WISHFUL THINKING FROM GRAFFITI ARTIST ON CASA DEL NYLON AND A CRITICAL ASSESSMENT OF THE APPRAISAL

By Juan Montoya
It's doubtful that the person who wrote that "Before I die I want  "Mr Galonsky to buy Casa Del Nylon back" will get his wish any time soon.
The city purchased the building on 13th and Adams for a princely sum of $2.3 million that was included in a $11 million issuance of certificates of obligation amid widespread suspicion that it was a questionable transaction between friends.
The building belonged to Abraham Galonsky and family and the sale was negotiated by Mayor Tony Martinez's law partner Horacio Barrera who just happens to be Galonsky's neighbor. Galonsky has claimed in the past that the price of the building had been even higher a few years ago. The city hired an appraiser who evaluated comparable properties, including some located on Alton Gloor and the 77-83 frontage as well a few downtown properties.
Some people have said that the appraisal were skewered toward the high end but until now no one has questioned the purchase of the property formally. Martinez is said to have told some city commissioners that the University of Texas System would buy it from the city, only to have the university turn down the deal.
What will the city do with the shell of a building if the university refuses to bite? Will out wishful thinker get his wish?
A critical analysis of the sale has been submitted to our blog and we share it here with our three readers.
Subject: 1304 E. Adams, Casa Nylon
36,000 square feet of building space
36,000 square feet of land
Built 1967
Effective Age 20 years

Rental Comparables:
Comp# 1; 700 E, Levee; built 1984; 23,302 sf; office use; partitioned for several tenants @ $1.35 psf
Comp# 2; 647 E. St Charles; built 1876; 2,180 sf; office use; @ $ 1.61 psf
Comp# 3; 1033 E. Adams; built 1925; 5,900 sf, retail use; @ $0.24 psf
Comp# 4; 444 E. 8th St; built 1950; 3,952 sf, office/retail use; @ $0.55 psf

Subject- Casa Nylon measures 36,000 sf and is located downtown and has no parking. None of the
comparables are similar to the Subject’s size with the difference being anywhere from low of 35% to a
high of 94% difference in size, when appraising guidelines asks for a difference of no more than 10% in
size. Therefore, all of the comps should be rejected based on size alone, this does not include the type of
use or location.
The appraiser used office leasable space that is not comparable to the subject and submitted comp# 1
that is misleading basing the comparable similar to the subject, as it is divided into different units and
leased as office space at a much higher rate than the subject’s applicable market. Comp# 1 is not a
comparable and neither are comps 2 thru 4 based on size.

This estimate is pretty close to what other properties sold for that were superior to the Casa Nylon and are as follows;

Conclusion: The subject’s market is approximately $0.24 psf foot with a cap rate of approximately 12%
for the risk, as the subject is located in an area that is a high risk to invest. On the assumption that the
subject commands a $0.24 psf, X 36,000 sf, equals a potential gross income of $8,640 monthly rent, or
$103,680 annually, less expenses to carry the property.
Expenses include taxes, insurance, maintenance, management, accounting, which is calculated by the appraiser at $60,000 annually. The estimated direct and indirect expenses to carry the property, is approximately 57%, which is a good estimate. After expenses, the net income to the property owner is approximately $43,680 net income, divided by the capitalization rate that takes into account the cost and risk of the investment, which in this case is .10%, giving you a market value of $436,800 for the Subject property known as Casa Nylon.
Using the appraiser’s cap rate of .07% gives you a value of $624,000, which is still nowhere near the $2.3 million dollars the Mayor ramrodded through the City Commission to purchase the Casa Nylon.
Not only is the Casa Nylon obviously not worth $2.3 million, but in addition to the city paying a high price for the property, the city had to invest to upgrade the property due to the poor condition the property was in. Add this to the Mayor’s cronies getting a slice of the pie by using his partner Horacio Barrera to put the deal together for the city to purchase the building and Judge Hanen’s wife to legitimize the rip off of the Century sale to the City of Brownsville. This scam is just as bad as the Imagine Brownsville Scam.
Sales Comparables:
Comp# 1; 1220 E. Adams; built not reported; 17,000 sf; retail/office; $44.12 psf
Comp# 2; 942 Wild Rose Ln; built not reported; 4,026 sf, medical office; $62.10 psf
Comp# 3; 1225 N. Expy; built not reported; 4,900 sf; retail; $67.35 psf
Subject-Casa Nylon measures 36,000 sf and is located downtown. None of the comparables are near the
size as the Subject with the difference being from 88 to 52 percent difference in size when appraising guidelines are not to exceed 10% of the subject’s size. All three comps are rejected based on size not being similar to the subject. This does not take into account location, use, quality construction and
condition.

Other factors that raise a red flag to disqualify the comparables submitted to estimate value are besides size is location, type and kind of use not being similar to the subject and the buildings condition, which needs a lot of work to restore the building to put on the market.

Sales Comparison Conclusion:
The Greyhound bus station building on a city block of land sold for $450,000
The Chinito Building with 56,000 square feet of space on a city block of land sold for $650,000
The Subject-Casa Nylon is located in a depressed market, but was sold as if it were a new building in a  market located by Sunrise Mall or on Alton Gloor.
Both the leasable/income approach to estimate value and the direct sales approach support each other in that the City paid overwhelming too much for a property in a depressed market.