10B-025 (5) 9/26/2018 City of Northampton Mail-Property for sale at 7 Mulberry Street
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Karen Gledhill <ksgledhill@gmail.com> Tue, Sep 25, 2018 at 4:55 PM
To: kcarson@northamptonma.gov
Hi Kim,
My name is Karen Gledhill. I called your office today and they said you are away, so I left my
name and phone number, but then I realized I could just email you, so I thought I'd do that
instead. You are welcome to give me a call back if you have any questions though.
So the reason I am contacting you, and i apologize if you are not the person I am supposed to be
contacting, but I recently put in an offer to purchase the property for sale at 7 Mulberry Street in
Leeds. It is a property that has been neglected for many years and needs just under $200.,000 in
repairs, to bring it up to code and to repair the safety and health hazards present. I was then
going to separately finance through the SBA a project to put a corner store and bakery into the
currently vacant and unheated commercial space, but that's a different project and story.
So, I, along with my financial management team, our real estate lawyer and our commercial
lender, put a great deal of time, effort and research into finding out what the property's current
value is, what it needs and how we could bring it back. Unfortunately for me, the sellers are
firmly asking for far more than the property is worth, and more than a commercial lender would
finance, but again, that's a different story.
What this all means is that we needed to walk away from the project. And that's ok. It happens
in business all the time. However, my husband and I moved here from the north shore of Boston,
just a couple of years ago and we have many friends and family still in the area. I'm sure you've
heard on the news about the gas issues that have been happening, and since it is affecting
people close to us, I've been very worried. Which actually led me to worrying about the tenants
at 7 Mulberry.
There is quite a bit of deferred maintenance, health and safety hazards present and when I was
going to purchase and fix the building, it wasn't a big deal, but now that I'm not, and the price is
still way too high, which means no one else will be able to get financing so it won't be selling
anytime soon, I'm concerned about the issues that were uncovered while doing our due
diligence.
For example, when I first viewed the property almost three months ago, I noticed immediately
that there is a broken storm window on the second floor, front of the building and that a large
shard was somewhat precariously leaning over the walkway to the commercial space below. I
pointed in out immediately to the seller's agent assuming the sellers would want to know ASAP. I
https://mail.google.com/mail/u/0?ik=28605c8627&view=pt&search=all&permthid=thread-f%3Al 612614395597606080&simpl=msg-f%3A16126143955... 1/3
9/26/2018 City of Northampton Mail-Property for sale at 7 Mulberry Street
was with my 2 year old daughter and wouldn't let her walk anywhere near it. Yesterday,. I was
back in Leeds, scoping possible locations to still invest in the community, I noticed that the
window is still broken, which leads me to assume that none of the other issues we pointed out
have been addressed.
Additionally, there is a dryer vefvting directly into the basement. There is lint everywhere, caught
in all the cobwebs. I happened to have my contractor with me and he pointed it out immediately
as a fire hazard and something we'd want to get someone in to fix the day we closed. He also
noted that the 9x9 tiles on the ceiling of two of the apartments are most likely asbestos, and
while the ones on the bottom floor are still intact, there was water damage on the second floor
ceiling so some of those tiles are no longer intact. We asked for a test, but they declined, so that
was on our first things to do list. Also, the leaking roof, wasn't removed, they just put new
asphalt over the area. The roofer was had out for an estimate was concerned that he couldn't
give me an accurate estimate, because he had to assume there is rot and or mold etc under the
spot that was covered and he couldn't estimate without getting into the crawl space or opening
the roof how much the structural repairs would run. We also weren't allowed to really get in and
crawl around so it was hard to estimate.
Actually, I'm realizing that this email is getting much longer than I anticipated and I'm still not
sure if you are the person I should be contacting. Maybe I could just compile a list of what we
found and send it to you or maybe you could forward it to the right person or let me know who
that would be? One of the issues brought to my attention is the stability of the rear egress
staircase and if anything happened and people couldn't safely get out, I'd be sick if I hadn't given
anyone a heads up. Unfortunately, I'm concerned that the issues we pointed out won't be
addressed before the property sells, and I'm now worried it will be a long time before that
happens. I'd just like to know that someone knows, so I can walk away from the project with a
clear conscience.
Thanks for your time and please let me know where I can send a list.
Sincerely,
Karen Gledhill
P.S. it just occurred to me that I compiled a PDF last week of the offers we submitted to the
sellers so we could give City Councilor Alisa Klein an overview of what happened. We, along with
the Leeds Civic Association, were very disappointed we couldn't make the project work. Anyway,
the issues are outlined in the quotes and estimates we quoted in the offers, so that might be all
you need. Hope that helps. Again you are welcome to email or call me with any further
questions. (617) 413-6564
MulberryProposalHistory.pdf
525K
Kim Carson <kcarson@northamptonma.gov> Wed, Sep 26, 2018 at 10:03 AM
To: ksgledhill@gmail.com
https://mai I.google.com/mail/u/0?ik=28605c8627&view=pt&search=all&permthid=thread-f%3Al 612614395597606080&simpl=msg-f%3A16126143955... 213
9/26/2018 City of Northampton Mail-Property for sale at 7 Mulberry Street
Thank you for taking the time to let us know. This property has come to our attention in
the past. I will log the information you have provided into our complaint file. Kim Carson
[Quoted text hidden]
https:Hmail.google.com/mail/u/0?ik=28605c8627&view=pt&search=all&permthid=thread-f%3Al 612614395597606080&simpl=msg-f%3A16126143955... 3/3
7 Mulberry Street Proposal
Proposal: Find a fair and reasonable sale price that the Buyer and Seller can agree on for the 7 Mulberry
Street property. Upon completion of research into relative comparative sales of similar properties in the
immediate community over the last 12—18 months and the due diligence done to date by the Buyer,
the rationale for the proposed offer is below. Please note these costs include required repairs for
housing code compliance and do not include any costs associated with improvements to the commercial
spaces within the property.
Comparative Sales:
1. 227 South St-$335,000
2. 200 King St-$380,000
Expected Required Repair Costs(Quotes to be furnished upon request.):
1. MMC Roofing Estimate: $31,900
2. Pella Window Estimate: $18,652
3. Painter's Estimate: $16,740
4. Sprinkler System:$26,400
5. Asbestos Mitigation: $15,000
6. Lead Abatement Estimate: $30,000
7. General Contractor:Approx. $20,000
a. Exterior Repairs
b. Back Staircase
C. Sump Pump
d. Dryer Venting
e. Sinking Corner
Total Projected Compliance and Code Required Repair Costs:$158,692
Proposed Offer:$375,000
Benefits:
1. Sale of the property would save Seller expected repair costs as property continues to age.
2. Sale of property would allow Buyer to make property improvements as well as add new
businesses, highly desired by Leeds community groups and endorsed by the City Council,to the
commercial space.
3. Seller's current Cap Rate on property is less than the risk-free rate of return on a 10-year US
Treasury.Seller is currently not being adequately compensated for the risk of holding the
property.
Conclusion:
Buyer sees a tremendous opportunity to invest in and support a community she calls home. Buyer
understands that the Seller has owned and benefited from the ownership of this property for almost
two decades and that while it has been possible to maintain the property mostly as is, a change in
ownership will require updated codes to kick in,so will not come without costs.The purpose of this
research,due diligence and negotiating is to find a fair and reasonable price that works for all parties.
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Julie Hefld
Sent ftrmy J.Phone
7 Mulberry Street Counter Proposal
Proposal:The goal is to still find a fair and reasonable sale price that the Buyer and Seller can agree on.
Based on our research we already know that our commercial lender will not finance the property at the
current asking price. Please note these costs are updated and include required repairs, code updates,
feedback from two commercial lenders and a fair market appreciated value for the property based on its
current condition.These costs do not include any improvements to the residential spaces or for the
build out that will be required for the commercial space.
Expected Property Valuation:
Assumption:7 Mulberry appreciated following average housing market returns for Northampton of 3%
per year. Purchase Price 2001:$230,000. Expected Value 2018 based on 3%increase over 17 years:
$380,155 which is commensurate with comparative sales of$335,000 for 227 South Street and $380,000
for 200 King Street.
Expected Required Repair Costs(Quotes to be furnished upon request.):
1. MMC Roofing Estimate:$31,900
2. All Star Window Estimate:$18,652(would be higher for historically accurate Pella)
3. AI's Painting Estimate:$16,740
4. Legacy Fire Protection Estimate:$25,-000 for water from street+$35,000 for system
5. Asbestos Mitigation:$15.,000
6. Lead Abatement:$30,000
7. General Contractor:Approx. $20,000
a. Exterior Repairs—gutters,facia boards, siding rot,window casing rot etc.
b. Replace rotten/unstable Back Staircase/bring to code
c. Repair/replace Sump Pump—mitigate water infiltration at broken flashing
d. Reroute Dryer Venting in basement to mitigate fire hazard
e. Sinking Corner/Foundation repair- NE corner of store room.
Total Projected Repair Costs: $192,292
The difference between our initial proposed offer including necessary repairs and the asking price is
approximately$57,700. We would be willing to split that difference with you to bring the proposed offer
to$403,850.To sweeten the deal (sorry about the bad bakery pun:)we'd additionally like to offer a
pastry, on the house,each time you'd like to visit the shop.
Proposed Offer:$403,850
Conclusion:
This proposed offer plus the updated repair costs, less the difference split, brings the total project cost
to the asking price of$625,000. Given the research into actual values and feedback from lenders,we
hope you find this follow up fair and reasonable. We are willing to make the formal offer today and start
the closing process as quickly as possible. We would be very disappointed to have to break the news to
the Leeds Civic Association,Ward 7 City Counselor, and the respective municipal offices we engaged for
feedback on how to best serve this community,that we were unable to make the project work.
Unfortunately the amount of community buy in doesn't really matter if we cannot come to a fair,and
workable sale price on the property.Thank you for the additional consideration.We look forward to
hearing from you soon!
Sep 3 Jut.. H -.1-d . `days o
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Let me now what you thin.
Julie e Held
Sent ftw my hone
Son fdrwarded message
From:Afyx Akers
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Final Proposal for 7 Mulberry Street
Notes to Sellers:
Thank you for the recent financial outline you submitted.While we appreciate your due diligence,those
values don't accurately reflect actual market value of the property and unfortunately contained many
calculation mistakes or maybe number typos.Additionally,while tax assessed value can frequently be used as
a starting point,it does not necessarily reflect the intrinsic value of the property,particularly when taking
current condition into consideration.Also,costs associated with maintaining the property cannot,by
definition,reflect true and/or appreciable capital improvements.Sunk costs are irretrievable and cannot be
used in a property's valuation.
Proposal:We are hoping to come to a fair,realistic and workable sale price that the Buyer and Seller can
agree on and that a commercial lender will finance. Please keep in mind that these costs are based on basic,
necessary repairs,as assessed by licensed professionals,that are required by code within a specific timeframe
upon closing.These are immediate required costs and still do not include any improvements to the residential
spaces or for the build out that will be required for the currently unleasable and unheated commercial space.
Expected Property Valuation:
Assumption: 7 Mulberry appreciated following average housing market returns for Northampton of 3%per
year. Purchase Price 2001: $230,000. Expected Value 2018 based on 3%increase over 17 years: $380,155.
Additional studio efficiency(Unit 4 on MLS sheet) added 2002.The value of adding a studio apartment to an
apartment building in 2002: $30,000 as calculated with proportional value on sq/ft and rent history.With
same assumptions: $48,141. 12 Mulberry purchased 2002 for$5,550,with same assumptions:$8,906. Current
cost of losing a leasable commercial space-$48,000.Total property value:$389,202.Assumption:Buyer has in
good faith,applied GAAP Fair Value Reporting practices to calculate property's value.
Expected Required Repair Costs:Assumption:The Buyer has provided real quotes,developed by licensed
contractors and vendors that were vetted and interviewed by the Buyer in good faith.They reflect real,whole,
costs required to bring the building up to code,so it stays in compliance with current residential housing
codes with specific attention paid to health,safety and structural needs.These are not improvements that
could be done in phases.These are required repairs that would have to be completed within a specific
timeframe and are costs that must be incurred immediately after closing.
Projected Repair Costs: $192,292
Additional Considerations:This proposed offer brings the total project cost to$581,494 which is more
than the taxed assessed value of$568,800.Given the research into actual values and feedback from lenders,
we hope you find this follow up fair and reasonable.We are willing to make the formal offer today and start
the closing process as quickly as possible.Thank you for your consideration.We look forward to hearing
from you soon!
Conclusion:
If after this final proposal,we cannot come to an agreement on the value of 7 Mulberry Street we will
unfortunately,have to walk away. Should that happen the biggest loss won't be the disappointment of a
hopeful Buyer/local entrepreneur or the cost of a property rapidly aging and the opportunity lost for the
Seller.The community of Leeds stands to be the biggest loser here as it loses a community investor and
continues to go underserved,underdeveloped and the property's potential continues to go underutilized.
Final Proposed Offer: $389,202
Spreadsheet from Sellers 09/02/18
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Lot Assessed Market equivalent(assuming assessment=85%of market value)
L 7 Mulberry $ 568,800.00 $ 669,176.47
__.................
12 Mulberry $ 36,100.00 $ 42,470.59
_ ........
Total $ 604,900.00 $ 711,647.06
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Investment Investment Amt #of Years Annual growth Current value Notes
___.__....... .______ _..__ _ __ _____ ____ _ ___ . .___ ____ _____.._.
Purchase of 7 Mulberry $ 230,000.00 17 3% $ 380,154.96
......... ........ _ _ ........ ...... ...................... .:.......... ........ .._..._. ........ ....... ......_......_............; ......_.. ....._..... ........ _.... ............ _.. ......
Purchase of 12 Mulberry 5,550.00 16 3% $ 16,047.06
_......_... _.........:...._..............._.................................._............................_.............:.......... _................................::...................._....................._.:......._......... ...... ........ .........._._..........._.. ....
Loan to create additional unit(upper back) $ 50,000.00 16 3% $ 82,642.38
..................... .. ...................................................................................................:.............................................................................................................. ................................................................................................. ............ ........................................
Sweat equity to create additional unit $ 25,000.00 16 3% $ 40,117.66
...... ...._.. _ .. ....... ......
Additional capital improvements $ 30,000.00 9 3% $ 38,568.94 Replacing water heaters,furnaces,electrical service,etc.
Gut reno of lower right front unit $ 35,000.00 1 3% $ 36,050.00
. _ ......... ......... . . ... ........ __ .. .......... ..... .. ............ ........ . .... ........... .. _ ...... ..... ......... __.
Sub-total $ 593,581.00
Ability to add additional units $ 50,000.00 Conservative estimate(based on purchase of 12 Mulberry)
.... ............ ....... ..._. ...._.... ........ ......... ..........
Total $ 643,581.00
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Valuation based on assessments $ 711,647.06
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Valuation based on investments $ 643,581.00
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Averagevaluation $ 677,614.03
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The roofing estimate of$31,900 does not appear to take into account that 2/3 of the roof has been replaced in the past few years.
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We weren't aware of$15,000 of asbestos mitigation required.
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We believe some of the other repairs would not need to be made all at once and could be financed from the rent roll.
However,in the spirit of cooperation,we would be willing to consider splitting the buyer's anticipated costs of$192,292($96,146 each).
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Seller's valuation estimate $ 677,614.03
.. ................ .. ........ ............. . ............ ..........
Minus half of buyer's estimated costs $ (96,292.00)
...................._...........................
Counter offer $ 581,322.03