oversight

Conflicting Values for Land Near the Columbia Hospital for Women

Published by the Government Accountability Office on 1990-05-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                              United States General Accounting   Offke     /c/ / 9
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            GAO               Testimony,


                                                                              141401


                              Conflicting  Values for Land Near the
            For Release       Colum bia Hospital  for Women
            on Delivery
            Expected at
            1O:OO a.m . EDT
            Wednesday
            M ay 23, 1990




                              Statem ent of
                              L. Nye Stevens,   Director
                              Governm ent Business Operations            Issues
                              General Governm ent Division
                              Before the
                              Subcom m ittee on Governm ent Activities
                                and Transportation
                              Com m ittee on Governm ent Operations
                              House of Representatives




            GAO/T-GGD-90-39                                                       GAO Form 160 (12/W
                       CONFLICTING VALUES FOR LAND NEAR
                       THE COLUMBIA HOSPITAL FOR WOMEN
                               SUMMARY STATEMENT OF
                                  L. NYE STEVENS
                          DIRECTOR, GOVERNMENTBUSINESS
                                OPERATIONS ISSUES


The House Subcommittee         on Government Activities               and
Transportation       is considering     legislation         that would sell
government-owned       land located at 2400 M Street                in the District     of
Columbia     to the Columbia Hospital         for Women. In deciding              the
merits    of this sale, the Subcommittee             is considering         two
appraisals     that were made of this land.               GAO had one appraisal
prepared at the request of the Chairman of the House Committee on
the District      of Columbia.      Subsequently,         the Columbia Hospital
for Women also obtained          an appraisal      of this property.            The two
appraisals     varied    in their   approach and the fair              market values
estimated     by these appraisals      differed        significantly.
The principal      difference       in these appraisals          is that the one
prepared for GAO followed             federal    appraisal     standards,       while the
other did not.         Consistent       with federal     policy,      GAO's appraisal
determined     the fair market, value based on the highest                    and best
use standard.       This appraisal          estimated    the property's         fair
market value at $20 million              on October 31, 1988.            The appraisal
done for Columbia Hospital              did not follow      federal      standards     and
determined     market value based on the property's                   proposed use at
that time--a      women's health resource center.                  This appraisal
estimated    the property's        market value at $9 million               as of
February 22, 1989--less           than half of GAO's appraisal               estimate.
GAO concluded that its appraisal,      which was prepared in
accordance with federal    standards,    accurately  estimated the fair
market value of the property.       If the government decides to,sell
this property,   the sale price should reflect      a fair market value
that was determined   using federal    standards.




                                                         ,                             .
                                                               :.                          ‘,

                                        ,                                                       :,
Madam Chairwoman                and Members of the Subcommittee:


We welcome            the    opportunity                to appear              before         you today       to assist
the     Subcommittee            in its       consideration                      of H.R.         2031.        This      bill
would       authorize          the    sale        of government-owned                          land    located         at 2400
M     Street    NW in the District                       of Columbia                 to the Columbia                Hospital
for     Women.         In deciding,the                   merits          of this         sale,        the    Subcommittee
is     considering           two appraisals                    that          were made of the               land.
Specifically,               I will     discuss               our work on the differences                              between
the     two appraisals.


We had one appraisal                   prepared                at the          request        of the Chairman                  of
the     House Committee               on the            District             of Columbia,             and that
appraisal            was presented           in our March                      1989     report        to him.'            This
appraisal        estimated            the    fair            market          value      at    $20 million            on
October        31,     1988.         Subsequently,                     the    Columbia          Hospital        for       Women
also      obtained          an appraisal                that     estimated              the     market       value        at     $9

million        as of February               22,         1989--less              than     half     of the estimate
made in our            appraisal.


As discussed            in our December 1989                            report        to you,         the   principal
difference            between        the    two appraisals                      is that         our appraisal
followed        federal         appraisal               standards             and Columbia             Hospital's              did




'Federal        Real Property:  Appraisal  of Land to Be Sold                                                 to Columbia
Hospi'tal       for Women, (GAO/GGD-89-46, Mar. 10, 1989.)
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not.2           Consistent            with        federal          policy,            our     appraisal          based the
fair          market      value       on the highest                       and best         use of the           land.
Columbia           Hospital's              appraisal              based the property's                         market        value

on the development                     proposed             at that            time--a         national          women's
health          resource           center.


To determine                fair      market            value      under           existing       federal          policy,
appraisal               reports       are to state                 the       highest          and best          use     that     can
be made of the                 property            and then                value     the property               on the basis
of      that      use.       Our appraisal                  report           provides          a detailed             analysis
of      several          factors       considered                in determining                 the      property's
highest          and best           use.          These factors                    included       zoning
restrictions,                the      physical            possibility                for      development
(construction                moratorium,                 necessary             utilities,             etc.),       financial
feasibility,               and market              conditions.                     Based on these               factors,         our
appraiser               concluded          that     the highest                    and best       use      of the property
is      for     office,       hotel,         or mixed commercial                            and residential
development.                 Columbia             Hospital's                appraisal          report,         on the other
hand,          does not mention                   the     property's                highest       and best            use.
Instead,           it     refers       to the            special            use     proposed          by Columbia
Hospital           which       was not the highest                           and best          use.



Federal          policy        also        requires             that        the appraiser's                opinion         be
supported               by confirmed              sales         of comparable                 or nearly          comparable


2Federal           Real Property:   Conflicting Appraisals   of Land Near
Columbia           Hospital  for Women, (GAO/GGD-90-15, Dec.    11, 1989.)

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            lands       having         sim ilar        optim um              or highest              and best                uses.            Any

            differences               among the          com parable                    lands      or between                    them and the
            subject         property            should           be    weighed             and explained                    to show how they
            indicate           the     value        of the            land      being           appraised.                  To support                 the
            appraiser's               opinion         of the property's                           fair     m arket               value,        our
            appraisal           report         provides               a detailed                analysis              of    five       com parable
            sales       that     took         place      between              Decem ber 1986 and October                                      1988.


            In Colum bia             Hospital's             appraisal                   report,          the      appraiser's                  opinion
            of the       property             value      is not              supported             by an analysis                      of
            com parable          sales.             Instead,            their            appraiser              indicates              that         his
            opinion         is based on "discussions                                    with      developers                and investors                       in
            the     West End, as well                    as (his)               research             of        recent            sales...."                He
            does not           provide         factual            data        or research                 that         m ight        support           'his
            opinion.


            Federal         policy           also     provides               that        the appraisal                     should          not
            dim inish          or downgrade              the property's                         value      based on the purpose
            for     which       the     land        is to be acquired.                             That         is,        the      fact      that         the
            purchaser           does not            presently                plan        to develop              the        property             to       its
            highest       and best             use has no effect                          on the          value            of property.                    Our
            appraisal           report         com plied              with     this            policy.           The other                 appraisal
            report       did     not because                it        was com m issioned                   to base the                     value       of
            the     property           on the         use        proposed               by the Colum bia                    Hospital             for
            Women, which               is,     in fact,               less     than        the highest                     and best           use.




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In sum,        the     two appraisals                varied       in their      approach        and differed
in the application                 of the highest                 and best     use      standard.             We
believe        that     our appraisal                accurately          estimated       the    fair         market
value     of the        property      in question.                  If    the government            decides           to
sell    this     property,          the       sale     price       should     reflect       a   fair         market
value     that        was determined            using         federal       standards.




This    concludes         my prepared            statement           and I would          be pleased            to
respond        to any questions.




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