The landlord for Quiznos’ first location said property taxes are the reason that the chain has branded the restaurant “unsustainable.”
Broker Blake Kahlich of Prime Management — a subsidiary of Sidford Capital, which owns 1275 Grant St. — said that the value of the lot jumped 160 percent, from $468,500 to $1.22 million, in its latest reassessment by the Denver Assessor’s Office.
As a result, annual property taxes increased from $10,511 to $25,510 annually. Kahlich said that, like most retail tenants, Quiznos is responsible for paying the site’s property taxes.
Kahlich highlighted the numbers after a spokeswoman for Quiznos told BusinessDen in February that “the economics of operating our Grant Street location has become unsustainable,” citing “local market expansion and associated rising costs.”
The franchisee who operates the restaurant has not decided whether to renew its lease, which is set to expire at the end of April.
Kahlich said Sidford has tried to offset the property tax jump by offering Quiznos decreased rent. The company has been paying in the mid-$30 range per square foot annually for its approximately 1,500-square-foot building, he said. But Sidford has offered to renew the franchisee’s lease at $28 a square foot.
Quiznos has operated at the site since 1981, and signage notes its status as the company’s inaugural location. The chain grew to more than 5,000 locations by 2008, although total store count has since declined, dramatically, to approximately 600.
Denver Assessor Keith Erffmeyer said his department follows a standard procedure in assessing property values, and essentially establishes two figures for each property: the value based on the land and its zoning, and a value based on current “improvements” at the site, which includes structures. Whichever figure is higher is used as the property value.
The 1275 Grant St. lot is zoned for up to eight stories. Erffmeyer said that, for years, the higher of the two figures was the one based on improvements — notably, the structure that Quiznos occupies. But in the assessment, his office determined that the land itself is now worth more.
“In this particular case, it’s that land values have gone up to a degree that the building isn’t contributing to the value as it has in the past,” Erffmeyer said.
“Land value has gone up rather significantly throughout Denver.”
Kahlich said Sidford Capital disagrees with the value placed on the lot, which is 0.19 acres.
“Once building set-backs are taken into account, the developable floor area shrinks quite a bit,” he said. “Common corridors, elevators, stair wells will also need to be accounted for in any development. I doubt any developer can really pencil this site with such a small floor plate and try and provide any parking.”
Sidford, however, already has made this case. Kahlich said ownership appealed the assessment and lost twice: first with the assessor, and then at the higher State Board of Equalization level.
Businesses increasingly cite rising property taxes as a reason for their decision to close or move, including Denver Bicycle Cafe, Cherry Creek boutique Southern Roots and C Squared Ciders in recent months.
And the owner of an auto repair shop on Brighton Boulevard told BusinessDen last week that property taxes were the main reason he opted to sell the shop’s real estate to a developer.