Good to see these stories refer to the land, not the building, when they cover sales

Because a 1/10th acre parcel is only worth $14.4 million because of its location, not from anything located on it.

The lot where a McDonald’s long operated at a gateway to Amazon.com Inc.’s high-rise campus in downtown Seattle sold on Friday for $14.4 million — over three times more than what it did in 2016, months after Amazon opened the first tower.

Due to the site’s tiny size (less than a hundredth tenth of an acre) its quirky, triangular shape, and prominent location where Sixth and Westlake avenues cross Virginia Street, the property is a bit of [a] landmark.

It tripled in value since 2016 and for the same reason it commanded that price…location, proximity, nothing else.

Using the Mercer Metric, that land could be paying 1/10 of a million dollars in rent over 99 years…that would come out to $42,102,307.71 over that term with the same 2.5% annual increase. Annualized — dividing that by the 99 years to get a revenue number we can borrow against — it comes out to $425,275.84. Right now, it pays about $60,000 a year.

UPDATE: I let the reporter know about his 10-fold error on the size of the parcel but he reiterated that the value of the land is driven by the presence of a bank. As he writes:

The recent history of the property reflects what has occurred all around it since Amazon opened its first downtown tower in late 2015.

The next summer a local investor group, including Meriwether Advisors brokers Doug Barrett and David Rothrock, and Newmark broker Paul Sleeth, paid $4 million for the property when property values started to rise along with rents.
[…]
It would be tougher to make a big rent payment selling burgers and fries to passersby than it likely is for the largest bank by asset size in the U.S. catering to the financial services needs of the thousands of high-salaried Amazon workers across the street.

The two-story, 8,100-square-foot branch is the largest the bank has built in Washington in more than four decades, according to Chase. Last summer, it had eight full-time employees.

The new owner is a limited liability company affiliated with Boston-based Fidelity Investments.

No one pays $14 million for a parcel that small just to house a retail bank branch that employs 8 people. Does anyone really think the folks at Amazon do a lot of face to face banking? The land is an investment, owned by investors, not the bank itself. The scarcity of land in a dynamic economy is what drives these prices, not the work being done on that land. “When property values started to rise along with rents” would be more correctly stated as “when speculators raised rents to capture the value of scarcity.” This isn’t like the tides or phases of the moon. This is the landlord’s game.

All the investors need is enough to cover the property taxes…that’s about $5k/month for that location, albeit, a small portion of that location. A ground rent might pay as much as seven times the current property taxes. A swap for some other land, a plan to assemble a larger parcel, some way to block another investor from assembling one…who knows? What we do know is that putting a bank on it has bupkis to do with the value. The value is in the land.