The price of two floors in an office building near the county courthouse shot up by $500,000 weeks before Cleveland County commissioners could buy it, The Transcript learned this week.
A purchase agreement for the third and fifth floors of the Financial Center building at 111 N. Peters Ave. was approved by commissioners 2-1 in March, with District 1 Rod Cleveland voting against it.
While an appraisal done in 2018 by Jim Artman valued the floors at $1.6 million, the commission will pay the list price of $1.8 million if it executes closing documents following an inspection period, The Transcript reported. Both floors total more than 12,000 of the total building’s 42,000 square feet.
Real estate records show that the floors were listed for $1.6 million in May 2020, but the price dropped to $1.3 million on Dec. 2, 2020 before it was removed from that listing on Dec. 9.
The property was listed on LoopNet for $1.8 million, but The Transcript was unable to learn when the new listing appeared as it has been removed from the site.
An invoice from The Rieger Law Group which reflects services to negotiate a purchase is dated Dec. 1-30 and a second one is dated Feb. 1-28. The invoices total $3,458.
Agar Inc, the seller, filed Feb. 19 to reinstate its registration with the Secretary of State. Commissioners convened in their first executive session Feb. 22 to discuss the purchase of those floors, the agenda indicates.
When asked to explain the jump in price weeks before that executive session, commissioners did not respond, but later authorized Sean Rieger to speak about the negotiations for the purchase.
Rieger said in an email to The Transcript that a combination of factors, such as the rising cost of new construction and the need for property close to the courthouse, played a role.
“We began at an offer well below their asking price,” Rieger said. “The seller countered and asked for pricing higher than the $1.8 million contract proposal. The seller also pressed back with a February 2018 detailed appraisal from a highly renowned local commercial appraiser that valued the floors at $1.59 million at that time more than 3 years ago.
“At $1.8 million, that would be about a 4% increase per year since the February 2018 appraisal. The seller made it clear that they were firm at $1.8 million and would not go lower. In [the] recent year or so, we have seen bidding wars on Norman real estate as out-of-state buyers are flooding into the market and securing real estate at astounding prices. Securing property with large room for flexibility in immediate proximity is a rare opportunity that would be terribly regretful to miss.”
Rieger noted the county’s 2015 Master Plan estimated adding onto the courthouse at $425 per square foot.
“In today’s market, the consultants estimate that number to $525 per square foot or more to add on with new constructions,” he said. “In comparison, the two floors being considered here, with a partial basement provide a total interior usable area at a far more affordable price than new construction. The opportunity to buy quality and flexible existing space, in immediate proximity, at a price that is drastically less of what it would be estimated to build the same square footage next to the courthouse is clearly a prudent choice.”
New construction cost for residential structures is up by an average of $24,000 due to the cost of lumber spiking to 180% of its April 2020 level, the National Association of Home Builders shows.
Local developer Sassan Moghadam told The Transcript that the commercial market “follows residential” when it comes to market trends.
“The appraisals will catch up,” he said, “and commercial will go up.”
Local commercial and residential realtor Dana Hare said demand is up for residential, but she has not seen bidding wars yet for commercial properties.
“I don’t do a lot downtown,” Hare pointed out. In general, she said “there’s not really an overabundance of [commercial] listings. I’d say it’s about average.”
A property located at 226 W. Gray St. offers 19,300 square feet for $1.4 million, but the location was not close enough to the courthouse despite being less than a 10-minute walk away, Rieger said.
“That property is far less SF (square footage) than what could be available at the Financial Center and that property is a one-third mile walk from the Financial Center, across railroad tracks,” he said. “The Financial Center is about 160 yards north of the courthouse. It is no comparison in opportunity for integration into a cohesive master plan for the county. Certainly, it is a fundamental that all real estate is unique, and location is often a significantly paramount factor in the relative value to a particular user.”
While Commissioner Harald Haralson and Chairman Darry Stacy have not specified the use of the floors other than office space, Rieger said the options are wide open for the county’s needs.
“The Financial Center underwent a complete structural rehabilitation/renovation in 2011 and thus provides a solid long-term structure with great interior flexibility to fill many needs of the County far into the future,” he said. “Also, these floors were totally remodeled and renovated in 2011. Indeed, this property affords a wonderful opportunity to acquire a large amount of quality square footage that is consolidated in immediate proximity under one roof.”
Attempts to reach Agar Inc. were not successful.