Community Preservation Committee
Minutes of Meeting Held on Wednesday, December 10, 2014
7:00pm - Selectmen’s Hearing Room, Hudson Town Hall
Members Present: Absent from Meeting:
Bob D’Amelio Joseph Durant
John Parent Arthur Redding
Peter Breton
Glenn Davis
Jennifer Burke
Linda Ghiloni
Leif Longtine
7:00 Discussion re: Possible Acquisition of Jenkins Property – River Road – Linda Ghiloni
Mrs. Ghiloni stated that she and Mr. Davis were charged with trying to negotiate a price for the acquisition of the Jenkins property at the August 2014 meeting. The Town’s appraisal price was $620,000 and the family’s appraisal came in at $993,000.
Asking William Curley Associates, our appraiser to give us information on the discrepancy in the two he indicated that the “discount rates” for developing the property was where the disagreement in price was evident.
Mr. Parent asked for a basic explanation of those rates and development costs which Mr. Davis explained. Mrs. Ghiloni stated regardless of that information the Town should be looking at price per lot or price per acre compared to other properties since the development rates and whether or not sales would start in the first year and continue for 3, 4, or 5 and expenses in the those years were not what we should be looking at.
Mr. McCabe, the representative for the family that Mrs. Ghiloni and Mr. Davis were talking when sent a recent email (see attachment) outlining the family’s proposal of $940,000 with other stipulations regarding the house.
Mr. D’Amelio motioned not to pursue the proposal at this time, seconded by Mr. Parent and carried…
Vote: 7 – 0 in Favor
Meers Property
Mrs. Ghiloni indicated that she is still speaking with the family regarding land on Wilkins Street and received an email regarding eminent domain. Mr. D’Amelio stated he did not think that would work for open space and recreation land. The committee would like to wait and see if the family can come to a consensus to sell the land to the Town.
Motion to Adopt: Mr. D’Amelio
Second: Mr. Parent
Vote: 5 in favor
1 abstained (Mr. Durant) – January 13, 2015
attachment
Email Letter November 25, 2014
Dear Linda and Glenn,
I’ve had the opportunity to discuss this with Doris and the family has had numerous discussions internally. The price Doris is willing to accept is $940,000 subject to working out some logistics and timing details as set forth below. All of this is of course subject to entering into a signed formal written agreement with the a town and approvals by the required town boards and assumes such agreement will be presented to the town meeting in the Spring and a closing can occur soon after July 1, which I understand is when the town funds become available.
As we have discussed an agreement between Doris and the town has a great potential to be a true win-win for both parties. The town not only get’s a beautiful parcel of open space and also a property that can be used as affordable housing both of which are big steps forward in the town’s master vision. Doris gets remain in her home for a period satisfactory to her. I sincerely hope we can work this out.
I’d like to set forth some of the key factors which went in to Doris’ decision.
- The fact that Doris had a prior deal and an approved subdivision that would have resulted in a payment over $1,000,000 played a role in her decision. In addition she would have been able to maintain her home in the subdivision. I recognize that the prior deal and approved subdivision may or may not play a role on the town’s thinking now but it was a significant factor in Doris’s thinking.
- The results of the 2 appraisals played a significant role in her decision for the reasons set forth below.
- Mr. Curley’s appraisal of October 8th gave a value of $620,000. Joe Degan’s appraisal of June 30, 2014 gave a value of $993,000.
- When the two of you and I met in September, Glenn had done his own financial analysis that indicated the value might be in the High 700,000’s.
- It was very significant that both appraisers made very similar assumptions in their appraisals and the only material differences were the discount rates used and the anticipated absorption rates. Mr. Curley used a discount rate of 14.54% and a longer absorption rate while Mr. Degan used a 10% discount rate and a shorter absorption rate.
- There is no industry standard that sets discount and absorption rates. These assumptions are basically informed guesses about the future set by the individual appraiser based on profession opinion and experience. Reasonable minds can differ.
- When Mr. Curley was asked to perform an analysis using different discount and absorption rates, he came up with projected values of $760,000, $732,000, $819,000, $932,000 and $950,000. Mr. Curley’s new values were based on ONLY different absorption rates – he still used a discount rate of 14.54% for all of the new valuations. Presumably had he also used a lower discount rate his values would have increased significantly .
- Discount Rates are not published to be used as a standard for every property since the appraiser must use his best judgment in applying a rate that provides the investor an effective and reasonable return on the investment and that is subject to typical returns on low risk type of investments such as Savings Accounts or Certificates of Deposit and what might be expected based on the type of project at hand, and other associated risks expected based on the market conditions, absorption and location of the project. The best means of developing a Discount Rate is based on the appraiser's experience of appraising projects similar and consultation with investors that have experienced successful projects.
- The discount boils down to the level of risk a developer is willing to take. On our opinion Mr. Degan’s assessment of the risk and therefore the discount rate seems more appropriate based on the small number of sites, short term of sell-out, short supply of competing projects and good demand.
- The result is that the difference in the two appraisals is directly linked to the Discount Rates used whereas other information in the reports related to absorption and time for sales does not vary significantly.
- Since there is a good demand for developed sites in the area and a limited supply and that this is not a large subdivision it should not take a substantially long time to sell out, especially given that much of the engineering work has been done and there is a prior approval that gives some idea of board sentiment.
- Interest rates are reasonably low at this time and the expectations of investors in real estate are also lower than in prior years when Mortgage Rates were at 6-8% and now at 4-4.5% for commercial projects.
Thanks for your patience. I look forward to meeting with you soon to try to arrive at mutually satisfactory terms. Best regards, Art
Cc Joan Wordell
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