The new owners of the current Wal-Mart building are asking the
county to lower the property’s valuation by millions of
dollars.
Gilroy – The new owners of the current Wal-Mart building are asking the county to lower the property’s valuation by millions of dollars.
County assessors have valued the land and 125,000-square-foot building off Arroyo Circle at a combined $17 million, far outstripping the $5 million sale price paid in Dec. 2004 by Hudson Jones Commercial Brokerage, in San Jose. Lowering the valuation to the sales price, as the Hudson group is seeking, would shave more than a $120,000 from the property’s tax bill.The new owners claim the county assessment greatly overestimates the value of the building, given a contractual stipulation by Wal-Mart that prohibits the site from being leased to any of its big-box competitors.
“The fact that they limit who you can lease to affects the value of the building, since you can’t turn around and lease to a Target,” said Bill Cann, a broker with Hudson.
The inability to lease to a single large tenant also means Hudson will have to spend up to $3.5 million in renovations to accommodate a series of smaller businesses, Cann said. The renovations will likely include installing new loading docks, sprinklers, dividing walls, a new air conditioning system, and windows at the front of the store. Cann predicted the building would house several 20,000- to 40,000-square-foot businesses.
Based upon an initial glance at the case, county assessor Larry Stone acknowledged there may be reason to lower the valuation.
“If you have a sale restriction, those are things we would take into consideration,” he said. “That’s why dialogue between the assessor and the new property owner is important. It could very well lead to an adjustment.”
Hudson group has filed an administrative appeal with the county and plans to meet in coming weeks with county officials. In the meantime, the new owners continue to hunt for prospective tenants as Wal-Mart prepares to relocate to a new Supercenter in Pacheco Pass Shopping Center, off Route 152.
The new 225,000-square-foot store will add groceries to its list of discount offerings. It is scheduled to open in mid-September, although the retail giant has three months from that time to completely vacate its current building at 7900 Arroyo Circle. They have used that site for a decade.
Cann said several businesses have expressed interest in setting up shop in the decade-old building, but none have yet committed.
With plans for the future tenants still vague, the new owners hope the county will fix the site’s value closer to sale price.
“They’re now revisiting the whole thing,” Cann said. “This was a friendly conversation. You assess it when it’s done, not (based on) what the building is. If you went around assessing what the land was by its potential, you’d be in lawsuits for the rest of your life.”
