Update on the Little Neck (Ipswich, MA) sale by the Feoffees of Ipswich's Public Schools

I've posted several times before about this story (see Feoffees' land which includes these three stories

• The Feoffees, their tenants, and the Ipswich public schools with photos, maps and other illustrative data
• Update on the Feoffees' tenants in Ipswich, Massachusetts
• The Feoffees of Ipswich are still thinking about selling that fine piece of land at Little Neck) 

This past week, two articles http://salemnews.com/punews/local_story_128174243.html and http://www.wickedlocal.com/ipswich/news/education/x2133276729/Sale-of-Little-Neck-will-not-go-through report that the sale will not go forward because the 168 land tenants are not able to raise the purchase money.

There are 167 tenants, who own homes but under the terms of the gift of the entire almost-island.  Their individual lots total less than half of the total land area: 14 acres are kept as common space, including the 11-acre lot which holds the community center. 

My initial research (shown in the first of those three blogposts) suggests that Ipswich's assessor valued the land for 2008 at $32,751,500, including a very low assessment of $1,761,000 for the 14 acres of common areas.  If the common areas were assessed as the rented-out portions are valued, the total land assessment would be about $48 million.

The $26,500,000 asking price amounts to less than $160,000 for each building site.    A 5% 30Y mortgage on $160,000 works out to a payment of $859 per month, or $10,307 per year, a not inconsiderable sum.   One of the current real estate listings reports that land rent for a seasonal cottage lot is $9,700.  (That 99 year old cottage of 1,710 sq ft carries an asking price of $620,000, down $5,000 from last year.)

So how much are the lots really worth?  One way to find out would be to auction off the rental rights for two of the unoccupied lots not currently rented out.  Make one a seasonal property, the other a year-round occupancy. Publicize the auction well, including a letter to every current Little Neck tenant, and accept bids for several weeks.  Award the rental rights for each lot to the highest bidder, at $1 more than the amount bid by the second highest bidder.  That will give the Assessor and the Feoffees a sense of the current market for this fabulous almost-island.

The proposed "endowment fund" for the benefit of the Ipswich Public Schools will never provide as much as the market rent, net of expenses, will provide.  I do not understand why the Feoffees (that is, trustees on behalf of the schools, under the terms of a 17th century trust), or the voters of Ipswich, would ever consider selling this land, or why a probate court would permit the sale.

When the asking prices for Ipswich cottages begin to approach the depreciated value of the homes on them, the Feoffees will know that they are charging appropriate rents.  When asking prices are 3, 4, 5 times the depreciated value of the cottages, it is clear that the Feofees are not collecting the full land rent, and the discount is being capitalized into the selling prices of the cottages.  The terms of the trust require the Feoffees to collect the fair rent, and they ought to be required to get into compliance within, say, 5 years.

The tenants who assumed the Feoffees would never do it have my sympathy, but no tears.

This blog has more observations and history on this story.  See them collected at  http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.

Comments

[Lifetime Little Necker]

Last week the bank foreclosed on a property, and put it up for auction. The bidding started at $300,000, quickly went down to $200,000, and ultimately the bank bought it back for $125,000.

The property had liens of about $27,000 against it (for back rent owed). The auctioneer explained the lease terms. There were five registered bidders in the room, and no one wanted it.

Given this, how would you now calculate the value of the property?

[LVTfan]

I've got a standing google alert for Feoffees, and never saw this. How was this auction publicized? The folks who go to foreclosure auctions are a special sort, and they like having predictable conditions. I've had occasion to seek out foreclosure sales in a particular area, and it takes some significant searching, and, as best I can tell, some willingness to take on some risks.

I recommend that a well-publicized auction be staged. If the Boston Globe, for example, wrote about it, I'd bet that the bidding would be quite interesting. It might not be among current tenants, particularly if the location is not one of the better ones.

And how were the lease terms described? Did they mention that the trust calls for the market rent to be collected?

[Dissertation Topics]

Blogs are so informative where we get lots of information on any topic. Nice job keep it up!!