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Fort's valuation sparks complaint

October 26, 2004|by TARA REILLY

tarar@herald-mail.com

CASCADE - A PenMar Development Corp. board member has filed an ethics complaint against a firm that decided the sale price of the former Fort Ritchie U.S. Army base was "fair and reasonable" without first having the property appraised.

Board member Ron Sulchek said Monday after a PenMar meeting that he lodged the complaint.

Sulchek's complaint questions whether the real estate consulting firm of Lipman Frizzell & Mitchell LLC of Columbia, Md., violated professional appraisal standards by its actions.

Sulchek filed the complaint with the Chicago-based Appraisal Institute, an international membership association of professional real estate appraisers that enforces among its members a Code of Professional Ethics and the Uniform Standards of Professional Appraisal Practice (USPAP).

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M. Ronald Lipman said in an interview Monday that USPAP regulations did not apply in this case, because the firm provided a "fairness opinion," rather than an appraisal. He said the person who wrote the fairness opinion, Joseph M. Cronyn, is not an appraiser and is not a member of the Appraisal Institute, and therefore the standards do not apply to him.

"So, I don't know what Mr. Sulchek is talking about," Lipman said.

Lipman is an Appraisal Institute member, according to correspondence he sent to PenMar.

Sulchek said Lipman signed the proposal the firm submitted to PenMar to provide the fairness opinion, which he contended obligates the firm to follow USPAP regulations and do an appraisal.

PenMar has agreed to sell the approximately 630-acre base to Corporate Office Properties Trust (COPT) of Columbia for $9 million. The price will drop to $5 million if COPT creates 1,400 jobs over several years.

COPT also must contribute at least $7.5 million in base upgrades, such as road improvements.

PenMar hired Lipman Frizzell & Mitchell to determine whether the sale price of the property was fair and reasonable.

The firm determined in its fairness opinion that the sale and purchase price of the property is "fair and reasonable," and acknowledged it didn't appraise the base.

Sulchek, a CPA and a professional appraiser, has questioned how a determination of a fair and reasonable price could have been made without first knowing how much the base is worth. He also questioned whether the firm, before issuing its judgment, was required to appraise the property based on standards in the Uniform Standards of Professional Appraisal Practice and based on language in the sale agreement with COPT.

John S. Brenan, director of research and technical issues for the Appraisal Foundation, said in a Sept. 23 e-mail to Sulchek that, based on language in the sale agreement, the Uniform Standards would apply in determining whether the sale is "fair and reasonable."

Brenan, in a telephone interview from his Washington, D.C., office, confirmed Monday that he wrote the e-mail, but said he didn't have all the details about the fairness opinion and sale. The Appraisal Foundation sets the professional appraisal standards.

Sulchek also questioned whether Cronyn had the professional background to determine whether the sale was fair and reasonable.

The PenMar board voted 7-3 in open session on Monday to accept the fairness opinion.

Board Chairman George Griffin and members John Hershey, Peggy Bushey, Phil Ulzheimer, Elizabeth Morgan, Jack Simpson and Mike Zampelli supported the motion.

Bushey made the motion, which was seconded by Ulzheimer.

Sulchek and board members William J. Wivell and George Stone voted against the motion.

The vote took place with no discussion in open session on the fairness opinion's contents.

Wivell said after the meeting that he was confused about what the vote meant. He said the board didn't discuss the contents of the fairness opinion at all during the meeting.

Wivell, also vice president of the Washington County Commissioners, also has questioned the merits of the fairness opinion.

Griffin said after the meeting that he was confused by the fairness opinion vote and didn't think a vote was necessary. He said the board was required in the sale agreement with COPT to have one done, and that was accomplished.

"I don't know why we voted," Griffin said. "I don't think there was any reason to do so."




How they voted


The PenMar Development Corp.'s board of directors on Monday voted to accept a fairness opinion from Lipman Frizzell & Mitchell LLC regarding the sale of the former Fort Ritchie U.S. Army base. The opinion states that the sale and purchase price of the approximately 630-acre property is "fair and reasonable," even though Lipman Frizzell & Mitchell didn't appraise the former base.

For: George Griffin, John Hershey, Peggy Bushey, Phil Ulzheimer, Elizabeth Morgan, Jack Simpson, Mike Zampelli

Against: William J. Wivell, Ron Sulchek, George Stone

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