The beachfront lot at 2600 N. Ocean Blvd is back in the news. This lot cannot be developed under city code because it lies seaward of the Coastal Construction Control Line (CCCL), that is, east of A1A. In February 2019, the owner applied for a variance to build a four-story, 14,270 square-foot complex. The variance application was denied by City Council. The proposed development is back in the news because, in September 2020, a Palm Beach Circuit Court judge determined that the application had been prejudged by City Council members Andrea O’Rourke and Monica Mayotte, both vocal proponents of preserving environment and quality of life. The judge found that the landowner is entitled to a new hearing before City Council, absent these two members. Notably, the CCCL ordinance forbidding beachfront development has been in place since 1981, long before purchase of this lot by the landowner in 2011.
Castle in the sky
I would like to talk about the two very different valuations of this property. On the one hand, the county Property Appraiser most recently (2020) valued the lot at $165,000. On the other hand, an independent appraisal places its market value at about $7.2 million. These valuations are worlds apart. What gives?
The Property Appraiser’s estimate of $165,000 assumes that the lot is unbuildable. This realistic assumption is based on the city’s CCCL ordinance that forbids construction on this lot. The figure of $165,000 is consistent with the assessed market value of $154,000 for the beachfront lot just to its south, 2500 N. Ocean Blvd, which is also unbuildable since it too lies seaward of the CCCL.
In contrast, the appraisal conducted by Callaway & Price real estate appraisers in January 2018, estimates the lot’s market value at just shy of $7.2 million (the exact figure is $7,190,000). The appraisal itself provides the reason for this lofty estimate:
It should be noted that the Subject Property lies seaward of the coastal construction line. Development of the Subject Property will require variance approvals from the City of Boca Raton and applicable state and/or federal government agencies. At our Client’s request, our Market Value estimate was based on the Extraordinary Assumption that the necessary variances are achievable and that the Subject Property is a buildable lot.Callaway & Price Appraisal
An appraisal of $7.2 million does not show that this lot is buildable at all. To the contrary, this sky-high valuation is achieved only by assuming that the lot is buildable. Of course, even higher valuations could be reached by adopting other extraordinary assumptions. For example, if the property were to be exempted from zoning regulation to allow construction of a condominium tower, valuation would soar into tens of millions of dollars. Make extraordinary assumptions and the sky’s the limit!
Back on planet Earth, we find that $165,000 is the only realistic valuation at hand. Much has been made of taxes paid by the landowner since purchase in 2011. Their tax bill was $1,192 in 2011 and has since climbed to $2,321 in the current year. In 2020, this works out to about 1.4% of the lot’s assessed market value. In total, over the course of nine years, the landowner has paid about $17,000 in taxes on this property. He should be thankful that the Property Appraiser’s assessment is based on the realistic assumptions dictated by city ordinance, and not on extraordinary assumptions. Had he been taxed at 1.4% on $7.2 million valuation, his tax bill would have been $100,800. And that would be just for the year 2020.
The landowner might consider offering the property at a fair price to recoup his original cost ($100 through foreclosure in 2011) and cumulative tax bill ($17,000) plus interest, while also building in a substantial profit. A number of parties would be receptive to such an offer. The lot could serve as beach access for condominiums and residences that lie across the street, west of A1A. There are a number of condominiums that use beachfront property they own as just such an amenity. At a reasonable price, the property would also be attractive to city government and both private and public foundations that champion the environment and quality of life. These, of course, are the values that underwrite the city laws that have protected this lot from development all along.