Ready to proceed because that's supposed to come in by zoom so we're gonna start with the savings pastor appeal and Doug because Doug Zorzi is here ready to proceed okay all right would you and more you raise your right hands you saw me affirm subject to the pains and penalties of perjury the testimony you're about to give is the truth the whole truth and nothing but the truth okay you've been doing it is having the assessor go first so the first property we have is a 94 acre parcel of land on the street three appraisal companies set up an initial value of 1.518 200 at the informal hearing changes were made to the site and wetland adjustment at the formal agreements we made a lot size adjustment which brought the value down to the current listed value of 1.099 500 comparable sales there are three one of them is a half interest in the subject property itself which breaks down to a value of 8126 dollars per acre for a half interest and you'll see in parentheses if it were a full interest that would be a sixteen thousand two hundred fifty two dollars an acre the neighboring parcel sold to norwhal was part of the college campus at one point that one sold for 600 thousand dollars it's an 18 acre parcel sold for 33 thousand dollars an acre and we've all heard I'm sure of the isabel circle lot that's under contract for a million dollars it's a 72 acre parcel I've spoken to the current owner and prospective developer and it is still under contract in assuming to close up a million dollars that breaks down to 13 thousand dollars per acre the subject property is assessed at 11679 dollars per acre sir would you please mute yourself we're taking up a different case right now yes please yes the first sale of the half interest of the subject property today I would say stay on stay on but muted can you one of the questions the value was was accessibility the the half interest was purchased after a an appraisal was done for the for the bike path at the time an appraisal was done on behalf of the city September of 2015 was assessed it was a praise that a million five so that sale occurred after the easements were in place equity comparables the value of the land that's placed on the country club is 1.497 that is just the land no no buildings included it's 133 acres and the assessment on that breaks down to 11209 dollars per acre and the assessment the assessment on the neighboring property at berry street of 3925 that 18 acre parcel that breaks down to 21793 dollars an acre so it appears as though the land at saving pasture is equitably and fairly assessed at 1.995 the record card on the back there was some question about the the number of units in the land that is a way of achieving proper assessment there is not there are not currently nine divided lots that's just a way of breaking down the value down the very the the side with the with the p with the star on the very uh the other side the front the very bottom it's it's got a heading that says land section and you'll also see the the adjustment for the for the wet area that was made during the informal appeal on there you will also see the in the sale information the sale that occurred for the half interest um in november of 2020 any questions about that well yeah how do you get from there to from the full to the full value just by double you right but but it's been adjusted down it's not double anymore right it's not double the half interest they they bought a half interest in this in this property for right for 765 right yeah so we would assume that a full interest would sell for a million million five right so why is the number uh million 99 that's the the assessed value right right it's not always exactly the sale price is it okay initially it was set as you saw at a million five when they came in for the informal they brought up the fact that there were some wetlands and some accessibility issues so that's where the adjustments were made okay so you know you have a price that was set based on the sale and then they're saying that it's not worth half of what it was well there's an entire land schedule it's not just based on that one individual sale it's it's all of the sales within the city for three-year time period yeah still look confused but okay yeah mary maybe this is a question for the appellant that when we were talking about a half interest to your knowledge is it did the other the joint owner by half of the property or is it owned it's owned as one piece of property by two people now as i understand yeah okay thank you rosie um you said the city had it assessed in 2015 before the easement for how much uh 1.5 1.5 and um on the back of the property record under comments there's some comments about um main parcel only as 200 feet of unencumbered street frontage due to railroad right away per owner was that verified or is that the appraisal company just takes the information from these so these are all notes that would have been put in by my predecessor as things change with each parcel he'll update these comments the reappraisal contractor will come in and re-verify so they we assume that even though it says per owner that that has actually been verified correct okay yeah um and what is deed reference on survey is wrong mean they're same area where it says deed doesn't um at some point steve had gone back to look at the deeds and one of the adjustments that we made in the formal grievance um mr zoe as he brought in a survey so originally it was based on what the deed had for land the survey was brought in and it was changed so that comment will come out now that it's verified okay thank you carry um so back to this the city had an appraisal done in 2015 is that correct correct and that put the value at 1.5 yes and go ahead and so i'm i'm still not sure why it's been reduced now to basically 1 million um because that's i mean that was only that appraisal took into account the wetlands and the right of way and all that kind of stuff yes and that was just done to establish right away values that wasn't done for setting assessment that was um to to compensate the owner for easements and right away that were about to be purchased so so the the city purchased easements based on a value of one and a half million dollars correct okay how much did the city pay for those easements uh 0.3502 per square foot which came out to a total of five thousand one hundred and fifty dollars and then why was the value at 274 eight since 2015 that i you can only change it if something with the property changes um if there was subdivision made or there hasn't there's been no changes to the property um um you can't chase it has to be set until you do a reappraisal or something with the property changes uh i i've got a question as we're as we're evaluating this property is uh is the value based on the idea that there's a it had this is what it's worth for someone with the assumption with the expectation that it would be developed this is an as is value with no no future speculation okay trying to understand that so so what does that mean that that it's not taken into consideration any subdivision subdivision of you know it could be turned into 30 lots could be turned into two lots that's just one 94 acre parcel of land i think what i understand you're saying there is when you sent the land schedule a smaller lot is worth more per acre than a larger lot because of the land schedule and so when we're looking at this is 94 acres we're not looking at its potential to be but at 45 two acre lots right we're looking at it as one 94 acre parcel and the actual sales price of the half interest was how much 765 000 and that'll be right on the first first page there that's what confuses me well it's not so the value is set by all sales it's not just that it's not just that one sale of that but the sales price was that set by was that the actual sales price of getting the half interest yes and so that considered to be a arms length market rate transaction yes okay any other questions before you go to the taxpayer all right Doug are you going to speak for both you and Alan okay highest best use is defined as the reasonable probable use of the property that results in the highest value however the analysis requires sequential consideration of four criteria to determine whether the use of the subject property is one legally permissible two physically possible three financially feasible and four maximally productive the bca argument letter as amended on august 29th contains five sequential arguments has everyone had an opportunity to read the appended letter with the attachments the august 23rd the uh the august 29th would be the amended the list four different arguments by the slide here's a copy of you know i see something the dated august 23rd that has four arguments yes and what had happened since was that the last portion of that was changed into an additional argument and it was submitted to john and should be incorporated into this have i'm looking for something on the 29th i'm not seeing it so perhaps if you have enough to give out now that i've got three oh why don't we just ask the uh clerks to give make sure handle it to john now and john this is i see it's coming from you all just uh i've got the email from you saying that you received it and well rather than take time to give hand a copy to john let's give a copy to the assessor and we'll make sure every member of the board gets a copy thank you appreciate that um basically the assessor's patriot property card land section presently lists nine units of site acre vacant residential units only one site acre vacant residential unit based on property acreage can physically be located on the land westerly of blanchard brook the remaining eight site acre vacant residential units are assessed on property east of blanchard block which is landlocked the four arguments of the amended letter present factual documents let me roll through those real briefly up by me one property subdivision the property has never been subdivided for development purposes argument two property permit the property has never applied for a development permit or been issued a development permit the property owners had been in preliminary discussion with the city for receipt of a tax incremental financing grant for public infrastructure improvement associated with a potential affordable senior residential development in the riverfront zone east of blanchard brook the city choose to rescind the approved 2018 diff district award to the state in february of 23 but four without a tiff grant specifically for construction of a bridge over blanchard brook no residential property development is financially possible currently on the property east of blanchard brook argument three land assessment comparisons salons pasture does not have a dedicated city right away entrance as does the noir wall parcel the 18 acre parcel from the intersection of salons street and chemistry and salons pasture does not have an established curb cut with entrance street accessing the property site as does the else club property or the so-called country club road project therefore comparable rural land properties with a miscellaneous classification are listed in attachment seven title cba comparable rural land with miscellaneous classification in addition comparable rural land properties with an r2 classification are listed in attachment eight titled cba comparable rural land with r2 classification none of the above comparable rural land properties have been assessed with multiple units based on an assumed non-identifiable number of future units argument four landlock acreage blanchard brook east which comprises 92 acres of 94 plus acre parcel the property east of blanchard brook is not presently accessible for residential development once again approximately 92 acres of the 94.14 acre site became landlocked with construction of the pedestrian path previous existing limitations continue to exist they are surrounding residential properties topography railroad corridor and blanchard brook the city constructed the pedestrian path over the only section of box culvert which provided farm access prior to 2017 for this loss of use the city allowed an access location for the property entrance that is accessible by traveling approximately 300 linear feet on and over the pedestrian path and please refer to attachment nine the highlighted yellow section however access is restricted to agricultural and forestry equipment the allowed access is specified in the next to the last paragraph of the warranty deed easement contained in book 681 page 62 and is also attached in attachment 10 future construction of the bridge over blanchard brook will allow appropriate access for property access and residential development until such time of bridge is constructed over the brook the acreage easterly of blanchard brook is only marginally accessible for agricultural and forestry purposes the landlocked acreage cannot be assessed for any residential development furthermore the incline of the most gradual property access location requires ascending approximately a one foot vertical rise over a three foot horizontal run the 33 incline of the access only allows for a small farm tractor with a brush hog to ascend and descend the slope to access the acreage east of blanchard brook this argument five conclusion eight of the nine site acre vacant units are presently assessed on the 92 acre portion of landlocked property east of blanchard brook the 2.1 acre portion of property west of blanchard brook which has less than a one half acre vacant site that is not encumbered by wetland well and set back and slopes greater than 25 percent is assessed with a one site acre unit given argument one argument two argument three and argument four the property owners request that the number of site acre vacant units on the 94.1 acre property be reduced to one site acre vacant unit until such time or bridges constructed over blanchard brook which enables access to the landlocked 92 acres eight of the nine assessed residential units are not legally permissible to be permitted under city zoning regulations are not physically possible to access are not financially feasible to construct without tiff assistance and therefore are not maximally productive please advise me when the three person inspection team will coordinate their onsite review of the property I would like to be present to offer site guidance to the team as they conduct their onsite review thank you okay thank you um I'll get to you in just a moment um Doug Doug do you have a figure in mind of what you think uh it should be assessed that if we use the property card and one site acre unit that has a value marty of 105 000 I believe whatever the value is for one site acre unit plus the balance of the property would be approximately 93 acres at the rate per acre that's comparable with the rural land classifications in attachment seven and eight and also the r2 classifications so I forwarded that to everybody that changed the paragraph so so you don't have a figure that your the figure I believe comes out approximately to what it was previously assessed at 274 roughly in that order of magnitude I believe it's whatever the number of acres times the price per acre and I believe that price per acre excuse my voice is approximately 26 000 I believe okay anyone else I got a question Mary just um as I understood so two things um the first just dawned on me while Doug was talking that I I do not feel a need to recuse myself but I did want to mention that I was heavily involved in the previous life with looking at the redevelopment I was on a committee we were pointed by the city in seven eight thereabouts to look at how could Sabans be developed so I had a close connection and Doug you were on the committee I think and there are a bunch of us who were there but yeah that doesn't sound like a required recusal no but I just it popped into my head and so I thought I should mention that thanks um where where I'm getting confused is in the assessor's presentation he described what is under the land section on the card um the number of units is a mechanical calculation get at a value rather than an assumption about what how many lots would be developable there and as I understand it we are looking at what the value of the this undeveloped piece of property is not what its potential development if it were nine or ten lots but what its value as it is now not what it could be um and did did I get so the argument about I so I'm having trouble with your discussion of there's really only one developable lot given the constraints of the access and and other issues with the property can you help me understand that if you look at any of the other parable properties none of them were assessed in the manner that savings is being assessed okay your comparables are his comparable the assessor's comparables the comparables that were pulled in the attachments Bob and Rosie yeah I still I have one question what when you sold your half interest how much I didn't sell it okay so there's no half interest what's this as sales price on the sheet what Ellen might want to speak with uh to about okay we'll get these two we'll get to you Alan yeah that basically how was that arrived at if it's not a sales price uh-huh Rosie um so I think that I heard you saying when you're talking about the right-of-way issues and referencing the um the easement I think I heard you saying that that the restrictions in the easement about logging in forestry reduce the access or reduce the value of the land because you'd have difficulty accessing it um so I'm trying to reconcile that with you know you're you're I think I hear you arguing that the uh easement makes it worth less that that seems to be part of your argument there um hearing that the city paid five thousand one hundred and fifty dollars do you agree like does is that how much less it's worth or what would make it I'm not quite following that there at the time bridge is constructed high case in point we have been in discussion with the city as I mentioned for a number of years the tiff was pulled out from use when a bridge is constructed then the value of that property exists it can be permitted for any number of units right now it cannot be permitted and the city has restricted access to the 92 acres if it's for agricultural and forestry can you walk me through that so the it sounds like you're saying that the value should be reduced by a significant amount when you you do your math there um why wouldn't the value only be reduced by the value of the easement I'm using the bit I'm basing it on the property card and the value that was derived it was derived with number of units at a certain price and the other acreage okay so that's that's the sole argument then not anything about the easement or access or anything there well access is not it's not accessible can't be permitted it's landlocked right and what I'm hearing you say is that it's landlocked because of the easement am I incorrect in that understanding that is correct so why would the value of the easement only have been five thousand dollars if if it reduced the value of the overall property by by so much because the way that we were previously the farm was being accessed the 92 acres was over a section of box culvert that the city installed at city expense years ago in conjunction with making access for the railroad okay the railroad came through the box culvert that was being used for access was taken away for the purposes of constructing the pedestrian path and a temporary access which was restricted was created by the city okay so the all right I think I follow what you're saying there thank you there you have you okay anyone else have a question actually I'm one of the opponents I'd like to be heard please Alan I've told you you're going to be heard I'm anyone else of this witness before we move to the other witness okay Alan do you have the ability to turn your video on I could not I apologize I cannot I can only okay raise your right hand and do you solely affirm subject to the pains and penalties of perjury that the testimony you're about to give is the truth the whole truth and nothing about the truth I do chair and thank you for allowing me to do this thank you and try to keep your voice up because uh we're a lot of people listening I will try to talk a little clearer and apologize I'm I got my vaccine last week and I react fairly strongly to it um I found a couple of comments uh obviously people are talking about the purchase price of the 765 and so I think I should probably start there because because I'm the one who was the buyer um that contract was negotiated in January and consummated in February 2020 so the closing took place later but at that time it was well aware to me and many people and this is why I bought the parcel or share the parcel with Doug is that the city had applied for a master tiff permit for 64 million 16 million was going towards the hotel 11 12 was going to the garage 26 million was assigned to go to savings there was a piece to Governor Aiken's drive they were redoing a big portion of Berry Street and that was the reason why I purchased the land because the 26 million was targeting savings to give it access that we desperately need we worked hard with the city's officials we've made some great progress and we're close and we're very excited to begin when we really can but uh the city came to us and said they need to shut down the tiff for the 26 million that was going to help us gain access sewer water road power sidewalk that is no longer offered and so we are stranded I also wanted to mention uh Marty when you talked about the the um assessment value of the alks it's at the 1.4 but you did not mention that the purchase price was three was three something million or it was three actually it was three three million according to the city's website so want to please put that out there the price and value are not always tied together we as a community just bought the alks for three million but we have it assessed for half of that um they have a road they have sewer water power we're going to put 36 trailers thank goodness to help folks up there and the Good Samaritans is going to run a program for the unhoused but they have many advantages so I wanted to point that out um if I had ever known that the tiff was going to be withdrawn and that I'm now in limbo I would have never ever paid 765 I would not have even bought the project at all um we're very excited what's going on with the alks Doug and I really want to work on priority housing for seniors I don't know how I became so old so quickly but I did I'm a senior um so I guess that's my main point to the group is I'm the buyer that's why I bought it um at the time I bought it there was 26 million that was slated for that project when we worked with white and Burke Mike Miller Mr. Frazier they encouraged us to build something even much larger than what we came forward for again offering the assistance to get us on site Doug and I felt at the 70 somewhat unit we would do priority housing for seniors with the help of the city we would look at how the traffic impacts are being absorbed what's going on with the new market there's a new paradigm um and here we are also when I started Marty I really want to point it out times past quickly but we've gone from a three and a half percent rate structure for construction but more like eight so the values of development potential have changed radically um and that's probably most of what I would say and we hope that we can gain the city's assistance as soon as possible to gain access we really look forward to working with the Elk's project next door um but right now we're sort of a stuck piece of land as I said to Doug uh many years ago we used to look for landlocked pieces when they are landlocked to be able to get civil cultural practices the board of civil authority grants access through a parcel at this point I can't even pull a log off that property I can't get my tractor up there other than a tiny one I can't get my combine I can't get my hair I can't do anything so I just really want to point that out where until we can get the assistance we for what we've estimated and estimated the new box culvert and the things we need are going to be about a million and a half dollars to get to the site until we can raise that kind of money a million and a half to two to get on the site we really can't do anything with the majority so I really just wanted to point that out I thank you for letting me speak uh when I could not come I'm having a lot of health challenges so the COVID is a very difficult thing for me thank you very much so the question about the country club that assessment is just up the land only not not the total property but Alan I have a question that maybe you can help me think through which is that the assessor just told us that we should be considering the the value just as raw land and a lot of what you've been telling us has been your sense of the value based on the the potential uses that uh that you look to be putting to the land so how should we be uh thinking about those two issues well I think you've left out the value was because I'm the one who wrote the growth center application so in 2018 the growth center application was was was was triggered for the 64 million unfortunately things did not happen the way the city had planned and so 26 million at 3 fixed for 20 years was coming with the project that's an enormous amount of time at a very special rate without the 26 million at 3 for a 20 years immunization the value has been destroyed and that's why I'm saying that it had a greater value chair um when the 26 million was targeting the project so we could develop it yes um but at this point I no longer have that capability we're looking forward to the city hopefully recreating a new tiff and maybe years from now we will have a new value okay thanks any other members have any questions Donna this is really simple okay so we railroad sort of upset all of our plans and the shared use path has been changed but is there no possibility of access across it through it is it an absolute that nobody crosses that path I mean I'm just and this I just I think that's a good question I mean they assume it's not you can't cross it but really you cannot cross the railroad right away there was an interstate commerce commission so it's a railroad not the shared use path correct shared use path you can cross it where it does not interfere with the railroad that's a section where there has been discussion about a potential curb cut to serve the land that right now can only access the east excuse me the west side of blanchard brook blanchard brook is basically severing the 92 acres so then you'd be really interested in a connection on the country probe property we create another access that might be through your land that's okay so it's not forever ever isolated it just is now correct okay thank you at which time there is a bridge yep or a connection Rosie then Bob I just have a procedural question for actually for a bunch of the properties that we're looking at tonight my understanding and I just want to verify this is that if we do the evaluation and we determine that actually the value should be higher we have that authority is the dca right yes okay thank you you're welcome the railroad mission that you're talking about that exists in 2020 existed before then so that's nothing new that's happened correct so that was there at the time whatever half interest was purchased so but actually it had been it had been unused it had been unused for 70 years it was a path that was abandoned unfortunately the railroad did not stay their original course on the river it was cheaper for them to go along the side by the bike path in fact it's really heartbreaking because bike paths and railroads really should not be next to each other so we found out sometime in late March and I think Doug will verify it we found out in late March or April that the railroad was being put in and reviving that piece that had not been used how long Doug how long would you say it was yeah since 57 58 but they kept the right away so correct yeah Mary well now i'm going to testify and that's not appropriate but railroads never give up their right away they do not have an ability to give up their right away there is a hope that they're can get easements across it and that's what we had all hoped for with what had been abandoned but they never give up their right away and i mean you know this better much better than i there was a petition seeking reversion of that and in 2017 there was a decision decision that came down saying no they wouldn't yeah so it has always existed there was an attempt to get rid of the right of way and they in the railroad or the state refused to accommodate that but that restriction has always been there or in our lifetimes it's always been right but there was no physical use of that right yeah unfortunately okay any other members of the board have any questions okay we will appoint a three-member committee to uh do this any any volunteers rosie Mary and Bob do you want to be on this sure okay rosie mary bob okay thank you for bearing with my voice i apologize you're welcome i might be your allergy related so yeah and and so we will have the committee and you will be in touch about okay be in there thank you you write down your contact information point we'll use trevor's secretary sure yeah any mail stand on number three and alan is it uh fair that uh that mr zorsi would be the point of contact with the committee or do you want to be kept in the loop also you asked me sir yeah we please include us both and we have uh we have alan's email address so oh i did want to ask i'm sorry go ahead one more there was a mr zorsi said that uh it wasn't a sale and there was some is this is that all relevant here should we know more about that you he says he bought it wasn't a sale it's a little juicy okay can we have to address that for you yes alan dog had a dog has other family a cousin who owned a portion and i purchased 50 ownership from him and his grandparents excuse me and his parents oh so you were just saying that was in person from you i got you okay got it thank you good that's what i thought okay thanks okay thanks for coming in debacle all right now we're up to national life and step on up and you're you're gonna be the only witness okay everyone is going to testify you saw me affirm subjective pings and pedals as a purger you're the testimony you're about to give us the truth the whole truth and nothing but the truth all right did everyone just name yourself yes uh i'd like to introduce everyone who's here from national life tonight but i'll start off by letting you know that um would you give your name my name is frank von turkovich von turkovich do you want me to spell that i'm gonna get a pretty close okay thank you let me know if you do so i'm a private attorney i work here in montpelier and i regularly work for national life insurance company on their real estate matters so i've been asked to assist the company in its efforts to try to resolve the 2023 property valuation changes for the company's montpelier property i want to say that we appreciate the board giving us an extra time tonight i know that you're this meeting will probably run a little longer we will try to be brief and but we're here for as long as you would like us to stay tonight to answer questions so i'd like to introduce our our other national life representatives the first person is scott rogers right here and scott is the head of facilities for national life group he's responsible for all aspects of the company's physical plants in vermont and the company's business in texas before joining national life scott was a was the director of maintenance and operations bureau for the vermont agency of transportation scott is also the signer of the letter that we sent to you that accompany the uh the break the Blake appraisal and scott's available tonight to answer questions that you might have about the montpelier property he will also with your permission follow me up tonight to make some comments before we uh introduce the rest of the of the group but first by way of introduction marco grady is here marco is the director of real estate management for national life group he he handles the all of the company's leasing of office space and other facilities across the country uh before coming to work for national life mark was in private practice as a professional real estate appraiser and worked for the state of vermont as its deputy commissioner of uh from the department of buildings and general services bgs uh mark was uh directed by the company to investigate the 2023 change in value and he would follow with your permission again you would follow scott uh up here to talk about the appraisal that that we have from the Blake company so also by uh zoom or by uh internet connection we have uh kevin quinn from the joseph j blake company uh mr quinn is an mai appraiser who did the actual appraisal of the home office properties that you you now have a copy of he is available tonight to answer questions and his professional qualifications are contained in the appraisal document itself and if you have any questions about his background you can you can ask mr quinn yeah let's just ask you to pause mr quinn uh did you raise your right hand and swear at the same time the other witnesses did okay you soundly affirm subject to the pains and penalties of perjury that the testimony you're about to give is the truth the whole truth and nothing but the truth so thank you i'm sorry i wanted to mention a possible conflict of interest i think i'm able to be fair here but just wanted to run by others um my office is located within national life and my employer rents the the state of ramot rents the space from national life but okay and i have worked with scott before but i feel like i can be fair other folks agree yeah i agree nothing that happens in this case is going to change your compensation don't he refers to a report that some of us don't have mary said she got her the Blake report last week but there's nothing in the notebook and i didn't get it i was here last week and he was here last week so i was not there everybody i wasn't here last week oh i was but this is it we have a it's very thick but there's okay okay i'll make sure the site team has it yeah was there testimony on that last week or just no okay okay you don't have one on and i was talking last week thank you um thank you thank you so finally uh also with us tonight is Tamara Strauss tomorrow's here she is the vice president and associate general council for the national life group uh miss strauss is in charge of the company's legal response and i'm sure she'd be happy to state that she has no objection for conflicts tonight all right so with that said if you have any questions for me i'm happy to answer but really the people here who are here tonight who can really address some of the issues that we'd like to talk about and concern concerning the value are scott rogers uh marco grady and mr quinn who's available as well so i'll step away and we're figuring if they'd go first or what do you want typically it's been us but thank you if you need them first well i don't need them first it's fine to have you go first okay um bill grigesky is going to present testimony on the national life um mr grigesky is the head of the reappraisal contractor that did the city-wide reappraisal he'll be able to speak better about um the the appraisal that was done and how they arrived at their value okay and were you here when i was having everyone swear in yes and i raised my hand okay great thank you all right let me start my name is my name is bill grigesky can i have your name sure bill grigesky k r a j e s k i and i am the president in order of new england municipal consultants we did your reappraisal in town i've been an assessor in bramont mass chooses throughout 40 years now um in this type business um it's been a complicated subject tonight so i'm going to try to take you through what i saw step by step a property like this we always approach from the income point of view if there's property to where to sell whoever bought the property would say how much rent can i get income can i drive what are my expenses therefore what do i have what would be called a net operating income before my debt before taxes and things like this where where do i end up is this worth me buying so this is a decision that any owner is going to make so i'm going to take you step by step the process simply what is i develop a a gross income a potential gross income i lest the expenses from it and from there i end up with a net operating income and from there we use a capitalization rate to turn that net operating income into an indication of value it's a simple division process at that point now this is basically what this report is much more complicated than that getting to those answers but that's basically what the report is doing is it's trying to establish income for the property expenses for the property a cap rate for the property and therefore a value for that property simple all right in essence so a complicated property like this i thought my best approach this evening was to look at the report that was given to us and try to make a determination on how this report was put together now i think it's very important and i'm going to point it out to you how important it is to understand that there are many opinions that get thrown out there are facts also but in the end the appraiser chooses a path i can do a or i can do b which will i choose i'll choose b or i may take a and b and put them together and take the median between them so there are there are opinions in every appraisal if you're ever going to see it's not a fact everything has to be developed and developed through the information that's garnered so i'm going to give you an example that although i'm not going to lay my report on this thing and i want to show you how this is it mr quinn is that it excuse me mr quinn is a fee appraiser okay and a fee appraiser is and he's an ma i that's as good as they get um but in our business in the business of taxation this is ad valorem taxation we do not include taxes as an expense taxes are added to the capitalization rate because what we're trying to determine here is what a proper value is and therefore what a proper tax bill is so adding the the taxes the existing taxes as an expense is a fundamental error in our ad valorem taxation you can look into the international association assessing officers any other type of manual legacy and you'll find taxes are always added to the cap rate so we have a fundamental error made in the report i'm going to show you how things like this occur mr quinn came up with first of all i want to make clear i believe eight million eight hundred fifty seven thousand three hundred sixty seven thousand dollars that's what he claims that income can be garnered if there's really i don't have any arguments about that at all his income is very well developed he looked at comparables he looked at existings he really looked at everything there is a cell tower that rents there's a although the solar field doesn't rent it adds or diminishes expenses because it's there so he really took everything into consideration but just to show you he had he had a a a net operating income of two million seven hundred and eighty eight thousand dollars that's what i started with eight point eight i ended up with two point eight so i'm taking six million dollars in expenses out the taxes on this property as they are today are one million four hundred sixty nine thousand three hundred forty five that number should not be added to expenses therefore i'm going to add it back to the net operating income when i add it back to the net operating income i end up with four million two hundred and fifty eight thousand two fifty two now i still have to account for taxes and the way i account for taxes and add valorem taxation is i take my cap rate and i add a tax factor to it now for the moment i'm going to make an argument that the cap rate is not what i would have chosen but we'll use the cap rate that was chosen it was nine percent so therefore what i would do to that cap rate is i would load it with a tax rate which in this town was twenty two dollars and eight cents so i had two point two oh eight and i end up with a capitalization rate of not nine but eleven point two oh eight that's the cap rate because we're trying to determine what's the proper tax bill what's the proper value and therefore rendering the top proper tax bill so right away the appraiser capital the value of thirty six point seven million dollars and this change is the value of forty three point two million dollars so you can see how little things like this make a really large difference in an appraisal and it's important that we look at all of those different things to try to determine whether in fact they are correct so we start out with this basic fact now this is going to get even more complicated as we go along because the next thing i really looked hard at was estimated expenses and i know not all of you have the report and i apologize that you don't that's too bad but first of all i just want to say if you change turn to page 86 in the report it's going to show you the cap rate the taxes that we use so that was the amount that i reduced it by or added back to the net operating come the one million four sixty nine three forty five so that was directly from that report eighty six now if we look at the page before that page 85 the appraiser has done a series of comparable assessments or come excuse me comparable expense ratios looking to find out what should i because it hasn't as a an appraiser you balance what the actual expenses are in a building versus what market expenses i just think about this if i sell the building the next person may run that building different than i do and they may want to maximize in different ways they want to spend more in some areas less than others and as an appraiser you're trying to determine what that is so what we have here is we have six comparables at the bottom of page 85 and you can see here down the bottom i have that same coffin i apologize for that down at the bottom i had the expense ratios and you can see they run anywhere from a low of 25.11 to a high of 78.75 now the 78.75 is is is not a good figure and the reason very simply is is that that comes that comes out of the state of new york one of the highest property tax rates if you look at their price per square foot that they're paying for taxes it's nearly 20 of their rent that's a very high ratio so one of the reasons why that's at 78 percent for expense ratio is because taxes themselves are very high in that state can i ask you about that before you get to much farther you just told us that taxes shouldn't be included in that's correct and we're going to pull that out we're going to pull that out you're you're correct but what i'm trying to at least start with is on page 85 we have a series of of comparables showing what the expense ratio is and what i want to point out here so i pointed out first of all that the last one is not not valid because it has a high figure for taxes but what i'm pointing out more than anything else is that the appraiser used 68.7 expense ratio that's incredibly high compared to what i see in in the um in the in the uh comparables that we're given so if we're trying to determine what the market bears well how did i get to 68.7 versus here i see i think my my average was 50 percent and i think the median was 49 when i looked at them how do i get the 68 percent on this particular building is there's something unique about it now i'm not familiar with all of these problems as a matter of fact i'm not familiar with anyone except for the one in massachusetts i know the one in and over that he's he's listening there and it's pretty comparable a lot bigger but but a comparable property in terms of its campus is beautiful etc so the point is is my second point very simply is is i think that the in the expenses are overstated and i think they're overstated dramatically if we look at the appraiser's own analysis of expenses we've jumped from an average of 50 percent to using a 68.7 expense ratio that's a lot all right so what i tried to do is this and i think you all have this sheet that i gave you if we flip to the very very next page because i think the next page might be the easiest way of doing it just the last one just just till the last thing out of that so i want to i want to take you through in that second page what i really tried to do is we're going to start a little bit again showing you that if we take the appraisal income i have no disagreement with the income figure that was that was done by the appraiser i i think it's it's valid it's 8.857 million dollars he used that 68.51 expense ratio to take six million 68 thousand in this case as i stated in my very first argument i have to add those taxes back in because we're trying to determine what that bill should be so using as an expense makes no sense we take and we build it into the cap rate so if i take their cap rate and i put it at 9 plus the 2.208 rate then i end up with an 11 point it's actually a 0.1208 that's the way you do the math i divide that into that income of 4,558 and i get 37,992 now another area i don't have substantial disagreement i think you could nitpick with it but i don't have substantial disagreement with it is the way that the appraiser handled the other properties there are five or six houses involved there's a sort of a center i'm a little bit not in agreement with the value half a million dollars that he placed on the excess land i think that might be low but given the overall magnitude of the project i don't think if i made an argument i even if i got to 800 thousand dollars 300 thousand dollars it's not making a huge difference in this so that part is is i don't i think it's worth more than he stated but i don't think it's worth like six million billion dollars or something that's my point so if i had the 5.2 million dollars in there as i said i'm at 43 million 192 so the very first one that i did i'm showing you how just by not doing the taxes correct we're off by almost 6.5 million dollars and to me there's no argument there this is ad vorum taxation you have to do it this way because that's the determinant we're trying to figure out what the tax bill is not supposed to be i can't use it as an expense i need to build it in my cap rate to figure out what that value should be that's the way it's done in assessment the second area i looked at was i i looked at that i'm trying to make an adjustment for the tax for the for the taxes involved excuse me i'm yes so if i looked at those six comparables you're telling me about how the taxes i'm not pulling them out so what i did here is i took all six of the comparables and i looked at how much of the total square of the excuse me the total expenses as a percentage was the tax load on the buildings and you can see in vermont i have two buildings that were 8.95 and 8.91 the one in california was at 10 the one in massachusetts was 15 new jersey was 12 and it was almost 20 19 and a half in new york i mean i'm i'm sorry but i feel strongly that what we want to do is we want to look at vermont i'm going to select both of those because they're more indicative of a vermont tax rate so what i did here very simply is is i looked at first of all if we look at the expense ratios once again i show the average at 51.15 and i show the median at 48.69 these are median and averages based upon the appraisers studies so i start in the next column at 8.857 there's never been a disagreement so far about the income i'm going to take 55 percent expenses because i'm trying to show you how the numbers move here so i'm going to take 55 percent expenses that's about 4.8 million dollars i'm going to take 39 8 39 85 is my no i but i have to add the taxes back in so what i took is eight no i is what a net operating income okay excuse me it's kind of what we get down to the end before we capitalize if i apologize when you're lingo when you're talking to late people it's always good but when you talk about it and say it is always right i think you get caught up in the lingo and i apologize for that i'm going to add taxes back into that once again so what i did is i took 8.95 percent of the 8.8 million dollars and said that's an average tax bill i'm going to add that tax back in again because i'm going to use my cap rate to determine tax code so i'm trying to make an adjustment for those taxes i end up with an adjusted no i in this case of 4.7 million dollars now this is where it even gets a bit tighter in in his study the appraiser talked about capitalization rates and capitalization rates are incredibly important um their market derived he did he did a good job very good job of deriving what that rated but in the end it's an opinion i came up with he came up with 10 to 8 percent he chose the one in the middle nine and here we go and what what you do when you choose a rate like that as you're looking at risks and different things the the attractiveness of a property now this comes to a really big point here and and this is where we i've had a disagreement this is the second time i've dealt with an appeal for for um uh national life i did it back in the last repraisal also and a lot of times in this appraisal does somewhat the same thing really feels as though Montpelier is not a good location and who would ever want to buy such a building here i disagree with that concept i disagree for two reasons first of all this is class a office space you have no competition in the tech in the in the city nobody else has office space of this of this magnitude no one there is an international airport that's 30 miles down the road there is access to a major highway immediately i don't think this is such a bad site i'm sorry it's not the sunbelt or it's not 128 in boston those would be worth more no doubts but i think the way that we look at this site i think sometimes it is looked at as very negative and i myself don't look at it that way i don't look at it as negative at all i also look at it when you look at risk it's who who who is currently leasing your building well what kind of vacancy first of all i have basically zero vacancy my knowledge there's there's no vacancy them the state has a piece of it national items because there's a few other tenants that are in there i guess i'm not absolutely sure that but i understand there are a couple of others so it's it the building is is is utilized fully um there's a comment in the appraisal that says well if these people were to immediately leave why would they leave i don't we can say that about any building that a that a company could go bankrupt could go belly up and somebody not pay its rent anymore i don't think national life that's going to happen to them and i'm positive it won't happen to the state of amont i mean maybe some of you here who disagree with that i don't know but that's not going to happen so i look at that and i think to myself my god you have two great a tenants is what you have the risk is is minimized at least at the moment and then to say well that's going to run out there paying less i think the state has a 20 year lease on the building i believe um or at least it's still got a ways to go in the building eight i believe eight more years to go on it and and i don't i haven't heard that national life is going to pick up their operations and move themselves somewhere else like i couldn't answer that question but we we seem to have a very stable building my point very simply is is i think the cap rate that's chosen it is on the higher end of the scale and it should have been a lower end of the scale so just to show you in something like this if we used 55 percent expenses we end up with an noi a net operating income of four million seven seventy eight five forty nine if i take a nine cap rate and i divide that through by the 11.208 which is what we've used before i end up with a value of 42 million six i had the 5.2 million back in for the other buildings in the access land i ended up with 47.8 million dollars if i take an 8.5 cap rate instead that value changes to 49.8 if i take the lower cap rate i turn to 52.01 million dollars but the numbers really push value depending upon what opinion you have of this property and where this property sits on an overall basis its actualities its potential and the type of tenant i mean i i again speculation pure speculation but if we look at the building and given unfortunately what's happened in montpellier i would suggest to you that the state may want more space rather than less space up there i don't know the answer to that totally but it certainly is a possibility all right now i'm going to go somewhere else with this and this this is where i i want to be with this in my opinion i don't think i think 55 percent of expenses is too high i think we should be at 51 percent that's the average i think the average should be used on this so we're going to be doing the same thing down the bottom i'm going to be to this time my adjusted noi is 5 132 844 i'm going to cap it at using the 9 the 8.5 and the 8 rate and i have anywhere between 50 and 55.4 million dollars i've spoken to the assessor on this to make sure that we're both on the same page the assessor feels that the valuation should be lowered at this point to the 55.4 million dollars and that's we would ask this board to lower the value the current value is sixty point six or sixty sixty thousand but the recommendation of the assessor with my advice is that this board should consider lowering the valuation of the property to 55.4 million dollars okay and i'm done thank you very much does anyone have any questions any members of the board mary i'm catching up so and your recommendation is based on the assumption that the cap rate should be eight percent that's correct okay excuse me rosie i'm sorry i don't have the what was the initial assessment app it's currently at 60 million did we get one of the handy maybe i missed it one of the nice summary pages you know why i totally spaced it out i forgot to make copies of it i was so i was so focused on working with bill i spaced out i can do that so you'll get it to all yes we'll get it okay this sheet is very helpful i i i hope i wasn't too it's a complicated subject trying to simplify as much as i can but it's not easy okay thank you i actually managed to follow i won't be able to repeat it but i followed um thank you when when i was thinking about this initially and based on the information provided to us by national life i was thinking that we needed to break this down into a bunch of component parts they talked about the value of the office buildings the three office buildings um that there's a guest house that there's six houses that there's land there's the garage et cetera and so i was trying to tear that apart and thinking okay we need to set a value for you know how we think about the office space we need to set a value based on how we think about the houses about how we think about the land i had questions about the solar array but i believe you're you were saying that i assumed from something you said that that those other issues are essentially incidental to what they're they're not only they're not incidental because they're substantial but the appraiser did a good job of judging those he looked at those houses he looked at the fair market value of them he looked at the the um i'm sorry what is it called the uh little hope you know hostel or whatever it is um and and i i i can't disagree with that but as i said i think he might be understating the excess land value but i don't think that's substantial the five point two million dollars is is what that accessory is worth above me obviously the big nut is the main site in the offices and then while i have this war um it was suggested that um the contract with the state will run out in eight years um that strikes me as something that is dealt with in eight years if there's a change in the value am i incorrect in thinking about it that way you're not incorrect but a prudent buyer is going to look at the length of those leases um and that's to potentially go to effect um on the other hand i would think that that i think it's not a stretch to say the likelihood is the state will renew those laces but at what level they would i don't know where else the state's going they don't have office space anywhere else so it's hard to say but i gotta be careful that's speculation but anybody who buys it yes they're going to look at the lake the lengths of those leaves it's absolutely okay thank you any other questions from members of the board kim the appraiser developed a range of cap rates between 10 and 8 percent and he chose the one in the middle i chose to look at his discussion of the property um the risk associated with property being good tenants etc i i don't i think the the the location is over i think it is deserving of the lower cap rate because i believe it's an attractive property with very attractive tenants and therefore it deserves the lower rate and not something in the middle i think that you know there there was some evidence there to say that it should have been eight or it should have been nine or it should have been ten i i make my opinion in my opinion is i think it should be the lower the scale and not the middle of it this is a lot of opinion in this i i it's an opinion about you think a willing buyer would want to earn on this in in the end that's what it is all about is is what a willing buyer might you you know it's it yes do you look at other uh properties and recent sales and try to generate a cap rate it's hard it's very hard that the the appraiser uh mr quinn um has a whole section here on comparable sales comparable sales are very difficult to deal with it in a proper parcel of this magnitude it's it's a pretty unique piece it's you know a lot of space a lot of acreage and it and it and it sits as as a i would call it a crown on top of the hill and not a white elephant that's just the way i look at it does that does that answer your question kim or are you sad heard the answer i'm not quite sure i have all the pieces in my head okay and let me let me jump in and ask a question because i we're just talking about this cap rate stuff at our last meeting and i said well you know the last time we did a townwide reappraisal i got to the point where i could do the calculations and understand the cap rate and all this stuff and that's not in my head now 10 or 15 years later or however long it is but so to help me a layperson understand this uh is the capitalization rate essentially the uh rate that rate of return that a potential buyer would be looking for taking into account all the all the factors including the income and as you put it the risk and relative that will attract this money yes that would cost great thank you mary nope okay sorry donna i just wanted uh kim one of the helpful things here not only the eight percent he does comparison to the nine and eight point five so the site does particularly that would be important he likes me i know um it's yes any other uh questions from members of the board before you're from the taxpayer boss one easy one so you don't have any problem with the additional property the 5.2 5.2 no i don't i and i think people what they yeah i think if i i didn't spend a lot of time with it i looked at it and anything that i would do would have been peanuts changed them given the size of this property it's it's not it's just not it's not worthy of spending time arguing they i thought they judged the houses very well in the 600s hive one of them in the 300s one of them's a lesser piece um i thought they judged everything pretty well like i said the land may be a bit low but it's not going to make a lot of difference in this assessment it's just not mary um i appreciate that and for us and thinking about not just this property in front of us but how people are going to look at this and other large property owners saying hey i've got a similar hunk of underutilized land why is it my rate this great so we that that may be something we want to poke at um i appreciate you know overall it doesn't make much of a difference here but it may be it may matter in terms of people looking at this as a comparable to other issues let's just just one just one other point and i don't know exactly maybe marty can but even then the value of that excess land is is severely reduced because it's under current use so the value of it doesn't in a tax sense doesn't really matter very much because current use says where it's to be valued i can value that eight million dollars and it would make absolutely no difference because that value is wiped up by current use that's another reason why it's just not worth you know going into it does it doesn't make a substantial difference to the city at all so i i actually had wondered about that wondered if there was just a misuse of the term current use but in fact it is enrolled in the current use program yes it is in which case it doesn't matter that it is what in essence as i'll be careful i'm gonna praise her and i come up with fair market value it's like arguing about the value of something that's really it's a kind of structure in taxation that i can't touch it's not really worth going into rosy i'm confused about that so i thought that we shouldn't take into consideration current use at all because that's after the fact and i also think when we're saying it doesn't matter because of current use that might not be accurate because the state sends money back to the town for the education portion education yeah education portion of a percentage yeah so we would be true if we said oh it doesn't matter it'll just the current use will take care of it it does it's a good point it does have a bank fact okay thanks rosie okay kim thanks good point the uh mr planer i guess has three reasons why uh the city appraisal doesn't make any sense on his forward page cost approach um um he says shouldn't be used i i would like you just to address page amount excuse me they're a cover letter it's a cover letter that's a different cover letter yeah this is just this was their um submission for the well i understand cost approach it's i don't i don't i don't use the cost approach in this case i know that the the state the appraisal card looks that way but they the appraisal card the cost is is adapted to meet what we looked at as being an income requirement the cost becomes sort of a secondary approach we adjust appreciations functionality and stuff like this because we produce everything in town in a cost format so the taxpayer can understand it easier we can easily flip the switch on this and give you an income card that's what you want but we use the same process throughout but the the cost answer that's on that card has been adapted by or has been affected by the the income approach we make our adjustments based upon the income approach so you say it's not significant no it's not it's it's we're talking about the format when it spits out a card um it's just what we do everywhere we do it the same way but internally it runs that everything is it is is affected by the cost is the estimated cost to build this building as it is today i doubt if those are valid what i have on there i'm looking that the income is the answer i'm trying to understand the theory of the cost approach mm-hmm cost approach is what are the costs to build that building reduced bias depreciation yes and somehow you would call up a contractor and say what are you going to build this thing i mean it seems like a crazy start to me well because i don't see how you can estimate we don't believe it or not in in in the in every one of your assessment cards in town every one of them is affected by either the market approach or by the income approach we adjust um tables accordingly because in the end the state of vermont does not say in its statutes come up with a fair cost value of the property it says come up with a fair market value right so we make adjustments in our model to replicate that i don't use a true cost model the other place we use a true cost model is in exempt properties because your town hall and things like that i i don't have sales in town halls i think i use a cost the third point about the current commercial real estate market gone to hell since the pandemic i read about that every day in newark city's acres of vacant uh office space all due to the pandemic and people's changing idea of what work is that seems to me to be something that should be considered my answer to that would be is to look at the individual building itself and do we see that experience that all the answers were done in building this fold hundred percent fold so people didn't leave the countryside because they're already in the countryside and i think we saw the effects of that in the residential market i'm sorry there was a period of time when you couldn't find a home for sale in montrealier i mean there's there was a ton of people moving in i'm not saying it's just for national life well well the data in this report was very small change in the population over years so came on we jump in and ask are you making an argument here i'd like to get to all the questions out so that we can rather than argue about who's right at this point i'm trying to understand whether i accept the proposition that was made to me or not okay the proposition is that should have been taken into account and it seems to me it has some quality okay thanks rosie if if kim's point about number three here or if we if we were to accept number three that it was a riskier proposition you know renting space there because of the impacts of the pandemic the impact of that would be to increase the cap rate that should be used like the cost potentially the risk would be higher in the cost of money would end up being higher that's correct and they'd be what what a cap rate rises it rises for two reasons it rises because of the cost of money but it also rises because of what someone expects in an equity return on the building the riskier um the investment is the more i want an upper end i want to make more money i'm going to put my money you had a taxpayer in here before this who sort of put his money on the table and it didn't work all right that's that that's a risk of a project etc and what happened and in any buyer of a building like this goes through the same thing what's my risk is it higher is it low so if we were to take that argument face value and say there is more risk because of the pandemic if you were to accept that what would be appropriate cap rate going back to the nine okay thanks the nine plus the tax load great yeah okay any other questions before we go to the taxpayer mary so just to kind of tease this line out a little bit more we'll find the assertion has been made it's a hundred percent least we'll find out if that's true and that there's an eight-year tail on those leases can you help us evaluate the risk of that is well i i would i would that's that's a difficult one to say but i would say this to you that i'm an eight or ten year lease if any property owner had such a thing with with right that's they'd be pretty happy with something like that that's a longer term lease than you generally see however i want to be clear usually the larger the office space the longer those leases have a tendency to be because there are fit ups involved somebody comes in and they want their building done in a certain way so they build out their office space they're not just going to abandon that fit up because that's their cost not necessarily the landlord's cost so those those leases have a tendency to be longer i don't think that's absolute but eight years is a good lease and that that's a good long lease thank you thanks um national life i want to get to you i uh i want to ask alan alan goldman you're sitting here and i know you're unnoticed that this is going to be a longer than uh usual meeting but i know that you're also uh sick and you're calling in here and so i want to ask you do you want to wait for as long as it takes to get through national life or would you like to come back on another night where you don't have to wait that as long thank you so much mayor i feel terrible i would be very pleased to be able to just come another night okay great why don't we do that and we'll uh we'll work with the clerk to uh come up with another date and then finally before we call on national life because i expect you're also going to be kind of a long presentation i want to uh offer people a break may i please say thank you then and i will say good night thanks alan so 10 minutes all right well national life and also proud montpellier high school alum although you know when we came tonight and they said it was in the library i went that way because that's where the library used to be yeah yeah offices yeah um so i just want to start by saying and by the way i'm a sort of a buffer between appraisers i'm not going to get into a whole lot of that stuff and then i'll turn it over to the experts but i just wanted to say how much we appreciate the partnership with the city and the community on going with national life it's been a really great thing one of the reasons i enjoy working there is the ability to work with the community i am disappointed we didn't receive the information that was just handed out ahead of this testimony it would have been helpful but we'll move forward from there one of the things i wanted to mention and you all touched on it just a little bit before the break is that you know unlike the residential market which we all know has gone like a rocket ship commercial office space market has done just the opposite and we know that from our office in texas and and other spaces around the country that mark can speak to but really because of the pandemic there's been a very sharp downturn landlords can't lease their space people aren't looking for office space people are working from home and that really results in a surplus of office space everywhere including in vermont long-term rent expectations are for significantly lower rents and there's meaningfully less demand for office space the other thing i want to mention we we heard a lot about expenses earlier whether it's 50 percent or 55 percent or 60 percent we know what our expenses are because that's what my team does we maintain and operate the building i know what it takes to run the facility we provided three years of expense data to the assessor and it wasn't used and that was disappointing in addition i can tell you about the state lease because i'm the one who negotiated it with the state we signed it july first 2019 and it's a 12-year term with an option for a 10-year extension so it expires in july first 2031 or june 30th 2031 to be more precise so we have about seven years eight months if my math is right left on that finally and and again i said i keep it brief because we want to get to the meat and potatoes of this um national life wants to pay our fair share and that starts with a fair appraisal um that's why we're here tonight so just thank you all for taking the time with us i appreciate it thank you um at this point i'll turn over to mark and with kevin's assistance he can step you through our appraisal unless you have any questions for me about the okay thank you thank you god good evening everybody um so some of you have and some of you've hadn't had the opportunity to review the appraisal completed by joseph j blake okay okay so we um when we started down this path we we interviewed several uh commercial regional commercial real estate firms and we ended up going with kevin's firm joseph j blake was a global valuation firm um and we selected them because they do a lot of work a lot of work in vermont um back when i used to appraise properties to speak with kevin and i know you know they they do a lot of work here in vermont we felt really comfortable that they could know that they understand the local market but obviously harvest data throughout the country and we knew that that was going to be important to provide a credible value opinion for this property um so that's a little bit about why we selected um joseph j blake um i do have a question though and we did provide your firm with a copy of the state of vermont lease yes you did okay so i'm wondering why in the valuation of the davis building those rents are reflected in here i haven't seen that so what is it what does it say it says it's nine it it says it's 1419 triple net the the lease rates in the davis are 1961 gross absolute gross with no expense true ups and if i go back and i reverse engineer your cap rate to build it into the 9.25 it shows a seven percent cap rate on this building and overstated rents okay so that would inflate your value correct you're you're you're looking at that i presented tonight a case that says that i'm overriding that by saying it's 55 million and not the 60 million or whatever it is you wait we're gonna you can argue about the assessment that's worth the ri but we never got into your assessment we just went with the the appraisal that we okay okay um so i'd like to introduce kevin quinn to go through the appraisal uh and discuss his methodology and and the valuation so kevin if you would you know i was i was wondering when i got a chance to say hello thank you um my professional career is stand about 40 years in the business i'm the president of the firm on a national basis we do work as mark indicated of a large a lot of large corporate headquarters such as these um my biggest opening comment would be for the board to understand uh there was just a reference on the prior comment is as what has happened in general to the overall office market uh this is throughout not only the united states to be quite frank it's in the world and because of my background and coordinating assignments like this throughout the united states primarily um we have seen a significant decrease in valuation primarily for the office sector more so than any other both you know it's quote unquote food group other sectors have been hurt but and the main reason for that has been there's a there's a couple of reasons but the main primary reason is owners and lenders all involved know that are pretty confident that the future use of office is very much in question prior to what we had said that there was a quite a bit of a discussion initially about is the pandemic and letting people work from home is that going to be a transient or is it going to be only a temporary thing and it's turned out after many years now that that is not the case i personally have seen um quite a bit of lease renewals if a tenant renews they would take anywhere from 30 to 40 of existing space so by definition the office product in general is is one where the the investment the investment market is basically and lenders will tell me the same thing they were not we will not lend on office at all um so we have to we have to kind of frame the valuation i certainly have um with the idea that what would the market be for the for the subject that we're talking about now the next and larger question as well is what would be the demand for basically the office space of 450 000 square feet most of which is owner occupied um the numbers that we're talking about your rents and all of that assumes 60 percent of the building i guess you can argue is a sale leaseback in other words in the event of market value assumes a sale correct so we would have to assume national life would sell the facility would stay and that's a that's an assumption you know um it's it's not clear whether that would happen if it ever happened you know where to sell so this is a factor which we talked briefly about um capitalization rates one of the women asked the question about risk and factors and all those the higher risk of an investment than the higher the cap rate can be um and so the the biggest question we have to always examine and understand is what would the market value be for a large asset like this in a very small market you know the i think the population in montpellier is somewhere under 10 000 um so in my report i stressed strongly the sales i know it was dismissed by the the fellow that was making the comments about my appraisal um i felt that the sales are actually very very important to look at because what what would sales of these large facilities around the country if they were in vermont i would use them but we're complete anomaly um and the sales approach and the discussion about them and kind of looking at the population of the certain areas of the largest assets that i could find um were were presented in the report and i i stated in the report that was my primary approach my my my whole approach here is to understand the market value of this property um we'll get into and i can make some comments about the income approach in a second um there's a reason i don't do this the cost approach because i'm always mirroring what an investor is going to do when they buy a property like this an investor is not going to look at bricks and mortar and what would it cost to build because it would be extremely high today we all know how cost has gone crazy um you can make your best attempt it's a 60 year old facility i think 1960 was the primary uh office uh section and you can figure out depreciation to the best you can but how does the cost approach address economic obsolescence in other words the demand and the negativity that's in the market again particularly for office and the answer is it doesn't you know so i and and any i do a lot of work for a lot of institutional owners and and lenders and they they realize that a cost approach does not have a lot of meaning it's particularly in an asset like this so that's my comment on the on the cost approach there's a number of things that were said about the cost i'm sorry on the income approach now let's talk about the openings the comments well hey we have three four years of history i think it was running at $16 $17 a foot of expenses any buyer coming into that property and looking at the end are going to do exactly what was handed to the to the board i believe and say look what are the what's the expenses that are being operated uh for this for this asset i actually thought a few were high the i think administrative costs were higher and i reduced it to about 13 $13 i think it was a comment was made about the ratio the the reason the ratio was so high and maybe it was perhaps a mistake that might have or maybe didn't understand that 100 and whatever 170 thousand square feet is fully gross there's there's no recapture of any kind for that expenses so that naturally distorts the expense ratio on a higher meaning that the income was so low the the Tuesday tenants that are in there have a are going to have a reduction in rent to the point i i made a note i think it's $14.26 fully gross if you back out my 13 you can argue quite a bit about expense i lowered the expenses from the history of the subject at $13 the net income to any owner is $1 think about that $1 net income the larger tenant is going to be paying 838 the largest space for the state of verman is 1839 take away my $13 give or take and the net number is like $6 so i projected $10 for the subject space again you could argue you know whether there's no lease i'm just projecting what the rent would be that's a net number which would be fully recoverable again using my 13 something we're talking about a $23 rent Montpelier the average rent in Montpelier today is $16 it's stated on page 36 the average rent fully gross is 16 so i'm i'm being more than aggressive in determining i'm saying $23 for this keep in mind the size of the space we're talking about because the larger the space a tenant is going to negotiate and an owner is going to realize they're going to have to negotiate down because it's a large space it's just common sense right a smaller tenant is going to pay typically a higher rate on these are stated these facts are on page 36 by the way the average capitalization rate for office investments in Montpelier is 10.5 percent 10.5 and i selected i you have the tenant of you know the state of ten of the state of roman is a good credit tenant this term there i made the decision that a nine percent was a very reasonable estimate again the issue of i'm very familiar with the issue of taking taking out the taxes and and loading in that but that you know what that's not reality in terms of what the market would do my you know my entire career is based on forming an opinion of market value so again what investor is going to say think about what was said before you on this panel hey the expenses are this but i'm just going to wipe that out and make it much less i know the the taxes today because we're we're sitting in a panel right now discussing taxes but an owner coming in is going to say what what are my taxes what do i have to pay i might save money down the road i might go higher but they're not going to adjust and manipulate the taxes they're going to say i'm going to buy the asset today based on the taxes that i that i have to pay um so i i totally understand the methodology that the gentleman i don't know his first name but that indicated um but again under the opinion of market value i'm representing what anyone would do and that that is what is the best estimate of revenue what is the best estimate offsetting expenses and what is the best estimate of capitalization rate now keep in mind my opening comments i don't think the income is also the primary approach here because again we have an owner so there is no revenue that we can actually 100 substantiate i i did it as obviously a secondary approach but you know maybe i don't know if you want me to walk you through the sales because i thought the sales work actually quite good i have a a litany of sales of even larger facilities around the country that had and i i didn't again i'm i have i have no allegiance here by the way to be a high value low value or i i'm being truthful to you i i've been too long in this career you know to to uh to be told or be suggested to and nor and anyway was i i have i have no other interest at once this meeting is over i've i've given you my best opinion and again i've been doing this for a lot of years back to what i was saying if i looked at larger facilities that had a lot of vacancy for instance or was used that i i have a table of sales there some of them are 15 dollars i think the highest sale i found per foot the highest i found was like 40 i didn't even use those i used the sales that i presented all i thought extremely good and it seemed like that was kind of brushed over and to me it's the primary approach look at the first sale excuse me well i'm finding a cold too but um in august so you know you're talking about a an 18 million dollar for a sale price of a 300 000 square foot um corporate headquarters that happened pretty recently it's post pandemic at all i thought that was an extremely good sale to analyze um and it traded for 58 dollars a foot i'm 70 70 dollars a foot you know so that i would suggest the panel you know whether now it's hard to go you know through everything but look at those sales and look how i analyze them and and and you tell me or you know after that eliminates all the other kind of things that we were just talking about and saying what is the sale market and and look at what the you know the population i made i went to the trouble of putting that in and the meaning that the larger population based in theory will have more suitors i'll use that term but keep in mind my opening comments most people don't want that don't want to touch office today you're probably going to find this with some of your other properties i'm sure in town um because they're having owners are having trouble financing that we're seeing giveaways you know left and right so that's the biggest issue that i would would respond to the comments made by by the prior gentleman and i'm happy to answer specific questions on anything that you may have seen in anything that i've just said kevin can you make a quick comment on the scale of this asset relative to vermont and relative to the other areas of the country because i think we haven't really emphasized just how big this property is um and how much of a challenge it is to find tenants that can take 180 000 square feet um it is extremely rare exactly the point i mean that is the most important aspect here we're not talking about it is hard enough to to think about i can give you war stories and i want to bother you with that but i guess i'll give you a twist you know i i've just finished an analysis of a 60 000 square foot building in downtown boston which a couple of years ago it i can tell you was substantially higher because of the market was better and was before all of the the pandemic it's today sits empty and between you know in talking to investors whatever i wrote that asset down by this is a smaller building in sitting in the city of boston and the actual ratio was probably a 60 differential down so now that's just one example but we're talking about an asset of 450 000 square foot with tenant bait like we say 170 you there's vermont doesn't have tenants of that size they simply do not um and national life space is even greater so you have to kind of look at it we just can't look at this as you know in a vacuum almost and saying you have to understand overall what the market is today and what the impact has been as market said particularly for an asset of this size sitting in a small marketplace monpelier um you know what where's the demand for that you know it's you have to you cannot dismiss that and back to what i was saying a cost approach doesn't address that if i were to do a cost approach i would have to do it and determining where we think stable i went you know that's why it gets wrought with so many assumptions what would the right market be if the market was stable today but it's not is it recovered when will it recover you'd have to do a whole analysis we call it economic obsolescence as a big deduction because again a buyer's coming in and they're not going to say hey if i bought this brand new and built it it would cost this and then maybe figure out depreciation which is a challenge you know a buyer just isn't going to do that it would cost tremendously more than the values we've been kicking around here to build us today you know that but that doesn't that doesn't reflect market value um so that again that's my expertise is market value so you can drill down to all the things we talked about initially with the other reviewer looking at income i more or less not dismissed it 100 but saying hey this is reason this is representative of what an investor would do in acquiring this property and the more importantly where are the sales what what what is the market telling me and the sales i presented on page 101 the summary are from $50 to the highest is $100 for a 200 000 square foot building i know there i i stayed on the east coast i had sales all over the united states but i tried to stay on the east coast so that's what i'm trying to draw them home i guess and saying it's you know market value is market value what would somebody pay for this asset today in the current environment that we're in and it for and it is not a good one for for office space so um going back to the cap rate conversation and it's always been my opinion that the best way to abstract the cap rate is from the market and i believe that kevin has done a nice job on page 92 of abstracting seven sales directly from the market which these are actions of buyers and sellers transacting and kevin's reconciled cap rate is nine percent but the four most recent sales are nine to nine point seven five that could be influenced by the huge spike in interest rates cost of borrowing but nonetheless i think that he's done a nice job abstracting market abstracting the data from the market and supporting with other these secondary sources so thank you for that no question that the the spike in interest rate has a direct you know impact on capitalization rates i told i was trying to keep from doing stories i i work on a billion dollar asset for a client every three months i'm just i won't identify it's downtown it's over a billion dollars fully buttoned up with the best credit you can think of and be the lender the institutional lender as asking as we discussed it we need to write it down kevin we have to write this asset down and i'm and i'm going it is 25 years of term solid credit tenant and one of the answers given to me were they it's all what we talked about they're saying that they're still the construction financing is eight or nine hundred million dollars and they're saying no we cannot find a buyer to find financing for this for this asset and this is the one of the the strongest assets i've ever dealt with it alone not even currently my point is even on an asset like that they're writing it down because there this is open-ended funded that you and i and people that might be own real estate you don't even realize but that that'll be in that that pool let's say and they're writing it down why because it's office they're not sure what the use is going to be and they're and you have to figure out today if you were to finance it the cost of dollars they they can't find someone to you know there's no lenders that are going to even at that kind of you know usually they're pool of lenders and again the only reason i'm telling you this story is that again the market for office in general even in the what i just described the best but by the way that's not an owner those are tenants i don't want to give you the names because it's it's confidential but uh this are the types of things that go on in my mind as i do any appraisal i you know naturally because i'm exposed to so many different assets of all kinds and it's not all billion dollar property either it's i just told you the example of a 50 000 square foot building in and boston written tremendously that no no there's you could almost mark it you'd say there's no market value for that there's no one would buy that today so keep all of this in mind when we're talking about a cap rate a capitalization rate at nine i thought it was more than fair you know recognizing you know i again i'm not trying to beat this up i'm not trying to be high i'm not trying to be low in value i'm very passionate about what i do you know and i it's as you can probably tell and and i i feel very strongly that my opinion of value i think the gentleman indicated yeah it's an opinion it's always an opinion you know and i i would love to think that you know two ma is looking at an asset maybe i've said this in a courtroom if you're five percent apart of seven percent i'd feel very comfortable you know that that's what you would like to be you know but we we shouldn't be miles apart and i've been in all kinds of cases similar to this but um but i really would stress to the panel to consider the comments i'm making and and looking at sales activity because it is important to understand what what if you could find a buyer to acquire this asset the market value what would would someone pay with all of these risk factors that we've just talked about thank you rosie i have a question going back to something you said quite a while ago um when you first started talking about fully gross which is a term that i don't really understand um you said i'd love for you to ask i'd love for you to ask questions so please go ahead um so you said something about uh a large portion of the office space is fully gross and so that changes the expense the increase is the expense ratio because you don't count that i didn't follow any of that so can you let me try to explain it was part of what i was saying before if a very large portion of the asset is fully gross which this is the tenants don't oh okay that no fully gross meaning the tenants don't pay anything else other than their base rent that helps a lot they only pay base rent so then therefore the what we call the effective gross income after counting for uh vacancy is is distortedly low because the the rents that they're paying they're not paying any recoveries so any owner who then pays the full amount without getting that portion back the ratio of expenses is going to go higher and if i used you know what is reality meaning what the what the current owner national life is operating you know on an expense i actually i told her i had reduced that it would it would even be probably even higher you know but so i recognize that some of them that's why i showed some of those and the example the expense comps that were cited for i think it said 20 25 to 79 i can guarantee you more than likely that the uh the overall revenue to expenses were a part of in other words in a perfect where that where that ratio is much more consistent i'll use this example is when we do multifamily assets because the multi you know tenants don't typically do not pay anything and usually that's a pretty similar so you would look at the expense ratios because there's there's not this issue which is what you just asked me between triple net and fully gross so that's an that's a factor that is very very important to consider in this fact that that again that the revenue coming from the state of vermont quite frankly to the owner is very is small and will be smaller by the way coming i forget the date in june of coming up the both contract rents go down it's it's coming up in 24 i don't know if the panel knew that or not when you say it's going down is that part of your initial lease it's part of the current lease that's in place that i believe it expires in seven years kind of yeah so it what happened was is this is was renegotiated from the previous lease and there was some fit up that was part of the previous lease and then there was a fire in the davis tower back in 16 it's 18 and so we renegotiated the rates and we still the state still owed money for some of that fit up and so that that sun sets in that time period so the rate actually reduces and then the other aspect that he was defining for rosie has to do with there's nothing in the lease that adjusts should your expenses go up correct no there's in most leases the ones that i do throughout the country most of them have true ups after every every year there's an expense true up yet this does not true up this was the framework that was done before and and accepted by both parties yes harry so one of the wonderful things about national life is the significant investments it's made in the property for energy savings which all accrue to national life so i'm trying to fit that into so i'm assuming that you know your cost of heating and cooling and electricity is lower had you not made those investments there i mean so i'm trying to fit that with the argument that hey we have a lot of expenses and you're getting a relatively low return but in fact your costs are thanks to those improvements you've made which i bet we're also facilitated with wonderful grants etc hopefully hopefully yeah i mean that's supposed to work so those costs are being held down too as much as we can um it's still what the actual they are in the our actual expenses are on page and they're fixed in variable expenses in the right are heating waste water things like that are all water i should say but they are on page 85 thank you kevin and kevin does a nice job breaking them down and those are our actual expenses from the building yeah and so you've now made this public information by giving it to us and if we chose we could go back in and use your actuals i'm assuming rather than the averages that we normally use didn't come from us we didn't so that's between you and them yeah and whoever has the calculator yeah okay they didn't use those they they only use their gross expenses that they got right that day i think if you look at his report he he did account for that that some of their expenses are lowered because they have a solar facility etc he accounted for that it's a reduction in our utility expenses yeah yeah but you know the city suffered you went to low use water toilets it made all the other bills go higher when was that when was that oh i was in city council i mean we were so was it more than two years ago because i won't i won't this is like my second year and second day so that's no because it was it was a big motivator to have the council started looking for somebody like bar hill that would use our water i mean it was stunning the results when that went it's like whoa so your bill had to improve because we weren't getting the revenue impact fees on new development right i don't know if this makes sense to talk about now but i we've heard all the testimony about the office space and that's really interesting to think about but um you had mentioned earlier you you thought maybe some of the um the other pieces the houses and the land maybe were a little bit low and i'm i'm curious about those because i want to go back to you know donna's thought maybe was mary's thought about how we have to justify this to you know if we just look at some of those pieces individually taking the office space out of out of it you know does one of the houses compare to another house because a new investor coming in may decide to subdivide those out and so we'd want to make sure that we've kind of accurately assessed those and even if it is negligible in the terms of this property it is still important you know in terms of the impacts on the other property owners in the city so i'm sorry you did a good job on that stuff i i couldn't find anything to okay i can provide a little bit more context on that too is i i did a side-by-side comparison as to what the the recent assessed value is and what kevin's reconciled values are and and kevin's values are higher on every single piece it's tough to break out every single um home or office what he did include the in the in the appraisal which should not be included is 34 mountain view because that was not part of the assessment i think we purchased that marty you're not helping out with that in june i think yeah after the haven't received the values were established um but we are we kevin's valuation was higher than the assessed values of the individual other homes in my mountain view and the end this is on page 112 the surplus land is is difficult to break out because it's included in the land valuation in the assessment i believe is looked into i believe the main building assessment he actually he actually sets that up separately is he 4.7 million on the single family houses and the other one and then half a million dollars he established as a value somewhere early in the report for the land am i correct kevin i remember right pardon me are you yes you didn't know the land but separating that from your your company's assessment yes i can compare those two because it's their land value is lumped into i believe the card one i guess okay question about the garage is is that part of the office value yes so within kevin you can you can speak to this the the value of the parking garage the parking garage was is included in the overall value the reason we made that comment thanks by that's a that's a an amenity it's particularly up in montpellier vormont to have the the garage itself is from an owner's standpoint one of which is most owners quite frankly it's a very very expensive thing to have but the the value is incorporated in and the rents that folks are paying and ultimately what my price per foot is on the building itself in other words i've accounted for that in in i do an adjustment grid and saying whether you had all surface for instance it's it's definitely an amenity that any tenant would would prefer to have i think in the wintertime i believe it's very well occupied i was there in the heat of the summer and there wasn't there wasn't a lot of folks in that and understandably but um so i didn't separate it in in terms of monetizing i'll use that term just for the garage i did incorporate it as part of the analysis as to what the overall building would be worth in other words the garage and that's what that's normal appraisal practice we do again a lot of these type of assignments we would never uh separate and say okay the garage is worth this if that was the question it's definitely considered within my my price per square foot of the overall building so the garage space is included in the square foot yeah and in the state of vermont they have x amount of spaces as part of their rent already included so if you separated out you'd be double dipping does the state do state employees use the garage yes they used to only be allowed to use surface but so they have yep they absolutely have i was only allowed to park out this expanded when were you there a long time okay two years two years two years i like the garage in the summertime it's so hot you're right yeah so i see in the letter um you say the Blake appraisal or appraisal is um assessing it at 36.7 million is that what national life is arguing it should be or are you arguing some different number i have to refer to uh the team behind me on on that so in kevin's statement he doesn't come up with a price what's happened to the board would like us to respond to it or not well yes well i think it's better to say that the appraisal is accurate uh we also were here to take this opportunity to talk to the board and i think the board's been very considerate of both of the opinions that it's heard uh there is a number that's fair the national life wants a fair number it really wants to pay its fair share of taxes so it's really up to the board to consider modifying the the appraisal that the city has made and we will be happy to consider a change and that's why we're here today so you don't want to negotiate against yourself we don't but we also we really respect the work you're doing and and you know it's hard to pinpoint that number but we we have more confidence in the work that the Blake company did than the appraisal of the percentage of the city okay thank you i'm sorry i don't have the report so in the report kevin doesn't come up with a number yeah so yes the valuation okay so that's the one you're sticking with 36.7 36.7 and again uh just a technical piece is it does include 34 mountain view which was not part of the original assessment but it's it's it's well i can't analyze the scalpel round with an axe right rosie were you starting to ask another question oh i was just gonna try and nail you all down a little bit further on that because you know you're here to make an argument that it should be a different value um but it sounds like the the assessors uh kevin's value here is what you're you're arguing is that accurate one of the questions that i uh am thinking about is that we know you're saying that we need to consider the rental risk and and we believe and i think you said in your report that national life isn't going anywhere so uh that you're essentially saying that there's a guaranteed uh occupancy for a large part of this parcel is that a fair inference for us to draw that was addressed to me i'm because of the mic i'm having trouble hearing it a little bit but i think what you're saying is i'm in a way i'm giving it a bonus to the property because i'm saying it is 100 occupied in the event of a sale that's not a guarantee there is no lease with national life you know so i again if i took that position i'm not trying to be uh you know funny and that's not anything funny at all but you know i would be at 15 or 20 dollars a foot meaning think about it if if 280 000 square feet were vacant and and national life said i we want to sell this building we have state of vermont for a portion of it think think about it i'll leave you with this thought i mean as we talk about the income again how long do you think it would be to to be able to find tenant tenants multiple and how long it would be to fill that space i would argue it could be decades you know to find it so again i hope i'm answering your question i didn't take that position i'm saying hey they're there the gentleman before said the same they're probably not going to go anywhere i i recognize that i know this is an assessment appeal so i i and again i thought i was very fair with the rent that i projected and again with the slump what reduced rent at i'm sorry expenses at 13 and i used a $10 number that's equivalent to $23 fully gross that's greater what the markets and certainly greater than the tenants that are in there think think about that you know and and is a much bigger tenant in space so i could have been i'm trying to argue both sides so you can see i could have been conservative i i mean like aggressive and say oh no and i that's not me i'm not i've been doing this for too long i think i told you 40 years i'm not going to do it anything more than what i believe in so i i didn't reduce the rent because oh this is a a tax you know okay so i'm going to beat the the property up i'm just i'm not going to do that and i never would so i know i'm giving you a long answer so i'm giving i i assumed 100 occupancy at i believe a pretty healthy market rent you know and that and and then did that analysis again i want to emphasize as a backup to what i believe is the bigger issue is looking at what the sales market is and and the macro what is the market for an office today i we cannot get away from that the market value okay thank you that's actually something i'd like to think about a little bit so we had been saying hey there's it looks like there's seven or eight years left on the lease thank you for reminding us is a right to renew of an additional 10 years i guess we'll have to speculate as to what the state is likely to do but i'd be willing to put really good money that they're going to renew those leases because we can't afford to build anywhere else so there's that so in fact there's probably a long term i guess i'm going to say some things and then ask you to poke holes in it um so i think in fact there's a likelihood of good high likelihood of renewal one and then the other thing that i'm thinking about is yes we've heard we've all read the new york times about how soft the urban real estate market is i think there's perhaps something unique about montpelier as one a capital that's facility which is class a remarkable amenities that would make it extremely attractive to any tenant looking for class a so again i'm inviting you to poke holes in that argument and then the third thing that i'm thinking about is um i'm guessing that the state has learned the lesson of not using its basements and so we have seen an awful lot of office space knocked offline that will never come back which is going to make national life extremely attractive because we're all in trouble of national life floods so i mean i to me that is an argument for um not a soft real estate market but in fact a really strong one for this sort of property what's wrong with my thinking on those points national life floods i cannot poke a hole in that argument because they're all in a lot of trouble um i think uh i think it's important while the state is up there and they do have some issues in the basement i used to work there um the uh they're giving away one away cherry street montpelier or in berlington that's 110 thousand square feet of office space they're collapsing in their own space and water bearing them renting out a clinic on lakeside avenue so they're making decisions to to collapse their own space here it does impact here a little i mean there's nobody up there there's nobody coming back to the office we can't guarantee that there are going to come back to the office um and it's also important to point out though the the rates in the lease are set so no matter what an investor purchases that property for they are only a lot they are only entitled to the rights and encumbrances and rates that are in that lease that's not going to change so it's predetermined so you you're not just going to get a lot of value extra value because you're not getting any more income out of it because they're already predetermined rates is it that you follow me on that yep so but they're predetermined for seven plus 10 years so yeah i think it's two fives or 10 i don't remember exactly but yeah i think it's 2 increases but an investor looking at that is going to say ha that's that's not bad that's not bad but you're not going to recover you know what are your expenses your expense is increasing at when your tax is increasing at every year are they two or three percent when you're when your rents are only increasing by two percent um you know inflation is three and your rents are increasing at two you're in trouble you but national life was making the argument that there's soft market for real estate absolutely so let's just look at if if the state doesn't okay that's 180 000 square feet of vacant office space and as kevin said it could take decades and it doesn't lend itself to chopping it up very good because they're wide open floors as you'll see when you do a site visit and you work there so but it's wide open floors it would be very very expensive to chop that up into a multi-tenant configuration probably cost prohibitive just incidentally the one-way cherry street is falling in on itself it's i mean it's not in good shape well i'll tell you i would not park my vehicle in that parking garage unless you want an insurance yeah right but but i mean it's so i can't really compare 108 to again a class a plus office space but it's it's what it is telling you is the state is collapsing the footprint not necessarily taking on morse base but i do want kevin to comment because he's he lives this every day i don't i'm happy to um i wish i knew everybody's name but uh you were you were referencing some of the space obviously i feel so bad for the folks you folks that live in montpellier i happen to be trying to head up to burlington that day of the storm and um and the highway shut down and i had to turn around and come all the way back to poston uh it was a horrible day and i can only imagine that i would happen to be back two or three weeks later and um i couldn't believe what i was seeing on on main street and right in front of the capital plaza hotel etc and i just i didn't even mention that to you guys so i folks that live there i feel really really bad about uh so back to your point i'm the woman with the green that asked the question uh the if if you're referring not only to the 180 i think you were starting to say you know we have 280 thousands grand fee if if it wasn't national life and and if the state of vermont you mentioned vermont the basement space that's being taken offline or what and permanent i i i get that but again i would ask that question who who in this market or even in the region i would say would realistically would you be able to find to fit that amount of space it's it's a really i don't want to say a white elephant it's it's it's an huge amount of space for for the market that we're in that they built this they built it you know at the time and obviously it was too big for them they got the state of vermont to take some of it so there's a lot of unknowns again about the long-term usage of office so i i understood your point and saying that you know that basement space is offline forever and and right now during the flood aren't we using some of the building right for i think for the post office and for you know the rmv you know but i guess all i would say to you in response do you really think we'd have enough uh tenancy in this market the greater market even to fill that amount of space it it you really have to think it may be class a for that for this area but you know a building in 1960 we would never call it a class a building it's old you know no i'm serious but i i you know that's always a discussion what's class a and it it can vary by market but this is an old building was built in 1960 so and beautifully capped up i don't don't get me wrong but i again i'm hoping i'm answering your question uh it the sheer volume of amount of space is what we're talking about yes could you fill some in and whatever but it would boy it would take a long long time i worked on idx's headquarters i worked on the biggest assets all throughout vermont main all and there's nothing like this you know unit life's headquarters up in in portland main it's it's it's just huge it's a big amount of space and and that means generally that means discounts you know for because of the risk that we're talking about that goes back to cap rates and all we don't want to start all over on that but again i apologize if that's too long an answer but it don't underestimate what we're talking about the the sheer size of this to be able to fill it in the event that any of these ten the owner and or the state we're not to renew but no good you may have answered this and it may be in your presentation which i don't have a copy of what's the breakup of the space between national life's own use of the space and tenants using the space and it's the only ten at the state of vermont pretty much when i say that pretty much i'll give you the explanation so national life has a few sub tenets in our space um but they they would roll in the appraisal they just roll up under national life and their income doesn't approach what kevin forecast as as the rent so how much of the square footage is national life and how much is the state uh the state is 38 percent i believe of the net rentable area and what was the total again because i don't have the original that's fine 449 324 441 449 324 thank you and that's 38 percent kevin right 62 percent is owner and 38 percent at the state of vermont follow up to that how much is that ratio changed over say the last five years remember two years three days not much not much yeah it's okay they we took some space back on main two but it was only in some of the we took some basement space back from them to expand some of our groups that we wanted to restack but maybe four or five percent on that i don't have that exact number but not nothing substantial they've pretty much had the davis tower and we've pretty much had the main building for how many years at least since iran could probably before that but i don't know but at least since iran is when we kind of redid everything that's when a and r moved up there and i wasn't with the state or national life then where did the people from national life go they say they we stayed in our okay so you're you haven't your play count hasn't moved or changed much in the last actually i can address that yeah um so time frame march reference and thinking back and i was a state employee of the flow working international life i worked in the davis building and there were seven eight hundred people in that tower and maybe eight hundred eight hundred fifty people in the national tower and it have been flowed a little bit on this side so you think maybe sixteen hundred seventy nine hundred people maybe as high as eighteen on campus now and it in mark mentioned this earlier the state's not in the building much they they release it all and we love the paragraph check comes everyone but there's maybe a hundred people in their davis tower on a good day on a good day um you know on our side we've got our demographics have changed as well with the pandemic so and don't quote me on these numbers this is approximate but we used to be let's say 60 percent vermont maybe 65 um a heavy dose in texas and a very small percent of vermont that remote has grown to about 20 percent uh texas has grown and vermont has shrunk so our footprint in vermont right now is probably about and i'm going to ask for your help or maybe between five and five fifty something like that it could be as high as 600 but it's it's not as much as it used to be i'm sorry you jump from percentages to numbers could you go back and say those are numbers or percentage you said 20 went remote and that left how what percentage of vermont very round number is 50 percent vermont 20 percent vermont 30 percent texas texas is growing a little vermont shrimp a little um one of the challenges we have and and kevins mentioned this is a small area and i grew up here this is my favorite place in the world but it's very hard to recruit people here when we have 60 to 80 job openings in our organization it's very hard to find a dozen you know actual areas where it doesn't have a lot of accounting it's just not here and they don't want to drive down from burrow so lately as we've been hiring leadership positions it's been mostly texas unfortunately so that's probably why we're seeing that shift and that's a real challenge for us that we're working hard to address and that's a whole other discussion that has a lot of intricacies like our housing shortage here um cost of living daycare challenge i mean you can talk about that all night but the unfortunate fact is we're hiring fewer people in vermont these days and we're starting here kim i think he's answering my question okay okay anybody else before we move to our next your next witness i think we're all okay oh you're done oh okay sure you don't want a chance at the table i am so good thank you so much for everything we need you to be open everything oh she's not we gotta know she's got the correct answer okay okay um that is fine so we need to appoint a three-person committee um to do this do we have any volunteers mr america can i say good night to kevin yes okay kevin thank you you're all set thank you for your time thank all right we have any volunteers to do this okay you're all dismissed too yeah you can go too thanks for coming up so donna sal yeah i think that's all right there's three bob do you want to get in on it too or no big space why don't we because yeah we have a minimum of three but bob was volunteering to be the fourth but i don't know if you also want to be all right so we should be able to knock this out by next week right i think we're good yeah all right well here we are it's 10 to 9 and do we have any oh you want to talk a little about reports we're not gonna we don't have any schedule for tonight and john and i have been talking about really wanting to get notice to the people whose whose cases are on for reports so they can be here for those hearings it's not a requirement but it's the best practice right i think a couple were on last agenda that's why i was really surprised we didn't get to them well that was part of why we told them was to have this to slap okay so that makes sense to me but and also may we good night thank you all may we see them in advance too i i don't want to be reading them the report yeah sure they're not getting those out i guess that wasn't no we haven't seen any okay formally um all right yeah i'll get those out we saw them maybe weren't there tonight that they came we saw them we didn't get them ahead of time you didn't get them ahead of time yeah and john and i are gonna sit down and go over scheduling too and and we'll make sure that john gets all the reports out to people that are that we have rosie again the people who went to the site one of them have to be there so yeah just right above the coordination and we're getting down to the lower less things yeah so as with all of these what have i got i've got we well we should reopen atchison for this reason i know especially because they were frustrated that uh they went first instead of second but um i mean i'll take caravos an issue but atchison carpenter blatchford and dale that would be what we have to do and those are all ready to go and those are ready to go so atchison wants to reopen it well atchison was not pleased with the way we the order that we we did things that the the that's what they reported as i understand that the inspection committee that our procedures said that the assessor would go first and then they would go and we actually flipped that around but so i mean i think that's reasonable but also if we're going to allow folks we might need to reopen that if we're going to allow folks and start notifying them that it only seems fair to sort of reopen that and give them that same fair notification so they can come if that makes sense well that can be you know that can be a um a question for the board to decide yeah do we reopen that or not it's true and along with that i have a question so when they come and we actually give our site report do they then add anything before the site report's given they can comment on it under the report it gets first and then they comment i think it should be the report and then they get to comment and that's what we've done in the past that's what the rules of procedures so there are two questions on the table one is does atchison get another bite at the apple because they went he went first instead of after the assessor and i guess i'm fine with that i'm i'm a little disappointed in it well that's on me i should have known that that was not bad but just that that's become an issue yeah i mean i sure didn't get that i was on that inspection committee oh you were yeah and and that sure didn't seem to be an issue i don't see i'll have that came from the inspection committee maybe i oh yeah no he he remember he wanted to give us um he thought there was a mistake in what the assessor presented and he wanted to try to give us more information and we said no we can't take more information yeah i don't know everybody's been able to talk after whatever whoever's talked i i can't believe they didn't have a chance to speak no no that was i mean at the inspection i'm talking at the meeting at the but at the meeting he went first and there was not he was not given an opportunity to speak but if he needs to go again because we mishandled it fine i want people to feel they were treated yeah exactly yeah i think it's because at the inspection he wanted to give us information and we told him we couldn't right we couldn't take it yeah and so he's saying well if i had gone on second i would have been able to present it at so he wants it they're telling us information nobody's offered me any you can't accept any information inspection so they aren't supposed to talk to you right they're really not supposed to say time check you know people it's hard to not have someone talk not let someone talk the whole board that information at another time or no the evidence is closed the evidence is closed okay that first year okay i understood that yeah right okay but natchez and one deals that he didn't get a fair shot so we're saying okay well they comment on the report you guys are gonna read it different yeah that is in the report uh no not yet i was holding off sending off this copy until we sorted this so he doesn't know if we reopen if we aren't gonna reopen it i need to send it to him tomorrow yeah well no because i think these are two different issues one is did he fairly get have a chance to rebut essentially the city's position which he's i think is saying he did not because he went first and not second that's the first issue whether having the ability to read our report and say oh no this is wrong and this is wrong that's a whole different story that i'm not sure we want to do with every single person he can do it then everybody well to literally respond to the report and that's what's considered the best practice if they're here when the report is done here's the report this is what we say and then theoretically they could ask questions or make a comment about the report but not out for more evidence that's what's considered that i was done could i ask a question about so if he's if he's saying he wants to do it again and go first where he want i mean would we actually do that he'd go first body wouldn't do the whole thing we do a whole new area should go first or marty goes first you have to represent and he represents and then do we have to reinspect theoretically i don't know if it's if it's if it would be enough for him to simply represent the report so that he has an opportunity to comment on the report so that i mean it was reopened so he can give us the information he wanted to give us at the inspection basically that's what he wants to do from commenting on the report that's different than commenting on the report no i don't think he should see the report till we're all done yeah yeah but i mean i guess that's the question do we want to reopen the whole thing which seems a little i don't know i would think that's a bit much but or just reopen revisit the decision and bring him back for a re-rep presentation of the report and let him fit in whatever you know he couldn't give new evidence but he could certainly give commentary reopen his portion of the hearings so that he can present whatever information he wanted to give us at the inspection if that's what he's after let's just do that okay well i'll um for just one case just that one yeah and and then perhaps at that point if he gives us if he says what he thinks is wrong or whatever the committee could consider whether you're still happy with your report or you want to change your report yeah right because you can say okay fine i get it but we still this is still our report so we reopen it and then start with the reopening with an opportunity for him to offer more and then and then bring up the report yes we're reopening only because he the order was reversed like i said rather listen to the recording to see what he really went how active he really was but i understand i'm an minority but i don't remember anyone being quiet but but to be clear he can present what he wants to present the three of us who did the inspection can i guess have a sidebar and say does this change our decision if it's yes we have to rewrite it or revisit or something if it's no we present the report he can then comment on it but not with the expectation that we change it based on his commentary i mean the board will vote however the board is going to vote yeah exactly right that makes sense because it just seems like the simplest way to go about it clearly we could we could just tell them no we don't that we thought you had a fair chance to present your case but he's scaling the views right the law doesn't say we have to do this no i think we should just okay just so people have not been getting marty's piece before they arrive here you know i didn't forward that to folks this last time because i wanted the question is to be i questioned whether