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Posted on Fri, Oct 29, 2010 : 6:03 a.m.

Wellesley Gardens tax auction sale: 'It's like they got land for free'

By Paula Gardner

Jim Porth remembers a time when Wellesley Gardens condos were selling so quickly that the developer struggled to get bricks delivered fast enough to meet the construction timetable.

The condos hit the market before competitors, he said. The Pittsfield Township location near US-23 was strong. The architecture - like brick exteriors - spoke of quality. And the amenities were front-loaded so that new residents didn’t have to wait until the 427-unit project was completed to use the $2 million clubhouse.

But the market collapsed before the final 218 units were built, eventually resulting in the sale of the 33 vacant acres in a Washtenaw County tax foreclosure auction on Thursday.

The selling price: $245,000.

“There a time when I probably would have sold (the land) for $20,000 per unit,” said Porth, a commercial real estate broker with the Thomas A. Duke Co. in Farmington Hills. “I probably could have gotten $2.5 million (for what sold on Thursday).

“Maybe more.”

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Wellesey Gardens will have a new owner as soon as payment is received and the county issues a deed.

The change in value is a stark example of how the dynamics for development land have changed in Washtenaw County since a homebuilding slowdown started in late 2006 and slid into a recession two years later.

Today, existing home values have fallen along with land values, dropping them below replacement cost and further stifling new construction among many other factors, like high unemployment and strict lending standards.

The reality for the buyer of the Wellesley Gardens property is “there’s a ton of inventory out there,” Porth said.

And that means that while the price for the property is low relative to 2004, today’s market means the buyer - who hasn’t been identified - is taking on a new risk timetable.

“I really think it’s a fantastic site,” Porth said. “But you have to take what you’re paying for it, what the carry is on it, your cost to build, what you’re going to build, how many and how many sell a year.”

That, he said, is what needs to be calculated as the buyer evaluates the deal.

Rob Aldrich, president of MAV Development in Ann Arbor, agreed.

And that’s still with this assessment: “It’s almost as if they’re buying these lots for nothing.”

A few years ago, land for condo projects in and near Ann Arbor would sell for $20,000 to $30,000 per lot, Aldrich said.

The sale on Thursday breaks down to $7,424 per acre for the Wellesley Gardens land.

In some scenarios, even with covering the 2010 tax bill and ongoing carrying costs, the deal can be profitable, even if the economy chugs along without a big housing rebound.

“You can phase one at a time, 2 at a time, 10 at a time,” Aldrich said. “… You can put up a half-dozen, and one’s a model.

“It seems like somebody should be able to make some money,” he said. “It’s like getting land for free.”

Washtenaw County Treasurer Catherine McClary will weigh the impact of the sales price on the taxing bodies affected by the tax foreclosure auction.

The property didn’t sell at an earlier auction, when the starting bid was $1.2 million.

By law, McClary has to use the sale proceeds to reimburse the revolving fund that pays out property taxes. In 2009, the unpaid taxes on the Wellesley Gardens land were $150,000. It’s possible that Pittsfield Township and the other entities - like the Ann Arbor Public Schools - will have to refund some of the tax payments received in advance.

The buyer also can’t count on the assessment coming down, since assessments are based on an area, not a single transaction. However, the sales price could end up indicating that the assessed value was out of line, McClary said.

Another indication could be nearby properties sitting on the market, awaiting a buyer.

Porth has farmland to the north listed for sale. The 60 acre-property is listed for $689,000, and it has access to municipal water and sewer. The price has been reduced from $1.6 million.

He points to that as an example of how many builders won’t buy land today unless the market is assured, since the profit from construction won’t be made until the last few sales.

Watching the county strike a deal - which presumably will close in the coming days and yield $245,000 toward unpaid debt - is win in today’s market, he said.

“There’s a tremendous amount of people who’d like to sell their land in Washtenaw County.”

Paula Gardner is Business News Director of Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.



Wed, Nov 10, 2010 : 4:29 p.m.

I still wonder who bought the land. Any updates yet??


Sun, Oct 31, 2010 : 12:15 a.m.

This brings into question Ann Arbor paying top dollar for "Greenbelt" properties. Didn't taxpayers just pay something like 100,000 dollars an acre for recent Greenbelt prperty? Some folks are still getting rich on the taxpayer's dime.

Steve Pierce

Sat, Oct 30, 2010 : 9:15 p.m.

"The sale on Thursday breaks down to $7,424 per acre for the Wellesley Gardens land." Compare this to the nearly $750,000 per acre the City of Ypsilanti paid for Water Street condo project. - Steve


Sat, Oct 30, 2010 : 11:20 a.m.

"'It's like they got land for free'" What is the implied assertion with a headline like this? Such a statement reflects poorly on the part of the speaker. The statement is false; repeating it in unproductive. It's 'like' they got the land for exactly what it is worth.


Fri, Oct 29, 2010 : 11:01 a.m.

I share Blahblah views on the assessment process. One think to keep in mind if you are considering appealing your assessment--the assessor only honors your appealed reduction for 1 year. After that, it goes back up. The assessor did not tell me this when I spoke with him before appealing, but that's what happened to me.


Fri, Oct 29, 2010 : 9:20 a.m.

It's a loss leader for the county in hopes that somebody will pay the property taxes, its most likely already zones residential so the taxes will be ridiculous in I'm excited for the spring time auctions, lot of cool parcels in superior township


Fri, Oct 29, 2010 : 8:38 a.m.

"The buyer also cant count on the assessment coming down, since assessments are based on an area, not a single transaction. However, the sales price could end up indicating that the assessed value was out of line, McClary said." During the run up in housing prices, municipalities had no problem using the new higher sales price as the new accessed value. Now with prices falling, they want to cling for dear life to those artificially inflated assessments. Bottom line, today's buyers are going to have to spend some time at the local real estate board of reviews and possibly go to Lansing to appeal the disconnect between reality and the local assessor's office.


Fri, Oct 29, 2010 : 8 a.m.

This puts into perspective not only the value of land in Washtenaw County, where the economy is probably the best in the state, but also the value of land in the rest of the state. If land is fetching these prices here, can you imagine what is going on elsewhere? The dynamic that is different this time, is that nobody knows when, or even if, our state can make a turn around. You've got to be prepared to hold onto a chunk of land for an extended period of time before realizing any gain. For the time being, perhaps the current owner could tenant out the land to a local farmer? Put some more Ethanol corn in?