Avia Collinder, Business Reporter
The Urban Development Corporation (UDC) is defending its pricing of waterfront properties, specifically the former Oceana Hotel, which an expert valuator says is worth less than a third of the asking price.
The UDC attempted to sell the former hotel to the National Health Fund (NHF) for J$350 million, but the deal fell through earlier this year.
Chartered valuation surveyor, Gordon Langford, of the firm Langford & Brown, suggested that the NHF was right to walk away from the transaction, saying based on the age and condition of the building, and absence of parking spaces, the property is closer in value to J$100 million.
The building is back on the market.
"The UDC is asking far too much at that price. They (NHF) were right to pull out - J$100 million is more sensible," said chartered valuation surveyor Gordon Langford of the firm Langford & Brown.
"Oceana was built 40 years ago and, ideally, should be pulled down. The UDC valuators are valuing it as a hotel, which is completely empty."
Langford says properties on the Kingston waterfront are among the most sought after by companies with an eye to accessing tax breaks offered for such investments, but that the pricing of the properties by the UDC is a deterrent.
The UDC, in response, said its properties are usually valued by professionals outside the agency, and that for Oceana, two discrete valuations were done by external parties.
"As it relates to the Oceana complex, the corporation had not indicated a valuation of J$350 million. For the record, the sale price of J$350 million was negotiated and agreed between the UDC and NHF in 2012, based on an August 2011 valuation of J$380 million to J$400 million for the complex," said the agency.
"Please note also that the appraisers observed that the complex was within a wider neighbourhood where there is permitted curb-side parking, car-park lots and two multi-storey car parks offering access to some 800 spaces."
The offices on the building are converted bedrooms, with separating walls. Langford said modern offices use "open plan" designs, and that Oceana may be better suited for apartments.
But no matter the intended usage, the absence of parking is a mitigating factor, he said.
Chartered valuation surveyor Connell Steer, who is a partner in the firm Allison Pitter and Company Limited, says investors are seeking property in other areas of downtown Kingston, beyond the waterfront.
Real-estate experts refer to it mostly as the 'Digicel effect', arising from the investment made by Digicel Group to locate its regional and Jamaican headquarters on the waterfront.
"There is a little speculation, especially in Port Royal Street, Harbour Street, Duke and King streets, and along the main corridors," said Steer.
"Confidence is returning on the back of two things: one is the military invasion of west Kingston, which has reduced the risk caused by crime and violence; and two, the establishment of Digicel's head office in the area has affected the perception of property values."
The tax breaks from the UDC for capital investments downtown is also driving business, he said.
As a result, property values now range between J$7,000 and J$8,000 per square foot - trending below new Kingston, but nevertheless an improvement on previous years, Steer said.
He too said parking is a sensitive issue.
"One of the main problems which caused the blight and drift from downtown Kingston in the first place was the lack of parking," said the chartered surveyor.
In other cities abroad, he added, this problem is solved with a transport system such as the underground or subway, in addition to a good bus system.
"Many people who work in the city drive to the train station and park and then take the train to work," he said, citing the example of what happens in London.
"If the Government had money, it could put up garages of two to four floors and charge - making money off that. But the resource to do that is not there. Money is tight."
The UDC said its sale prices are guided by the valuations received from chartered appraisers and "considered to be reflective of going market rates for similar properties for the period in which the valuations are done".
Langford said that were the UDC to adjust its asking price for downtown properties, it might capitalise on what is now a healthy demand for land on the waterfront.
"People want land anywhere between the Stock Exchange and Digicel, close to the waterfront. There is not much interest in the area, otherwise. The Digicel effect is still carrying on," he said.
Langford said other companies want to make investments downtown, but are stymied by lack of land space.
"With the UDC, it's a rigmarole," he said. "If only they could speed up and smoothen the acquisition process."