Friday, February 17, 2006

Preserving the "Preserve"

How much is the “Preserve” property in Old Saybrook worth? The answer of course is that it’s worth whatever the highest bidder would pay for it. But because the state of Connecticut is interested in buying it from Lehman Brothers to prevent the thousand acres from being developed into houses and a golf course, the answer is more complicated than simply saying it’s worth what it will fetch on the open market.

The problem is that when the state buys land, it must commission an appraisal and then is prohibited by law from paying more than the appraised value (that’s the way it works in New York and I’m inferring from what I’ve read that it’s the same in Connecticut; in New York it’s even more complicated when New York City wants to buy land to protect its upstate watershed: the city is not only prohibited from paying more than the appraised value, it can’t pay less either).

Requiring that the state not pay more than the appraised value seems fair to the taxpayers who are ultimately funding the purchase. But it can be a problem in several ways:

Let’s say a person bought land for $1 million. If the state’s appraisal says the land is worth $800,000, the owner is unlikely to sell at a loss to the state just because the state can’t pay more than its appraisal says the land is worth. The result is a preservation stalemate.

Even if the owner paid less than the appraised value -– let’s say $750,000 for land appraised at $800,000 -- he might think his price was a bargain and that the land is really worth $1 million, and therefore he’d be unlikely to sell for the state’s appraised value.

And if in the meantime the owner is working his way through the approval process to develop his land, each step of the way tends to increase the value of the land. If you paid $1 million for the land and in the meantime the local planning board has accepted your environmental impact statement, you're one step closer to approval and therefore one step closer to making a big profit from your development.

To one extent or another, this is what seems to have happened with The Preserve: the state says it’s worth less than Lehman Brothers says it’s worth: $4.4 million compared to at least $6 million.

The state’s appraisal could very well have taken into consideration the fact that access to the property is difficult, a reality borne out by the DEP’s decision not to allow the developers to cross Valley Railroad State Park to get to their land.

My vote is for Lehman Brothers to regroup, to realize that they made a bad investment, and to work out a deal with the state for the best price they can.

If they’re smart they will counteract their financial hit with a public relations gain by claiming themselves to be heroes for allowing The Preserve to really become a preserve. Galling, perhaps, but I have a feeling the opponents of the development could live with it.


Anonymous Anonymous said...

Think of the future generations that can say "Thank You Lehman Brothers for the The Lehman Brothers Preserve"
As they hike on the last unspoiled forest on the connecticut shore.

7:58 PM  
Anonymous Anonymous said...

Why would anyone thank the Lehman Brothers when they want to turn it into an 18-hole golf course. Future generations wouldnt be hiking anywhere except for the rich bastards riding to the next hole in their golf carts.

8:16 AM  

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