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Commercial properties selling at deep discounts

One expert says price of real estate depends on its proposed use

Daniel Wheeler purchased the two-building campus on 6680 Poe Ave. once occupied by Mazer Corp., a local education publisher, in May. Staff photos by Jim Witmer

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The two-building former Mazer Corp. campus in Vandalia was sold May 24 for $780,000. The building had an assessed value of $4.16 million, according to the Montgomery County Auditor's Office.

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By Tim Tresslar, Staff Writer Updated 8:26 PM Saturday, June 12, 2010

The recent sales of several local office properties show that commercial real estate is selling, but often for prices well below their assessed values.

Industry observers say the lower prices reflect the general economy, but also depend on the type of building and its location. But they note that the price a property fetches on the open market doesn’t necessarily tell the whole story.

“Those sales are showing the discounting effect of the economy and the market,” said David Dickerson, president of Gem Real Estate Group, a Dayton-based brokerage and research firm.

How much a buyer wants to pay for a building depends in part on how the buyer plans to use it, Dickerson said. When an investor buys an office tower, for example, that person has to factor in the time and costs it will take to fix up and fill the building with tenants so it can begin generating revenue, Dickerson said. An entrepreneur who wants a building to house a company may be willing to pay more, he said.

Owners often factor future costs into property prices, said Mark Fornes of Mark Fornes Realty. Commercial properties that are vacant or nearly so still have carrying costs, such as utilities, taxes, maintenance and security, Fornes said.

“You still operate an empty building,” he said.

In addition, investors who buy buildings with the intent of refilling them with new tenants will end up shouldering other costs, such as the expense of fixing up a space for the tenants, he said.

In November 2009, when the United Food and Commercial Workers International Union Local 75 and another buyer for the former Iams Corp. campus, also in Vandalia, bid on the property, price was a secondary concern, said Brigid Kelly, a spokeswoman for the union. The building’s location and its visibility from Interstate 75 were the bigger selling points, Kelly said.

Recent deals

May 24: Daniel Wheeler, a Springdale real estate investor, purchased a two-building campus in Vandalia for $780,000. The building had an assessed value of $4.16 million, according to the Montgomery County Auditor’s Office.

June 4: United Way of the Greater Dayton Area sold its former headquarters for $475,000. The building at 184 Salem Ave. had an assessed value of $2.7 million, according to county auditor records.

June 4: Cincinnati-area investors Marinko Gvozdanovic and Thom Hoffman have purchased KeyBank Tower, 10 W. Second St., for an undisclosed amount.

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