Last December, a library site committee recommended that the city’s shining, new public library be built on the site of the abandoned Church Street Centre. In short order, the Metro Development and Housing Agency (MDHA) and Mayor Phil Bredesen began negotiating to buy the property located on Church Street. On March 12, 1998, the mayor announced that a deal had been struck for $11.75 million.
Strangely—and despite widely varying estimates of what the property was worth—the city aborted independent appraisals that were being conducted on the property. To local real-estate experts, canceling those appraisals seems very curious.
That’s because over the last several years, the vacant mall has been estimated to be worth anywhere from $3 million to $20 million, depending on who was doing the estimating. Also, Metro government has typically required that two independent appraisals be conducted on property being purchased for public projects.
Here’s how the situation came down, according to interviews with officials in the Metro legal office, the mayor’s office, and MDHA.
Seven months ago, the mayor announced the purchase agreement of the downtown mall from Pacific Mutual Life Insurance Co. The mall actually sits on city-owned land; the city was only buying the structure, which is to be torn down for the main library building.
Weeks earlier, the city had hired two different appraisers—Michael Ishie and Robert Pickens—to determine the property’s value. But officials at MDHA called them to cancel the jobs shortly before the mayor announced the purchase.
Once the mayor talked Pacific Mutual down from its original $15 million asking price and struck a deal for $11.75 million, MDHA “ended any appraisals that we were pursuing,” according to the agency’s development director, Phil Ryan.
Attorneys at the Metro Legal Department say that “as a matter of routine practice,” city officials in charge of purchasing real estate for public projects have independent appraisals performed on the property. Even Mayor Phil Bredesen says it’s probably “the rule” that appraisals are performed on real-estate properties before the government agrees to purchase them.
But, Bredesen says, Metro went ahead and made the deal because the agreed upon figure was less than the company’s original asking price, and the figure was within the city’s budget.
“We just felt the best thing to do was to just go ahead and get it done,” Bredesen says.
Meanwhile, critics of the deal say, it was especially important to pursue appraisals because Metro and Pacific Mutual have been battling in court about the value of the building. From 1994 to 1996, the Metro Property Assessor’s office estimated the mall’s value at $15.5 million. In 1997, the office appraised it at $20 million. For purposes of contesting its property tax bills, Pacific Mutual has disputed those estimates, claiming for the years 1994 through 1996 that it was worth $3.2 million, $5 million, and $6.1 million, respectively. The case is pending in Davidson County Chancery Court.
Current and former city officials are critical of the way the deal transpired.
“There’s not a person in this city who would buy a home without getting an appraisal. That’s just the bare minimum,” says local real-estate developer Bill Freeman, who is also the former director of development for MDHA.
Freeman says he was “responsible for the acquisition and dispensing of all the real estate for MDHA, and we never acquired or disposed of a piece of property without at least one or multiple appraisals.” Freeman says abandonment of the appraisals “violates the intent of local and federal purchasing guidelines.”
To make matters worse, Freeman says, his own company had, about 18 months ago, explored the purchase of the property and determined it was worth only about $5 million. “Anybody can have an opinion about what it’s worth,” he says. “It may be worth $12 million, but we’ll never really know. It’s really arrogant, I think.”
Metro Property Assessor Jo Ann North is also critical.
“I have no knowledge of why they unhired the appraisers,” she says. “It seems to me like it’s just good business practice to hire an independent appraiser when you’re investing a large amount of money.”
