Silly Con Valley

Page 2 of 6

Chierighino, starting from a figure of $88,000 per acre taken from nearby comps, deducted discounts both for the bulk of the 520-acre parcel as well as for the time--six years, he estimated--it would take a typical developer to sell off various parts of the plot. He also estimated that $2 million of off-site improvements would be required before a typical tenant could make the land usable, and adjusted his estimate downward by that amount.

Chierighino arrived at a figure of $32.8 million for the land, or $63,250 per acre.

Wirth, meanwhile, operating from different assumptions and with different reasoning, arrived at the remarkably similar figure of $60,000 per acre.

A real estate analyst asked by New Times to examine the appraisals says the similarity of the valuations is remarkable for several reasons. The analyst, who requested anonymity, points out that the land being evaluated is relatively unique in size, shape and other factors. For two appraisers using different methods on an unusual piece of property to arrive at such similar valuations raises suspicion, he says.

New Times showed the appraisals to several industry experts, including other appraisers, and asked for their opinions on the work done by Chierighino and Wirth as well as the actions of state officials.

The consultants were unanimous in their scorn. The appraisals, they say, were shoddy and suspiciously unprofessional, especially given the magnitude of the project. They cited the lack of explanation the appraisers gave for some of their most crucial decisions, as well as errors in fact.

"Both of these reports are a piece of shit," says one appraiser. "They have flaws galore. They're not well-thought-out, and they're not professionally done."

But while experts familiar with land sales in the Desert Ridge area tell New Times that the appraisers seem to have been pressured to "go low," Sumitomo brass apparently thought Chierighino and Wirth hadn't gone low enough.

Three weeks after the Land Department accepted Chierighino's figure of $63,250 per acre (by law it must accept the higher appraisal), Symington sent his letter to Matajiro Nagashima, a Sumitomo manager in Japan.

"I have discussed the issue of the state land required for your factory with the State Land Commissioner and emphasized to him the need to provide fair treatment to Sumitomo Sitix, in the quickest manner possible," wrote Symington. "I am aware that the original appraisal on this property might have been flawed in that certain proposed future improvements were considered to be already in place. We are confident that the new appraisals will correct this and provide a fairer market value as the basis for the lease."

When New Times asked the governor about the appraisals during a recent public event, Symington frowned and turned away, saying, "Oh, I'm not going to get into that."

But the Land Department's actions in the wake of Symington's letter to Sumitomo suggest that he already had gotten into it.

"It's obvious what happened," says a former federal prosecutor. "[State officials] ran into hot and heavy opposition after the first appraisals and agreed to find a way to bring the price down."

The Land Department did find a way to bring down the price of Sumitomo's parcel.

On September 11, the department asked Chierighino and Wirth to reappraise the land, this time considering Sumitomo's smaller 132-acre site separate from the rest of the 520-acre state land parcel. The Land Department told the men to subtract $14 million from land values because of unspecified infrastructure costs--$7 million for Sumitomo's portion and $7 million for the remaining 388 acres.

The industry experts consulted by New Times say those instructions border on the ridiculous. And judging by the reaction of Chierighino and Wirth, the appraisers came to a similar conclusion.

Although they would drastically reduce their valuations, neither Chierighino nor Wirth followed the state's directions, and it's not hard to see why.

In Chierighino's original appraisal, for example, he valued the entire 520-acre parcel at $63,250 per acre. At that price, Sumitomo's 132-acre parcel would be worth $8.29 million (actually a little more, say appraisers, because the bulk discount would not be as great as for the whole 520 acres).

If Chierighino and Wirth had followed the state's directions and subtracted $7 million from the value of Sumitomo's parcel, the price would have gone down to about $10,000 per acre--in an area where raw land sells for up to ten times as much.

Wirth did not return numerous calls from New Times. Chierighino agreed to talk to New Times about his appraisals, and he acknowledged that the state's directions "didn't make sense." He says the $7 million for improvements "was just too much of a hit."

KEEP PHOENIX NEW TIMES FREE... Since we started Phoenix New Times, it has been defined as the free, independent voice of Phoenix, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Tony Ortega
Contact: Tony Ortega