an ownership representative for both Marvin Gardens and OP Riccio.

Schmid confirmed as much in an email response to the Independent on Thursday.

“The owner of record for this property is OP Riccio Owner, LLC,” he wrote in an email response, ​“a Joint Venture that includes certain owners of Propark who are minority shareholding members. Propark did provide parking management services for the property.”

As for why OP Riccio decided to sell the parking lots for $4.55 million to YNHH in October, Schmid said, ​“The Joint Venture was approached by an unsolicited buyer with an offer that was accepted.”

Petrini told the Independent on Thursday that YNHH did indeed approach ProPark about buying the lots when the hospital learned that they were on the market.

When asked about why YNHH paid so much more for the lots than their official appraised value, Petrini pointed out that an appraisal from the city is based in part on how much revenue a property brings in over a given period of time — in this case, how much income the properties bring in each year as surface parking lots

“We thought it was a fair offer to pay based on what we knew about the property,” Petrini said about the $4.55 million sale. ​“And it abuts our existing property, too.”

How Do Appraisals Work, Again?

Which raises the question: How did the the city determine the value of these two properties in particular? And how does it decide how much local real estate is worth in general?

City Acting Assessor Alex Pullen told the Independent Thursday that his office has some digging to do as to why the two Legion Avenue parking lots were appraised at a combined value of only $126,600 when the city conducted its last revaluation in 2016.

“We are looking into the initial determination of these figures back in 2016, at which time the owner attended an informal hearing, attesting to the fact that the values at the time ($64,600 and $62,000 respectively) were in his opinion too high,” Pullen wrote in an email.

He confirmed that the $1.7 million sale in 2005 is documented in the city’s records, but that it looks like the 2015 sale was determined to be unqualified. He said he’s looking into the reasoning behind that now, which could be because the two companies involved in that transaction — that is, Marvin Gardens and OP Riccio — are related.

“Nonetheless„” he wrote, ​“the values for the lot appear low on the assessor’s cards.”

He then deferred to YNHH as to why the hospital decided to pay over $4.5 million for the lots. But stressed that that amount struck him as high.

“Based on my back of the envelope calculations that figure seems above market, however, I do not know what they intend to do with the property.”

The answer to how the city determines local property values for tax purposes more broadly lies somewhere between state statute, industry standards, and the unique judgments of the city assessor’s office and hired help. (Click on the video above to watch former East Rock Alder — and current Mayor — Justin Elicker break down the revaluation process back in 2011.)

According to the city assessor’s office’s website, state statute, and various state legislative staffer reports written over the past two decades, municipal assessors use three methods to estimate a property’s ​“fair market value,” or its appraisal.

That number refers to how much any given property might sell for on the open market. Or, as the city assessor’s website puts it, ​“the most probable price a property is likely to sell for given a knowledgeable buyer and seller, no indication of duress or undue stimulus, an open and competitive market and no special concessions of financing, meaning the transaction is arm’s length.”

Those three methods for determining an appraisal are:

1. The market approach, which looks at the recent sales prices of comparable properties.

2. The cost approach, which looks at how much it would cost to replace a property with a similar one based off of current labor and material prices. This approach then subtracts based on depreciation, or how much the wear and tear a property has incurred over time has affected its value.

3. The income approach, which looks at how much income a property generates through leases of, for example, apartments, offices, and commercial space.

State law requires municipalities to conduct a revaluation of local real estate every five years to make sure that appraised values are up to date with so-called fair market values.

Municipalities then use that fair market value to determine how much to charge in taxes every year. They do that by levying a mill rate, which is equivalent to $1 for every $1,000 in assessed value, against a property’s assessed value. In Connecticut, all properties are assessed as worth 70 percent of their appraisal. New Haven’s current mill rate is 43.88.

McCarthy: A Pattern Emerges

East Rock Community Management Team Vice-Chair, former state legislative staffer, and frequent Independent commenter Kevin McCarthy told the Independent that this transaction seems to reflect a pattern in recent local property transactions documented by this news site.

While not an expert on the art of appraisals, McCarthy cautioned, he did spend much of his professional life in Hartford thinking about and observing firsthand the intricacies of tax law, as a staffer to the Connecticut General Assembly’s Finance Committee, among other legislative appointments.

“There seems to be a pattern in the delta between the appraised value and the sales price,” he said, not so much for small rental properties or single-family homes, but instead for large apartment complexes and vacant lots in and around Downtown.

“The larger trend is that a number of vacant lots and parking lots have sold for way more than their appraised value, and these are primarily close in” to the city center.

A vacant lot at 294 State St. in the Ninth Square, for example, recently sold for $2.5 million, while it was last appraised at $579,900. Another vacant lot at 480 Martin Luther King, Jr. Blvd. on the Rt. 34 West ​“superblock” recently sold for $2.8 million, while it was last appraised at $707,140. Click here and here for similar examples on Howe Street and Crown Street.

A key difference between those sales and the YNHH parking lot pickup is that all of the former buyers have publicly described plans to build apartment buildings atop their newly acquired vacant lots. YNHH, for now, plans to keep its a parking lot.

(Other local landlords have also pointed out to the Independent the opposite phenomenon. After buying a Hill office complex for roughly half of its appraised value, one developer told the Independent, ​“The market and the city don’t always agree on valuations.”)

McCarthy pointed out that a provision in state laws tates that a municipality cannot base an assessment solely off of a sale price.

That part of the law reads: ​“The assessor in any municipality may not, with respect to any parcel of real property in the assessment list for any assessment year, make a change in the assessed value of such parcel, as compared to the immediately preceding assessment list, solely on the basis of the sale price of such parcel in any sale or transfer of such parcel.”

Instead, assessors must take into account such considerations outlined above regarding comparable sales, replacement costs, and income.

McCarthy said that leaning heavily on the income generated by a parking lot like the ones on Legion Avenue will likely provide quite a bit lower of an appraisal than the price that nearby landlords like YNHH are willing to pay on the open market.

He also noted that the city has lost some high-profile, high-dollar tax assessment appeals in recent years, which might encourage a more cautious appraisal approach.

And he pointed out that higher assessments of apartment buildings, and therefore higher taxes on landlords, will likely result in higher rents for tenants. Relatively low assessments, meanwhile, shifts that tax burden onto the rest of the city’s property owners.

“It is something of a conundrum,” he said.

But the trend is clear: real estate players have been willing to spend many millions of dollars on vacant downtown lots that are currently being taxed as if they are worth quite a bit less.

Previous property sale coverage:

• Dunkin’ King Expands New Haven Realm
• Parking Drives $6.85M Boulevard Deal
• Winstanley Snags Temple Medical For $21M
• Local Builders Buy Fair Haven Warehouse
• Yale Buys York Townhouses For $2.85M
• So Long ​“Heights On River.” Hello, Mandy
• Beacon Bulks Up 9th Sq Holdings
• Lot Buyer Promises Affordable Apartments
• Mandy Picks Up 10 Houses For $2.2M
• ConnCAT Buys Dixwell Clinic Building
• City Buys Walt’s Cleaners For Dixwell Plan
• 2nd Try Adds $1M To Purchase Price
• Investors Drop $1.1M On East Side Condos
• Out-Of-Town Builder Buys Park St. Block For $4.7M
• Ocean Spends $1.45M On 7 Houses
• 66 Norton Sells For $1.46M
• Mandy’s Buying Spree Tops $16.1M
• ​“Rt. 34 West” Hotel Site Sold For $2.8M
• Spinnaker Flips Comcast Project For $14.6M
• Sherman Medical Building Sells For $2.7M
• Pike, Mandy Spend $2M+ In Latest Buys
• 200+ Apartments Planned At Empty Eyesore
• Annex Apartments Sold For $3.95M
• Mill River Office Building Sold For $4.65M
• Local Landlords, Albertus Magnus Expand
• Mandy Buys Warehouse For $1.6M
• Pike Collects $890K On Wooster Sq. Sales
• Springside Apartments Sell For $3.2M
• Family Dollar Sells For 1.8M Dollars
• Pike Sells 2 Buildings To Yale For $3.8M
• Mansion Sells For Only $1.45M
• Landlord Tops 340 Units
• High Street Apts Sell For $25M+
• St. Michael’s School Sold, For Apartments
• Ocean Management Acquires Perrotti Westville Properties
• Paris Realty Picks Up 6 Q Meadows Condos
• Landlord Boosts West River Condo Holdings
• $21 Million Changes Hands In 2 Days
• 50 Factory Jobs Coming To Fair Haven
• Brendan Towers Sold For $6M+
• Investors Drop $917K On West Side Condos
• Mandy’s 2018 Buying Spree Nears $13M
• Mandy Empire Buys Up The Block
• Roots Planted In Newhallville
• Latest Sales: Mandy Buying Spree Continues
• Latest Sales: Mandy Expands In City Point
• Latest Sales: East Rock Home Buy Tops $1M
• Latest Deals: Beulah’s 5th Rehab On Block
• Latest Sales: NHR Sheds Small To Focus Big
• Latest Sales: Mandy Buys In Heights
• Home Sale Price Doubles In 13 Years