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Determining fair market value of a fort

October 21, 2004|by TARA REILLY

tarar@herald-mail.com

CASCADE - The PenMar Development Corp. was first advised by its lawyer to have the former Fort Ritchie U.S. Army base appraised before it agreed to sell it, but the lawyer later said the property could be sold without knowing how much it's worth.

The PenMar board decided in July to have a fairness opinion done on the sale rather than an appraisal. It agreed to sell the approximately 630-acre property to Corporate Office Properties Trust (COPT) of Columbia, Md., for $9 million.

That price will drop to $5 million if COPT creates 1,400 jobs over nine years. PenMar was created by the state in 1997 to redevelop the base, which the Army shut down in 1998. The Army must transfer the land to PenMar before the sale to COPT can go through.

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Some PenMar board members and residents have questioned how the base could be sold without knowing how much it's worth.

PenMar Executive Director Rich Rook said Wednesday that PenMar's lawyer, Timothy Chriss, decided that a fairness opinion was the right way to go.

"The bottom line was that he was the one that recommended a fairness opinion," Rook said. "And that's our corporate council."

The fairness opinion will determine whether the sale price is a fair price for the property.

Chriss, however, first suggested that PenMar "promptly" hire an experienced appraiser before it agreed to sell the base.

Rook said he'd have to go back and check why Chriss changed his mind about the appraisal.

Chriss could not be reached for comment Wednesday. A woman who answered the phone in his office said he was at a meeting and would not be back until this morning.

"As you and I have discussed before, it appears to me mandatory that the PMDC board have an MAI appraisal of the fort prior to agreeing to any form of purchase," Chriss wrote in a June 2 e-mail to PenMar board member Ron Sulchek.

"It is important both as a negotiating tool and as part of the board's fiduciary duties in dealing with the disposition of PMDC's primary asset," he wrote. "How can the board credibly defend any sale transaction, with or without any development subsidy or 'equity kicker,' without some idea of the fair market value of the property?? I suggest that the board consider retaining promptly an experienced appraiser ..."

Rook said in an interview last week that PenMar chose the fairness opinion because it would be difficult to get an exact value of the base.

He predicated that on the property's remote location and other characteristics. He said it would be difficult to find a similar property for value comparison to do an appraisal.

Sulchek said Wednesday that the base should have been appraised, because it would determine its value and whether the sale price and discounted price represented reasonable amounts.

"You can't assess that without doing an appraisal of the property," Sulchek said.

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