City of Beacon’s Real Estate Savvy Quotient

City of Beacon’s Real Estate Savvy Quotient

 

Some of the real estate dealings involving the City of Beacon appear puzzling, at least when looking in from the outside. For instance, the city recently purchased a lot on the creek for over half a million dollars. Yet only two years ago, it sold a prime double city lot in the heart of town for $5,000. Today, there is a double lot listed on South Avenue for $524,000. Has Beacon real estate really taken off that much?

For even more direct comparisons, less than one month after the Cty sold the lot at 344 Main, across from the post office and next door to Beacon Natural Market, for $5,000, a private sale of an empty lot on the opposite end of town closed at $90,000. This is the in fill lot caddy corner to Hudson Beach Glass, where a hotel is going up. It has 25% of the square footage area of the lot at 344 Main. Earlier in the same year of the 344 Main sale, and two blocks away in a more restrictive zoning area, the double lot on the corner of Schenk and Main Street, next to Ella’s Bellas, sold in a private transaction for $195,000. Last year, another corner lot, at 249 Main, across from Homespun and just west of the DMV building, sold for $1,650,000. Like the city lot at 344 Main, it will be a total tear-down project.

In February of 2014, the city sold a building of row apartments at 65-71 East Main Street for $15,000. (Unfortunately, although he supposedly has a decent track record of buying, developing, and flipping City lots, the buyer of 65-71 Main has apparently gone AWOL.) In February of 2015, 328 Main Street, the building next to Quinn’s, was sold by the COB for $60,000, despite being on the tax rolls with a value of $285,000. (Quinn’s itself sold for $370,000 in August of 2013.) Obviously 328, formerly known as Rick’s Place, or Chinese Restaurant Coming Soon, was just a shell. But it could have been built out into retail or office space for a lot less than $225,000.

Already Enough Stimulation

Now, it can be argued that the city was trying to stimulate development, while at the same time being able to choose to some extent what type of project would be created. But as we can see from comparable sales during the same time period, the market was bringing much higher prices. The main reason for fire sales is when there are large areas of blight and no interest in the land at virtually any price. Then it makes sense for the city, or a land bank working with the city, to step in and sweeten the deal. Newburgh has this type of blight in some core areas. But, aside from a nationwide dip during the recession, Beacon has been steadily improving since the mid 90s, and has nowhere near the inventory of abandoned properties its sister city does.

As for controlling what projects are developed, that is the function of the zoning codes. And so far, the only project fully developed was the building sold last February, which now contains a Tex-Mex style restaurant/bar. It was also awarded to a developer who has ties to a number of other projects going in town. Yet one justification put forth for the controversial choice of developer at the lot sold by the city at 344 Main was that the competing developer, who had offered more money, a plan that had fewer units and required less parking, and a free 5-year lease for the historical society, already had a project going in Beacon; the (very reasonable) idea being, hey, let’s spread the opportunity a little.

No doubt the new restaurant is wonderful, but if the city is truly going to try to vet what types of businesses open in lots that go into tax default, perhaps there are uses that would be beneficial to a wider swath of its citizens. And in fact, the private lot sale that is currently the site of the hotel project at 151 Main Street is a good example of properly scaled infill development that allows a modest increase in available overnight accommodations for visitors to the City.

Buy High, Sell Low

As a buyer, however, the city is willing to pay much closer to fair market value. For example, the recently purchase lot on Churchill Street that was turned into a parking lot. It is interesting that plans for this lot were presented to the planning board not too long ago that involved construction of several new buildings, complete with underground parking. Word is that those plans were scuttled at least in part because much of the site, which consists of several separate parcels, is contaminated with industrial waste, and the remediation required, which is dependent on how much the land is disturbed, may make certain types of construction economically unattractive.

In any case, the property was sold to the City, which was eager to acquire this creek side lot in order to make a parking lot to accommodate “Main Street overflow,” according to its new quarterly newsletter. Original plans called for approximately 100 spaces, but that has been scaled back and now we are told the plan is for 45 spaces, and the scheme includes a small park-like area.

The scaling back was probably necessary in order to include some kind of catchment or filtering zone to help stop the runoff from entering the creek, since the topography of the area makes this inevitable without designing some type of system to help mitigate it. However, while this land should probably not be used for parking at all, it should be pointed out that, from a budgetary point of view, by cutting in half the amount of spaces it was expecting to build, the city also effectively doubled the cost of each space, which was quite high to begin with.

The City had been working this deal for some time, perhaps soon after (before?) taking out a $1,000,000 bond in October of 2013 for a parking lot on the east end of the city. It would be interesting to know if the developer had other similar full value offers for this lot. And maybe he did. But, if he were a reasonable business man, he may have been hesitant to sell to someone who might compete with his nearby units, or the many units planned by the developer directly across Churchill Street. If even half the projects currently in the pipeline get built out in the next few years, there will be a glut of high end dwellings in the COB. Why not sell at fair market value to the city and get a parking lot next to your building, paid for and maintained in perpetuity with public funds?

Ironically, the upshot of this is that, the developer, having presumably wiped a half million dollars of debt off his books (or, in a bright and shiny world, fattened his account by a similar amount, or some math equation in between), was then able to immediately partner with other investors to buy the Beacon Theater just up the street, which he plans to turn into 30 or so small “units” with, due to a freak ruling in the 1980s that has been allowed to stand…no parking required. (Unless, of course, the City once again decides paving over land is the answer and puts in a municipal lot next to the historical Madame Brett Home directly behind the theater.)

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The lot at 344 Main awaits its fate. The developer has missed several deadlines, and the city is fed up.

 

Apart from a certain naivete in real estate dealings, or at least an ability to create the perception of having gotten the somewhat shorter end of the stick, the other pertinent take-away here is that the city is in dire need of real and direct plans to deal with the parking issue that is bedeviling and befuddling almost every development project—and starting to cost serious money for problematic “solutions.” With the exception of 328 Main, the building next door to Quinn’s, which has the benefit of a free municipal lot in the rear, the other lots have or will face parking issues. Beacon needs a city-wide parking plan, now. We’ll examine what that might look like in the next post.

One other issue is that, aside from making the zoning more favorable to development, the City, mainly through its zoning board of appeals, has put lots of icing on that cake by granting major variances left and right, which allow developers to put up projects even more financially beneficial to themselves, but with questionable or negative outcomes for fiscal prudence and quality of life factors for the city overall.

5 Responses to City of Beacon’s Real Estate Savvy Quotient

  1. Steve Smith says:

    The last paragraph is the story, I think. Why does the city council, mayor, and zoning board of appeals make such obviously bad deals all the time? Are they afraid of being seen as “blocking progress”? Are they stupid? Are they keeping the crony in capitalism?
    I am at a loss to find any common motivator that would lead them to these decisions. After watching the January 19 2016 city council meeting, I wonder if our town is just too petty to get any long term planning done.

    • MR says:

      I am of the opinion that most of those doing public service are a. not stupid, and b.not doing anything shady, and c. usually making decisions that they feel are in the public’s best interest. In some instances–for example, the zoning board of appeals–from examining the sporadically available minutes of those meetings, I believe those involved do not have any real sense of what their responsibilities really entail. Overall, I think there is a fundamental failure to see the big picture, and how all of these decisions are inter-related. Part of that can be addressed by re-examining the comprehensive plan, and making it a living, working document, referred to often. But even with that, we are not looking at the situation holistically or realistically. Sadly, that is the norm in most quarters these days, not the exception.

      But basically, yes–nobody wants to be seen as anti-development, even if these days it is fashionable to talk about “smart growth” and “density” and “transportation-oriented development” and “form based code.” Bottom line is, these are all still based on one thing–perpetual growth. The reason for that is, our economy is based on this impossibility–note the GNP is every country in the world is supposed to rise every year without fail.

      This never-ending growth is a myth and not possible, and if we take a peek around, we can now see that we are bumping into the hard limits to growth, ie, reality.

  2. same old same old says:

    The parking lot purchase is another boondoggle by the city fathers(and mothers)The previous administration had several members who were placed there with the support of the previous owner of the parking lot property. He stock piled variances, gladly handed out with the promise he was going to deliver magnificent projects. His property escalated in value on everyone else’s sweat equity ,while his taxes never increased ,even though all the variances added value to the land at no cost to him. The new owner is paying discounted property taxes and benefits immensely from that property sale at an inflated price.
    The City did a very similar deal when they purchased the property the municipal center sits on at an exorbitant price and had to do remediation after initial excavation.

  3. Worried says:

    I totally agree with you on many of the examples you have made. The City seems to pick and choose without giving us specific reasons. The one project that I have personal knowledge of is 67-71 East Main Street. It’s a very complex site that has run into several issues that have delayed it. That will be a very nice building and property when it is completed. The owner is doing things the proper way. Construction will move very quickly when the weather breaks.
    I’m more curious about projects that have not moved forward in any noticeable way like the “Old Beacon High School” the developers don’t appear to have made any visible changes in years!

    • MR says:

      Every project is complex and runs into issues that delay it. That’s part of the fun of being a developer. My understanding is that the developer who purchased the property from the City of Beacon has walked away, but that may have changed. I don’t have an up to the minute status report.

      Although the previous owner of the Beacon High School was a profiteer who has to date contributed less than nothing to the City, the current owners, after a rocky start, seem to have settled in. They presented ambitious plans for the building when they first took over. I’m not sure if they have scaled back, or are waiting for more investment, or what. But the current use as artist studios, maker spaces, and small business office space, while it could be a little more community oriented, seems fine and fills a real need.

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