E-mail Story
Print Friendly
Send E-mail
Reprint story Front Page 
paperboy text news state
Sunday, July 25, 2010
DOT Sells Parcel, Buys It Back for Triple the Price
By Colleen Heild
Copyright © 2010 Albuquerque Journal
Journal Investigative Reporter
Less than an acre. No direct access. Triangular-shaped.
The state Department of Transportation sold the sliver of surplus land near the Paseo del Norte and I-25 interchange for $306,000 in 2005 — despite prior staff recommendations that the state keep at least part of the site for future interchange expansion.
Four years later, the DOT paid three times the price per square foot to buy it back for a Paseo interchange project still on the drawing board.
By that time, the new owners had expanded the parcel to 1.3 acres, and the tab for the state came to $1.6 million.
Which raises the question: Why did the state sell the parcel in the first place?
The official response: It wasn't needed, and plans for rebuilding the interchange had been shelved due to lack of funding.
However, just two months before the 2005 sale, then-DOT Secretary Rhonda Faught and Sen. Jeff Bingaman, D-N.M., held a news conference to announce that Bingaman was seeking $20 million for phase one of the interchange project. (Some of that money eventually was used to buy back the land DOT sold.)
Two businessmen ended up buying the property, which six months earlier was included in a shopping center site plan submitted to the city by Lowe's Inc.
A consulting firm owned by Herb Denish was the agent for Lowe's in that 2005 city zoning application.
Denish said last week he didn't recall that his firm was involved in the site plan request. His partner, Lawrence Kline, shepherded the request through the city process, records show.
While Lowe's had initially approached DOT to buy the land, Denish said he had nothing to do with the land sale.
The developers tried to lease or sell the vacant lot but were unsuccessful until the DOT bought it back in 2009. DOT records provided to the Journal failed to document why the state bought the entire lot instead of the smaller amount needed for right of way.
Steve Harris, who oversaw the 2005 sale while he was a top manager at DOT, now works for a private firm that has overseen new plans to expand the Paseo del Norte-I-25 interchange, which handles more than 170,000 vehicles a day.
In a recent interview, he defended the original land sale.
"It appeared to me at the time, the parcel had been unused for decades and it should be better served putting those revenues back into roads," he said.
DOT spokesman Mark Slimp also defended his agency's actions.
"While not typical, it is certainly not uncommon for the DOT to sell a property and buy it back," he said in an e-mail.
Slimp didn't respond to a Journal request asking for examples of other buybacks.
John Hamilton, of Hamilton-Hise Properties LLC, which was involved in buying the land and selling it back, said "it was just a pure economic transaction based on the facts that everybody had at the time."
Hamilton said he and his partner Neil Hise, both Republicans, couldn't have predicted the land would be needed for the interchange rebuild.
"It never entered our minds, or we wouldn't have done the deal."
Susan Showalter, an Albuquerque real estate broker with Commercial Brokerage Inc., represented clients once interested in buying the property. She called the turn of events "bizarre."
"It sounds like another one of those New Mexico inside deals."
Concessions made
It wasn't the first time taxpayers have bought the parcel, which borders on the I-25 frontage road south of the Paseo del Norte overpass.
Court records show the state paid $51,000 after condemning the land in 1983 for what was then the new I-25-Paseo del Norte interchange project.
By 2000, Wilson and Company Engineers and Architects of Albuquerque was analyzing alternatives to alleviate interchange congestion.
"We finished our study and it was put on the shelf. There was no funding," said Derek Meier, who works for the firm. "But we knew back then it (the rebuild) was going to be needed. Everybody knew it's going to eventually be addressed."
In October 2002, Showalter inquired about buying the DOT land on behalf of a New Jersey developer and the request was circulated among various DOT departments.
The only opposition came from Bob Bracher, then-traffic technical support engineer, who recommended not selling the property.
"New designs for this interchange are currently being evaluated. Additional R/W (right of way) will be required in all quadrants to accommodate the new interchange," Bracher said in a memo.
Bracher retired in 2002 and Showalter's clients were never able to put a deal together. However, the question of whether to sell the property was still being discussed.
Tony Abbo, then-traffic engineer for the DOT's District 3 based in Albuquerque, noted Bracher's earlier concerns, but said the "interchange (reconstruction) is no longer being studied."
Nevertheless, Abbo in a December 2003 memo had reservations about selling the entire .73 acre parcel.
"The District would like for the Department to retain approximately 20 feet along the western boundary of the property to accommodate any future widening in the area." Abbo said his office had no major objections to the sale "as long as the conditions listed above are met."
But that didn't happen.
In fact, selling the entire piece of land — including the 20 feet — was one of two concessions made by the state when it sold the property in 2005.
Who's on first?
In response to a Journal request, the DOT produced more than 100 pages of documents including e-mails, appraisals and inter-office correspondence.
None of those records included a copy of a February 2005 letter from Harris, then DOT infrastructure director, to the city of Albuquerque planning commission chair.
Harris' letter was part of Lowe's application seeking approval of a site plan for a subdivision to create a single shopping center site adjacent to its store. Maps on file with the city showed the site was to be expanded to include the DOT land and several acres of property south of there.
"Please allow this letter to serve notice that it is the Department's intention to sell the above-referenced parcel..." the Harris letter states.
"It is our understanding that Denish + Kline Associates, Inc. is acting as Lowe's Home Center's Inc. agent, has expressed an interest in purchasing the property, and is applying for zoning entitlements on Lowe's behalf regarding the (DOT) parcel," Harris' letter stated. The letter, which was copied to two DOT officials, said the agency had no objections to the planning commission hearing the case.
DOT records show Lowe's had requested to buy the parcel in the fall of 2004.
Both Denish and Kline told the Journal they never knew Lowe's wanted to buy the land.
Denish initially told the Journal that neither he nor his firm had worked on the Lowe's shopping center project at I-25 and Paseo del Norte after 1999 or 2000.
After being furnished copies of the zoning request and Harris' letter, Denish said he might have forgotten about the 2005 matter, adding, "I'm not even sure I knew about it."
Harris, when asked about his letter last week, said he never spoke with anyone from Denish + Kline before signing it and wasn't certain who told him the firm was involved.
"Obviously, somebody prepared the letter for me and there was a conversation going on," said Harris.
DOT spokesman Slimp told the Journal, "We are not aware of any discussions or involvement by Mr. Denish or his company related to these property transactions."
The firm of Denish + Kline, formed more than 30 years ago, has been the agent for developers of ABQ Uptown, Albuquerque Academy, Cottonwood Mall and Mesa del Sol projects.
Denish is listed as president and owner on state documents, but said last week the firm is now inactive.
His wife, Lt. Gov. Diane Denish, is a Democrat running for governor.
After the Journal provided Herb Denish copies of the zoning request and DOT letter on file at the city, it was a spokesman for Diane Denish's campaign who responded via e-mail.
"Herb received the letters you sent and indicated that he had never seen them before and wasn't aware of their existence until you sent them along," a Denish campaign spokesman wrote.
The campaign then agreed to set up a telephone interview between the Journal and Herb Denish and Kline.
Both men said their firm was involved in zoning matters only and had nothing to do with the sale. Herb Denish said he never talked with any DOT officials about the property; Kline said he couldn't recall whether he did.
A check of DOT records on the pending sale showed at least six e-mails in which "Lawrence Kline" was among the parties copied.
A Feb. 3, 2005 letter to the city shows Kline signed as the agent for Lowe's in the zoning matter.
"On behalf of our client, Lowes Inc and adjacent property owners Neil Hise and the NMDOT we respectfully request consideration of a Site Plan for Subdivision," he wrote.
In the end, Lowe's opted not to purchase the DOT land, a company spokesman said.
Because the DOT land had no access except through the adjoining properties, only adjacent landowners were eligible to buy the property.
That opened the door for Hise, who owned property south of the DOT site, joined by Hamilton, to negotiate a purchase as Hamilton-Hise Properties, LLC.
Hamilton told the Journal he and Hise were "probably working with Lowe's" on the project at that time.
In March of 2005, the city had agreed to the Lowe's zoning request and the matter was sent to the city's Development Review Board.
That same month, Bob Lopez, DOT supervisor in charge of land sales, wrote an e-mail: "Our office has been directed to sell the subject parcel...."
He didn't say who directed the land be sold.
Slimp said Harris recommended the DOT sell the parcel, and Secretary Faught approved. Final approval of the site plan by the city came in September 2005.
Harris retired in 2007 after 28 years with the DOT and now heads the New Mexico office of Parsons Brinckerhoff.
Faught, who left the agency in late 2008, said she didn't recall that the parcel had been sold.
Critical acquisition
Ensuring the DOT land was purchased and included in the shopping center site was "critical" in 2005, said James Topmiller, vice president for community development for the engineering firm Bohannon-Houston.
Topmiller, who worked on the project in late 2004 and 2005, said both Lowe's and Hamilton wanted the DOT land to complete the site.
"They were trying to increase the marketability of those properties in that corner of the intersection," he said.
"...They were very interested in getting that (DOT) land before someone else did."
Added Topmiller: "You don't want a little piece of triangular land in there that some opportunistic developer might come along and buy and then have the ability to completely mess up your site planning, mess up your marketability, your view from the interstate."
An e-mail Hamilton sent to the DOT before the sale said city planners wanted the DOT property "included in the pending replat..."
A Lowe's spokesman said his company had planned to combine the DOT land with a small adjacent property owned by Lowe's and resell the parcel. Instead, Lowe's sold the lot to Hamilton-Hise.
Hamilton put the two parcels together to form the 1.28 acre lot that the DOT ultimately bought four years later.
"It was a reasonable deal for both Lowe's and the DOT, because nobody had any use for them (the parcels)," Hamilton said.
Despite the buyers' high interest, it was the state that ended up making two concessions to complete the deal.
Although the appraised value was $10.50 per square foot, the state accepted Hamilton's offer of $9.70 per square foot in May 2005. Hamilton maintained the site needed infill.
And, just as the sale was to become final, Hamilton asked the DOT to add the 20 feet the state had planned to keep for right of way.
DOT land sale supervisor Lopez responded in a July 8, 2005 e-mail that was copied to several people, including Lawrence Kline of Denish + Kline.
"We were going to retain the 20 feet for the future expansion of the interchange so we don't have to buy it back," Lopez wrote. "There are plans to improve that interchange. But I will run it by my boss, Steve Harris."
That same day, Harris agreed to add the 20 feet, another e-mail shows.
Harris recently couldn't recall why he made that decision, noting he had numerous projects at the time.
"Basically I'm dependent on people putting stuff in front of me and bringing me up to speed on the details."
Harris also said he wasn't aware of the news conference two months before the sale in which Faught appeared with Bingaman to announce plans to seek a $20 million congressional earmark for the interchange.
Congress approved the funding just weeks after the sale.
About $14 million of that federal money has been spent on preliminary engineering studies and purchases of right of way. That included the land the DOT bought back in 2009 for $29 per square foot.
Buying back
The DOT determined in August of 2008 that the property should be reacquired, Slimp said. Neither the original title report nor the appraisal mentioned that the DOT once owned more than half the property.
He defended DOT's purchase of the property last year, saying, "Long-term planning and early land acquisition usually yields less expensive costs for land purchases needed for major projects."
Slimp has said the DOT only needs two-fifths of the land. But nowhere in DOT records provided to the Journal does it explain why the state bought the entire parcel.
Slimp said the state can buy more land than is necessary if the "acquisition will cause an unfair devaluation of the remaining portion of the parcel."
But the appraisal on the property never mentioned any such "unfair devaluation" or that the $1.6 million price tag included such a payment. Meanwhile, Slimp said the DOT has revamped its process for selling surplus property. Sales are now to be approved by the state Transportation Commission.
Hamilton defended the DOT and the transactions.
"If there's any story, it's why did DOT ever decide to sell it in the first place when they needed to buy it back later, and clearly at the time they sold it, they didn't have the vision that they might need to redo the Paseo intersection someday."
Timeline on land deals
1986
DOT pays private landowner $51,900 for the parcel after filing a condemnation lawsuit. Land condemned for new interchange project.
2002
DOT studies reconstruction of the I-25 and Paseo del Norte interchange. No designs are selected.
2005
May
U.S. Sen. Jeff Bingaman, D-N.M, announces he will seek $20 million in federal money for preliminary interchange design and reconstruction.
August
DOT sells parcel near the interchange to private developers for $306,000
2009
July
DOT buys back the property, which has been combined with an additional half acre, citing interchange reconstruction plans. The price tag: $1.6 million
You also can send comments via our comment form
|
|
