Little Neck appraisal should be released - Ipswich, MA - Ipswich Chronicle.
Remarkably, the Feoffees (trustees) for the 360 year old trust created for the benefit of the public schools of Ipswich by a forward-thinking and public-spirited landholder when he donated to his community -- forever -- a beautiful 32-acre almost-island in trust. The conditions included the provisions that (1) the Feoffees should collect market-level rents and (2) that the land could never be sold. Little Neck has 167 lots, and the tenants own their cottages, the majority of which are 70 to 90 years old and under 1000 square feet, on lots of 3000 to 5000 square feet. The tenants pay land rent to the Feoffees, which is supposed to be paid to the schools of Ipswich.
Well, the Feoffees have failed to collect market rents, and the tenants seem to think that that might be sufficient reason for them to be able to buy the land -- and at a very moderate price!
After the jump, you can read three recent articles, and the comments to date.
As you read this, remember that about 1/4 of the Little Neck tenants are also year-round residents of inland Ipswich, and are likely well-known to the Feoffees. This may tend to create some conflicts of interest between the Feoffees' role as trustees of this property for the benefit of the public school system -- forever -- and their role as good neighbors to some of Ipswich's long-time residents.
Click on the "Feoffees' land" link at left to read all the posts on this topic; I've been intrigued with this story since I first read about it in 2008.
The newest appraisal is 50% higher than the previous one -- but still only about half of what I estimate Little Neck's land to be worth.
http://www.wickedlocal.com/ipswich/newsnow/x827973272/Little-Neck-appraisal-should-be-released
Sometime, someone is going to have to say what Little Neck is worth — someone other than the Feoffees and the Little Neck tenant’s association who value the land at $29 million.
The FinCom commissioned an independent appraisal of the same land, but that value has been locked behind the closed doors of executive session for most of the summer.
Apparently, letting Ipswich taxpayers know how much their land is worth via an independent appraisal would disrupt negotiations over the sale of the Little Neck land trust to the Little Neck tenants.
The tenants now rent the land from the Feoffees, but own their buildings.
The Feoffees oversee the Little Neck land trust to benefit the Ipswich Public Schools, but haven’t paid anything to support the schools for several years.
The Feoffees hope to sell the land for $29 million to a Little Neck condo association made up mostly of current tenants.
The terms of the trust forbid the sale of the land and the School Committee and the Feoffees are fighting over the sale in court.
“I’m not able to reveal the outcome of the most recent appraisal (done for the Finance Committee). The proposed sale to the tenants is for $29 million. The Feoffees’ Attorney Bill Sheehan has alleged that is supported by an appraisal,” said FinCom member Michael Schaaf.
“The School Committee can’t comment further because it does affect our negotiating position,” School Committee Chairman Hugh O’Flynn said.
Translation: The independent appraisal is so much higher than the Feoffee’s sale price that if the public found out, there would be riots on Market Street — or people would at least speak angrily over coffee at Zumi’s and Marty’s Donuts.
In all likelihood, town officials fear revealing the independent appraisal would inflame public opinion and derail any hope of a settlement.
To which we say: Good.
If the Feoffees valuation is so far off from the independent appraisal, any deal should be derailed and fast.
Schaaf said a third appraisal might be needed. That is probably the best route to take at this point. Most accurate appraisals require three estimates. If the FinCom goes forward with another appraisal, another appraiser, independent of the Feoffees, should perform the work.
If the second, independent appraisal comes in much higher than the $29 million, as the first independent appraisal appears to have done, the FinCom, the School Committee and the Board of Selectmen will have firmer ground to stand on.
But, at some point in this process, the FinCom must release the independent appraisals to the public — and long before any possible deal between the town and the Feoffees may be reached over the proposed Little Neck sale.
The taxpayers have a right to know what their land is worth.
and the second article:
http://www.wickedlocal.com/ipswich/news/x995825512/Little-Neck-appraisal-remains-secret
Town officials have yet to release what an independent appraisal says Little Neck is worth, nor has consensus been reached on the value.
The Feoffees, the board of trustees that oversees the Little Neck land trust, places the value at $29 million.
The independent appraisal has been kept behind closed, executive-session doors for much of the summer.
The Board of Selectmen, the FinCom and the School Committees have been meeting in executive sessions all summer long to discuss a proposed settlement between the Feoffees and Little Neck tenant association to sell Little Neck and convert the cottages to condominiums.
Due to disagreement about the results of the Ipswich Finance Committee’s consultant appraisal compared to the value of Little Neck determined by the Feoffees officials are discussing the possibility of doing another appraisal.
An executive session was held last week with the Ipswich School Committee and Feoffees to discuss the Little Neck proposal.
FinCom member Michael Schaaf was unable to attend last week’s meeting since he was notified one-hour before it occurred. The Feoffees are responsible for posting their own meetings, he said.
The Little Neck property appraisal “is still in discussion relative to the negotiation with the School Committee and the Feoffees. Appraising is both a science and an art. Some folks have said indeed that perhaps another appraisal would be useful,” said Schaaf.
“I’m not able to reveal the outcome of the most recent appraisal (done for the Finance Committee). The proposed sale to the tenants is for $29 million. The Feoffees’ Attorney Bill Sheehan has alleged that is supported by an appraisal,” Schaaf said.
The centuries old trust with the Feoffees of the Grammar School forbids sale of the land and the School Committee has filed litigation opposing the sale of Little Neck in probate court, which needs to approve changes in the will for the Little Neck sale to go forward.
A review of the Finance Committee’s appraisal was paid for by the School Committee to make sure it was sound and that hasn’t been released, said Ed Traverso, School Committee member.
“I can’t understand how a decision of this magnitude involving so much resource can be made by just the School Committee and the Feoffees without involving the whole town. I think the final decision on the sale, the price and everything else, ought to be handled through the Town Meeting. It is that important. It is at least a $29 million and might be as much as a $40 million asset,” said Traverso.
The recent meeting between the School Committee and Feoffees was considered “a reasonably productive, friendly meeting with the full contingent of Feoffees, including Selectmen Feoffees, except for lifetime Feoffee Jimmy Foley,” said School Committee Chairman Hugh O’Flynn. “It was nice to get face-to-face with the actual Feoffees not just their lawyer. We didn’t discuss the Feoffees governance.”
In regard to the Finance Committee’s decision not to release its appraisal of Little Neck to the public, “The School Committee can’t comment further because it does affect our negotiating position,” O’Flynn said.
“The public and others are very interested in this matter that is why we have tried to position the School Committee and the Town most effectively to maximize the price in the interest of the school children. We are sympathetic to public knowledge of this information, but also know negotiations can be delicate. It has been determined that temporarily the negotiations could be affected adversely by releasing the Finance Committee’s appraisal,” said Schaaf.
“I can’t give you a timeframe, but everyone involved is aware of and sympathetic to the public having complete transparency about this. Part of the problem in my judgment with the Feoffees is their absence of transparency for years,” said Schaaf.
Although attendees at the recent executive session gained a clearer understanding of positions by both parties no conclusions resulted.
“This is a matter of active negotiation. I can’t see it trudging along for months without a tangible change. I can’t predict resolution since it could get complicated legally. We are working on this hard as three independent bodies, the Selectmen, Finance Committee and School Committee, striving to achieve unity in the negotiation,” said Schaaf.
That information ought to be made public, in time for experts to evaluate the assumptions.
Just like the Congressional Budget Office can provide some very rosy outcomes by sticking to the assumptions that the requesting legislator provides, they don't mean much if the assumptions themselves are crazy!
And I hope that each appraiser will disclose their affiliations and relationships with any LN tenants.
Anyone who has been executor for an estate knows that appraisers will provide a very different kind of appraisal for that purpose from what they might provide to a purchaser or to a lender.
I still can't see why anyone thinks that the Feoffees should even entertain an offer, based on the terms of the trust they were ENTRUSTED to carry out, but that is a separate discussion. They still must recognize who the beneficiaries are, and whose interests they must hold foremost.
and now a third, reporting the new appraisal:
A private appraisal the Ipswich Finance Committee commissioned values the 35-acre drumlin at $42.5 million.
The current tenants of Little Neck and the Feoffees have reached an agreement to sell the land to a tennant's condominium association for $29.5 million.
Little Neck is a land trust charged with providing revenue to support the Ipswich schools, which the Feoffees of the Grammar School administer under a 1650 will.
The Feoffees have paid nothing to the schools for several years.
The Feoffees hope to sell the land to the current Little Neck tenants, who own their cottages but rent the land from the Feoffees.
The School Committee is fighting the sale in probate court because the original will stipulates the land will never be sold.
The Chronicle will update this story.
A trust is a trust is a trust. This is land is not to be sold. And why, if the value is 42.5 million is it being considered to be sold for 29.5? Yet again the school will be ripped off.
Let's say it's twice as good as GN, then the land is worth twice as much...so, a lot the same size on LN should sell for $500,000/2 which is $250,000. How can you argue that that is not fair? That a lot on LN cost twice that of a lot on GN of the same size which would be $250,000? You are the greedy people, and you never answered the other question about the land up town?
I posted that four days ago and LTVfan doesn't agree and said that the reason they didn't release the amount was because it was such a high valued assessment and then threw a lot of numbers around...well I guess he was/is wrong.
It seems to equal about $250,000 per 167 lots and the common land split between those lots or $41,750,000...
Yet LVTfan says/will say it's worth $83 million and that the assessment is wrong even though he is the ONLY one who places that value on it...not the town not all the appraisals just him...maybe you should check your facts and your mouth before you speak...you obviously do not understand real estate only accounting tricks...
FinallyTruth 2 days ago
On the one hand, the public gets told to 'Stand Up', make the issue known to all and in the press.
On the other hand, when I tried to do that, I was put in shackles, placed in a choke hold by one of the present Trustees when he was assisting the former police chief (now on the selectboard), fictitious charges were placed against me, wrecking my professional reputation, and costing me a small fortune to fight in court, with No Show plaintiffs finally ending up in a dismissal. I am SO HAPPY the TRUTH is COMING OUT. It feels like sunshine!!!!! Shame on those intimately involved, and one of our leading media people!!!!!! Keep up the great work Dan, Jamie and Bill...and Ed!!!!
FinallyTruth 2 days ago
Your numbers, your math and your investigation were invaluable!
salifdiallo 2 days ago
rcg 1 day ago
The Feoffees contributed very little or nothing each year, and then all of a sudden had alot of $ to conribute for a couple of years. Where did that $ suddenly come from? Also, to be fair, the Town of Ipswich is not responsible for the apparent mismanagement of $7,000,000 for the sewer project. That is a Feoffee problem.
salifdiallo 1 day ago
BrokenAnkle 1 day ago
'LN paid every year until we needed to pay for our septic system _which the town didn't help us with - we had no choice. We had to install the system and there was no money left'
You used to have your own septic systems out there, so you've got a pair of brass ones to think that the town should have helped you with it. Join the club -- pay for your own septic. Look -- everyone who connects to the municipal sewer pays their share of an extension by way of a betterment. 'The town' doesn't pay for anyone. And some of the betterments have been very high.
Then ask some of the folks on GN who've paid $50-60,000 for a new septic system about your common system that came in at about, what, $37,000/lot. Now, if you hadn't asked the feoffees to build the common system, each cottage owner would have been required to put in his own tight tank for about $20,000. And, by the way, how do you think you would have liked a couple of pump trucks on your block every couple of days all summer as various owners had their fluids and sludge pumped?
DEP required the work under the Clean Waters Act. Hurrah, for the Ipswich River! My memory is that the owners wanted a common system ... and asked the feoffees to spend a lot of extra money to run a connection under the marsh to the municipal sewer and when that didn't work out because it was too expensive, you pushed to get the pump station outside the gate but that didn't work out either because of the conservation commission or the state. Those attempts cost you time and the state deadline was approaching, so guess what -- the contractors hosed the feoffees. Well, you got what you asked for ... so pay for it.
salifdiallo 1 day ago
LVTfan 24 hours ago
FinallyTruth, I'm glad something I wrote was useful to those seeking to protect Ipswich's future. I hope that the logic of what I've been laying out reaches the attention of those making decisions on this.
And obviously I hope that today's decision-makers are not acting only in the interests of today's generation or putting the interests of the tenants above those of the trust's beneficiaries.
Little Neck's specialness belongs to Ipswich's children of the future, most particularly including those who will never set foot on it because they aren't in the tenants' circle of acquaintances and guests.
salifdiallo 6 hours ago
what a joke this guy is...LVTfan didn't even mention that his estimate is twice that of every other assessment of the value...why are you so quiet on that now? Useful, more like useless...
LVTfan 3 hours ago
Regarding the value of the land at Little Neck, I think I am closer to the reality than are the valuations I've seen from others.
I laid out the logic by which I arrived at my estimates of the aggregate value of the land.
I have yet to see the assumptions and instructions by which any other appraisals were arrived at.
I hope that Ipswich's taxpayers will demand to know what underlies each appraisal, and consider whether the approach I laid out sounds logical, or whether they feel that the land is fairly valued and the rent fairly set when $75,000 cottages are selling for 2 or 3 or more times that value.
Until you ask the right questions, you seldom get right answers! And many requests for appraisals do not ask the right questions, for a variety of reasons.
I've done my best to lay out what I believe to be a sound methodology. See also http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/ for more discussion.
The land is worth more than the $42.5 million appraisal, but $42.5 million is definitely a step in the right direction. And keep in mind that the $42.5 million is (I assume) summer 2010, after a significant 'dip' in the year-round housing market; the $29 million figure is from a few years ago. And the $29 million figure is roughly consistent with the current land rent figure, which, as I've repeatedly said, is not enough to bring the asking prices on $75,000 cottages to $75,000.
The math: quick and dirty --
$29 million, divided by 167 lots is $173,652 per lot on average.
$173,652 divided by 20 ('20 year's purchase' or capitalized at 5%) is $8,683 per lot per year in land rent, which is less than the Feoffees are currently charging. So this valuation is below the valuation the current rents would suggest.
And the fact that at the current rents, $75,000 cottages carry asking prices of 2, 3, 4 (or more) times $75,000 means that a huge share of the land rent is NOT being collected at the current annual rent levels.
Just collect the rent. Pay the costs of maintaining LN, accrue something for future needs, and pay the rest to the beneficiaries. Repeat annually. Forever!
This blog has more observations and history on this story. See them collected at http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.
William Paine's will essentially said "don't touch the principal!" As neither mortgages nor financial investments existed in New England in 1640, the will expressed that in the very simple words "don't sell the land." Conversion of the trust asset between real estate and endowment fund is apparently not a big issue to the Massachusetts Probate Court (apparently not hampered by an over-literal DIY interpretation of those words), else a reputable legal firm would not have invested so much effort in potential presentations to that court.
The provision to collect "market-level" rents (and who knows what else:-) is contained in a document representing what the School Committee WISHES the trust said, and which is not actually valid unless and until it is approved by the Massachusetts Probate Court. Statements about certain actions being explicitly disallowed by the trust document (for example Feoffees not living on Little Neck) rest on a misunderstanding.
Posted by: Chuck Kollars | October 26, 2010 at 03:25 PM
I don't know enough about 1650 conditions to know whether you are correct.
But my understanding is that Paine's trust was clear about not selling the asset. Translating that to not touching the principal, in order to downgrade from an asset virtually sure to appreciate over time to any of a number of things with substantial risk to principal and likelihood of not keeping pace with inflation -- in order to be nice, kind, generous, accommodating to the tenants who really-really-really-really! want to be the ones who receive that appreciation, and are willing to pay 2/3 of a lowish appraisal of what the land is worth in the worst down-market in decades -- seems VERY shortsighted and "gifty" to me.
But if you're one of the people who might reap the windfall, I'm sure it won't look that way to you.
And perhaps if you're one of the people who was supposed to be collecting market-level rents on behalf of the local school district, and you let your attention wander to other priorities, you might be grateful to find a sort-of-graceful way out that would make 167 people, including 40 year-round Ipswich residents, happy and appreciative.
But this is not a win-win situation. The schools of 2025, 2050, 2075, 2100 and beyond lose.
Suppose that in 1931 or 1933, the Feoffees had sold Little Neck to the Class of 1931 tenants. What do you think would be available to the schools from this trust now? How much would the annual income be? How much would the principal be? (And how much would smart lawyers and investment fellas have made, versus what the schools received? Not a trivial question, btw.)
At least if Ipswich and the courts require the Feoffees to keep the asset intact, someone in the future can do what the trust calls for. But if the asset is sold, there is no such opportunity.
Would you consider that to be in the best interests of Ipswich? Please explain it so I understand where you're coming from.
Posted by: lvtfan | October 27, 2010 at 07:50 PM
Before responding to your issues, let me first stop and emphasize that you have not responded to one of mine! As detailed in the second half of my previous comment, your references to "the trust document" are apparently incorrect! Worse, what you've been referring to with statements like "the trust says ..." seem to be based on a draft document produced by an interested party --specifically Ipswich's School Committee-- that presents what they WISHED the trust said. What's your response???
Next, a main point that might be judged new to this discussion:
The assumption that the motivation for converting from a property trust to a money trust is the benefit of the current tenants underlies an awful lot of what's said. Removing that assumption also removes the great swaths of reasoning that are built on it. Just because it feels "gifty" _to_you_ doesn't mean it really is "gifty".
The real motivation for converting from a property trust to a money trust is more prosaic: administration has become too complex for amateur Feoffees to do in a sufficiently open manner. This was already the case forty years ago; Ipswich has been cashing in "good luck" chips for an awful long time already. The overload contributed greatly to the lack of transparency and public accountability and hence malfeasance ...which is one of the biggest issues front and center right now. (To put it bluntly, it's a whole lot easier to "audit" an endowment fund than a property management operation.) Knowing what a summer colony really needs is "social engineering" and typically requires expertise that amateur Feoffees don't have. Here too Ipswich has been lucky: having one Feoffee that makes extended visits to the summer colony every weekend and another that summered there as a youth. The accounting job is quite large and intricate; the idea of "running the summer colony out of a personal checkbook" sounds a little loony. Once again Ipswich has been lucky: having a hyperactive Feoffee who's very good with numbers.
And finally, my responses to some of the questions you raised:
The relevant words of William Paine's will are "unto the free scoole of Ipswitch the little neck of land at Ipswitch knowne as Jeferry's neck, the which is to be and remaine to the benefitt of the said scoole ... for ever as I have formerly intended and therefore for the sayd land not to be sould nor wasted". So yes the literal words are don't "sell" (or "waste") the land. What those words _meant_ though isn't entirely clear to everyone. It may be necessary simply for people to agree to disagree here. In any case, the only interpretation that really counts is the one that will be supplied by the Massachusetts Probate Court. Although I'm not a lawyer, I have enough experience with the legal system to know that both word meanings and decisions sometimes lean quite differently in law-land than they do in "common sense".
A specific example is the word "grammar" in "Feoffees of the Grammar School". That's just an old word for "elementary" school, right? Wrong! It was a special school that concentrated on Latin and Greek, especially declensions, hence "grammar". (Check out Ezekiel Cheever, especially his book "Accidence: A Short Introduction to the Latin Tongue".) The sort of school most pupils attended and that developed into our public schools was called "reading school". Who knew?
I don't understand what you mean by not keeping the trust intact. If the asset is real estate ownership and rents are collected and Feoffees oversee the process, that's "intact". If the asset is an endowment fund and interest is collected and Feoffees oversee the process, that's "intact" too! There's a critical distinction that I find missing distressingly often in discussions about this issue: the distinction between liquidating the trust by selling the land once and for all, and rolling over the proceeds of selling the land into an endowment fund managed by The Feoffees. Nobody has ever been talking about liquidating or terminating the trust. When folks say "selling the land" they really mean rolling over the proceeds into a managed endowment fund; I only wish they said so more explicitly.
Fears that the principle would disappear because of investment snafus are dramatically overblown. Proposed trust language includes the words "invest Trust assets in accordance with the prudent investor rule set forth on Massachusetts General Law c. 203C or any successor statute". Attempts to get a higher rate of return involve more risk; we learned that when the current financial crisis reduced the value of so many retirement accounts. But The Feoffees would explicitly be disallowed by law from pursuing any such strategy. Hence really bad things would be very unlikely to happen.
Fears that a money trust will eventually evaporate because of inflation may have been realistic as recently as fifty years ago, but they aren't any more. Proposed rules for administering an "endowment fund" include specific requirements for maintaining the inflation-adjusted amount of the asset. Does there remain some chance the asset will drop in value? Yes, nothing is certain. Land isn't a sure bet either. Because Little Neck is valuable right now, it's easy to forget that's in no small part due to luck that wasn't foreseen: Little Neck wasn't worth much back in William Paine's time, and nobody back then predicted what it would become. A future change in environmental rules could easily render it uninhabitable once again (Little Neck is mostly solid rock, right on the open ocean and bordered on one side by an endangered river and on the other by sensitive marshes; and there's currently a very serious erosion problem on part of it that isn't rock).
The current timing of a conversion sale is indeed not the best it could have been. The conversion is being forced to happen right now simply because Ipswich schools haven't received any Feoffees income at all for three years. Anyway, it may not be as bad as it seems: water-oriented property values have not cratered like the rest of the real estate market (the questioned appraisal says so:-), and proposed sale prices have increased right along with skyrocketing water-oriented property values: $7M in 1999, $10M in 2001, $26M in 2008, and $29M in 2010.
Posted by: Chuck Kollars | October 27, 2010 at 11:56 PM
Chuck, if the trust as written said something other than what the School Committee's extract of the Trust said, then of course that needs to be corrected. Calling them interested parties as if their PERSONAL interests were at stake, though, is somewhat different from identifying those who seek to buy Little Neck for their own personal benefit -- that's not "tit for tat." Their interest is supposed to be in maintaining the trust for the benefit of the schools, and they should meet any other proposal with extreme skepticism.
It seems reasonable that School Committee's primary concern ought to be the good of the Schools for which they are responsible, with, perhaps, an emphasis on the short term. The Feoffees' primary concern ought to be the good of the beneficiary, long term. That is, they ought to be managing the asset of the trust in such a way that it provides an income to the schools this year and next and the year after -- a growing income, not a declining one -- and caring for the asset which throws off this income with foresight, anticipating future needs and accruing for them, and providing the services to the tenants which are most effectively and efficiently provided on a large scale. (For example, it might make great sense for the Feoffees to contract with someone to mow the laws of those tenants who want their lawns mowed by a contractor. If the town doesn't do trash pickup, the Feoffess might logically arrange to provide that service to all, rather than leaving each tenant to manage trash on their own. These are things that are more efficiently done on a large scale.)
I agree that the skills required to manage an asset like Little Neck are far more complex than those required of an agricultural landlord and collecting rent after harvest each year. But the Feoffees could pay a manager who would hire a lot of those services and report back to the Feoffees. Property management firms do some of these things, for example; commercial landlords do some of these things. Those skills exist. And there is no reason that the Feoffees all need to have them; they need to know how to manage them. They need to maintain the systems and the common structures, but don't need to concern themselves with the cottages which are individually owned. But all those things could be efficiently managed for far less than the market rental value of the land -- and well done might even increase the amount that future tenants would be willing to pay for the right to occupy one of those lots and have access to the 50% of the land which is commonland. (Just as inland Ipswich residents value their parks, which are maintained by the community for the enjoyment of all, but which contribute more to the value of neighboring properties -- unless too much activity becomes a nuisance.)
The tenants would not have made an offer if they didn't think it was in their own best interests. But no one would expect them to make more than a minimum offer. And apparently that offer assumes that the past rent they've been escrowing instead of paying to the Feoffees would be part of their down payment rather than immediately turned over to the Feoffees as back rent -- a sort of lease-to-buy arrangement approved by ... who?? why?? (Can't blame them for trying, but why would an impartial authority do anything but laugh at it?)
To the question of making the investment liquid. Even if Mr. Payne failed to write his wishes in granting the Trust in language that would be interpreted in 2010 as he apparently intended, what is the sense in "diversifying" the holdings into assets of other classes, and in making it possible for future Feoffees or School Committees or Town Meetings to attempt to make a case for "oh, just a little for this vital purpose to benefit the students this year (and alternatively, for the next 4, 10, 20 or 50)" -- at the expense of continuing to provide an income whose tendency is to rise over time, as market rents do.
Popular ignorance of land economics is amazing, and there is no reason it should be any less in Ipswich than anywhere else. But there is a long-lasting effect for those in Ipswich who seek to protect the interests of the schools and students of future decades and centuries not understanding what Mr. Payne apparently knew in 1650: land appreciates over time. Beautiful views, access to a vibrant city by commuter train, fine breezes, open spaces -- 11 acres or more of non-tenanted space! Will it be straight-line appreciation? No, not as long as we have booms and busts -- but is the market rent in 2010 more than what it was in 2000 or 1990? Yes! (Look at the selling prices of houses on LN, and you'll see that they rose -- and it wasn't because the houses were getting newer! Only a few new ones among a large collection of 1910 to 1940 cottages.)
Can we predict that market rents in 2020 and 2030 and 2040 will be more than in 2010? Yes. (So can the LNLAC, which is why they want to buy the property now, particularly if they can get it at a bargain price at the bottom-of-the-market, with a mortgage from the Feoffees, and the last couple years' worth of rent credited against the purchase price!! Who wouldn't??)
No one can blame the tenants for wanting a bargain. That doesn't rewrite the Trust, or make black white, or yellow blue. As Nancy Reagan said, just say no! They're so used to getting a bargain, getting their way, that they think it worth taking a swing at the big prize. Who cares about the Ipswich students of 2050? Most of the tenants will be dead by then, and their children will be enjoying the possession of that lovely piece of land.
If the people of Ipswich think it likely that sea-level rises will make this land less valuable in the future, and that it is time to take the money and run, they ought to be taking other precautions consistent with that concern.
Money trusts don't just depreciation because of inflation, but also because of fees imposed by brokers, money managers, mutual funds. If you have a 401(k), take a look at the fees you're paying the manager your employer chose, and then compare them to, say, Vanguard or TIAA's fees. A significant share of the gross income disappears into such fees, some visibly, but most invisible to the average observer. (The FIRE sector's profits -- finance, insurance, real estate -- are something like 40% of the total profits in our economy. As Joe Stiglitz put it back in July, they're skimming the cream off the economy. (Not his exact words -- but look for the Stiglitz tag at left, and then look within that for a post written in late July about a talk he gave at the University of Queensland.) Do you want them skimming the cream from the Feoffees' trust, too?
I've raised the question before, but will ask it again: If the Feoffees had sold Little Neck to the tenants in, say, 1931 or 1933, how much annual income do you think they would have now to turn over to the schools, from that sale? And how much do you think the financial services companies would have made over the years? Recall the innocent question, "But where are the customers' yachts?" asked after the investment broker pointed out the yachts owned by his co-workers.
Your last paragraph -- "The current timing of a conversion sale is indeed not the best it could have been. The conversion is being forced to happen right now simply because Ipswich schools haven't received any Feoffees income at all for three years." -- is kind of funny. They are forcing the asset holder via a rent strike? Neat trick! (Reprise the Nancy Reagan response: just say no. If the tenants won't turn over the rent, they are asked to leave. Now.) The escrow funds rightly go to the Feoffees, for the schools. And tomorrow, start collecting the market rents. The current tenants have had time to comply. Enough already!
And I've demonstrated the math that shows that $29 million is a small fraction of the land value on Little Neck. Get real! The good people of Ipswich should be laughing the LNAC out of town, and requiring the escrowed funds to be turned over on their way out.
Posted by: lvtfan | October 31, 2010 at 04:15 PM
The Feoffees ought to make the tenants an offer they can't refuse: pay the market rent, or exit!
A year or two or three of not receiving rent on some (even all!) of the land is far better than selling it at bargain-basement prices with all sorts of concessions on past rent owed.
New tenants will present themselves. Not instantly, of course. But advertise it well, and they will come.
Hire a good PR firm, and a good real estate agent, with knowledge of the high-end market in the Boston metro and beyond. They'll hire a good photographer and create a good website, showcasing Little Neck and Ipswich, and you'll have good tenants who will pay their rent and spend their summers and money in Ipswich, and the schools will benefit.
It might be easy to forget that Ipswich is highly accessible by commuter train to people who work in Boston and nearby, and that this adds a value that other summer colonies can't offer.
Work it!!
Posted by: lvtfan | October 31, 2010 at 04:22 PM
Sorry to take up more blog space, but I don't know any other way to send a message:
Regarding the wording of the trust, you have still not grasped my point. My point is not that the trust wording differs from what the School Committee wishes it said, but rather that *there*is*no* trust wording, and so saying an action isn't allowed by "the trust document" simply doesn't make any sense. The School Committee's draft is *not* an "extract"; it is the first attempt to write down what has previously been an oral tradition. And it's more than just a straight copying of that oral tradition; it contains some changes and additions of its own.
Posted by: Chuck Kollars | November 01, 2010 at 12:35 AM
So you're saying there is no trust? no document? that this is merely an oral tradition? Wow!
You wrote earlier: The relevant words of William Paine's will are "unto the free scoole of Ipswitch the little neck of land at Ipswitch knowne as Jeferry's neck, the which is to be and remaine to the benefitt of the said scoole ... for ever as I have formerly intended and therefore for the sayd land not to be sould nor wasted".
I don't know T&E law, but it seems to me that he was creating a trust via his will. I agree that it doesn't say "highest and best use" but it does say "benefit of school" which would suggest that Payne held the school as beneficiary, not any tenants who might at various points occupy the land, and he seems to me to have been rather clear about not disposing of the land, nor mistreating it nor undercharging on the rent -- but I suppose you might interpret his words differently if you were seeking to make a case for someone else's interests.
How would you interpret Payne's words -- as a 21st century layman who was seeking to discern what Payne wanted future trustees to do, and future courts to enforce? If Payne didn't have access to an attorney, or chose not to use one, or used one who didn't suggest the then-magic words, should his intent no longer be treated as relevant or valid?
If his intent is inconvenient today, should the courts be petitioned to let it be sold in a down market to a low bidder, despite his words, which strike me as pretty straightforward and clear? That's what I hear being argued: if this small committee doesn't wanna, let's let the tenants have it, cheap!
It doesn't seem rational or wise or consistent with the gift, but maybe I take the wrong people or values seriously. Please tell me what I'm missing in what he wrote.
Posted by: lvtfan | November 05, 2010 at 10:20 PM
Again my apologies for taking up blog space on a topic where I've already posted my comments and where I'm unsure if I should even be a participant in this discussion. But I don't know of any other way to send a message that attempts to answer your direct questions.
The Little Neck Trust is composed at base of two over-350-year-old acts of Ipswich Town Meeting, a portion of Mr. Paine's will, and three acts of the Massachusetts General Court (i.e. the legislature) with at least two of the acts taking place before there was even a U.S. The Feoffees were created by Ipswich Town Meeting well before Mr. Paine's will; they already existed independently of Mr. Paine's will and originally held quite a few pieces of property (not just Little Neck).
Interpretation of these documents is tricky at best; for example the very fact that Mr. Paine left Little Neck to The Feoffees most likely implies things about his gift that aren't explicitly stated in his will. I won't venture any interpretations, as I'm not a lawyer and do-it-yourself lawyering in this case would most likely just be misleading.
Posted by: Chuck Kollars | November 10, 2010 at 07:05 PM
Chuck, of course you should be a participant! You're very welcome here.
I'd not been aware that the Feoffees pre-existed the will. It would be interesting to know what their functions were at the time the will was written, and what was expected of them. I'm assuming that they no longer hold other property.
It seems to me that Mr. Paine's intent was public-minded, and that he left rather clear and reasonable instructions, based on the sentences you provided earlier. If the current group of trustees is unable or unwilling to continue serving in that role -- especially if this is the only asset -- then perhaps the solution is to update the process for appointing trustees -- perhaps calling them something other than Feoffees if that term has come to have sour connotations.
If I left a significant long-term gift for some public entity, and the successor trustees failed to act in ways consistent with the terms of my gift, that wouldn't be a reason to sell the gift to a single bidder, at a bargain price, in a down market, without seeking competing bids. It would be a reason to replace the trustees with an entity that would manage the property, compensated and overseen, for the benefit of the intended beneficiary. Isn't that what probate courts exist to ensure and supervise?
Obviously I am a layman, but it seems to me that his intentions were clear and selfless, and offered a significant benefit to the community. And that efforts to subvert it, particularly for private gain, are just plain wrong.
Posted by: lvtfan | November 12, 2010 at 06:34 PM
As a post-script, it seems to me that Mr. Paine's instructions about not wasting the land make it pretty clear that he wanted it maintained well and expected approximately market-level rents to be collected. And his "not sold" is pretty emphatic.
Posted by: lvtfan | November 12, 2010 at 06:36 PM
I've only become aware of all this today, when it was pointed out by another member of the Paine family. I am not a direct descendant of William, and have no basis to intervene in the case.
I did a quick search in Old Lyme CT where there are also seasonal houses. The cheapest listing I found was $299,000 for a 2 bed 1 bath, .2 acres. No common property, but beach rights. From what I've been reading this is roughly comparable to the least upgraded cottages in the Paine trust. Note that that Old Lyme is on Long Island Sound, not the ocean, and no where near as attractive. And Old Lyme has a "sewer avoidance" policy which keeps the houses seasonal.
Subtract a house value of $50,000 and that's a minimum of 34 million for the land if all the lots are that small, not counting the common property. If it's going to be sold, put this property on the open market.
Any agreement for sale to the proposed condo association should also include transferring the debts for the capital improvements, and a fully funded escrow for additional capital improvements, so that these improvements do not fall on Ipswich. So they should pay more anyway.
Get new Trustees, hire a retired city manager to manage the property, buy back the cottages as they come on the market and improve or push in as necessary to a plan. Make the plan.
Posted by: Karen Sims | December 22, 2010 at 06:17 AM
Old Lyme is many miles from Boston and many miles from NYC. It is less accessible from Hartford than Ipswich is from Boston -- no commuter train.
Long Island Sound is lovely and scenic, but does not compare to Little Neck's setting.
I agree that the debt for the septic work should go along with the property that is getting the benefit of it, and that the value of the land is what it is in part because that work has been done (along with the huge locational value).
I don't see why Ipswich or any trust-related entity should have to buy back the cottages as they come on the market. They're not worth much, but the tenants should have been under no illusions about the connection between paying market rent and having the right to use the land, and the connection between failure to pay rent and their responsibility to remove the cottages. They can be knocked down at public expense, I suppose, but I suspect that somewhere in the commuting radius of Boston, there are 167 people who would pay $50,000 for a cottage and be quite willing to pay market rents on the land, now and into the future.
As your distant relative foresaw!
Posted by: lvtfan | December 27, 2010 at 11:32 AM