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A Nantucket gold rush goes bust

Posted by Scott Van Voorhis  July 3, 2009 09:00 AM

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Hey, back during the boom, it sounded like a good idea.

Developers rushed to convert Nantucket’s grand old hotels in luxury vacation condos.

The plan was to tap into demand from the merely wealthy looking to vacation on the elite resort island for which buying a multimillion-dollar waterfront villa is out of reach. Plus buyers would get all the comforts of a resort hotel as well, and no need for pesky household maintenance.

Of course, like all promising ideas in real estate, once one developer got the idea – I’m thinking Newton real estate mogul Steve Karp and his purchase of the White Elephant – everyone and his brother rushes in.

Now we are starting to see the fallout from this gold rush gone bust, with TD Banknorth moving to foreclose on its $40.5 million construction loan to developer Robert Mathews and his half completed conversion of the historic Point Breeze hotel into a vacation retreat for the Nantucket summertime wannabes.

The developer had hoped to strike it rich by carving the old hotel into 32 luxury condos, and, who could have guessed, a spa and a restaurant as well.

Anyway, it is now one big so-unNantucket-like mess, with the bank putting in new locks, ply wooding over doors and entrances, and hiring Tranzon Auction Properties to sell the old hotel off, The Inquirer and Mirror reports. While the exterior is largely complete, the interior is not.

The developer, in turn, faces a series of lawsuits from contractors who contend they have been paid for only a portion of their contracts.

Here’s what the auctioneer has to say.

“Response was immediate – calls began the moment we set foot on the island,” said
Tom Saturley, President of Tranzon Auction Properties, in a press release I found in my inbox Thursday afternoon. “It is clear this property is near and dear to many residents and friends of Nantucket and we are looking forward to selling the asset on August 19th”.

We’ll see. Sentiment is wonderful, but cold hard cash is needed now.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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36 comments so far...
  1. Nantucket was bubble central for the snooty crowd. It will feel a tremendous amount of pain as people opt out of the "look at me crowd" and opt for more
    laid-back, down-to-earth settings like Camden, ME, Block Island, Wellfleet, MA, etc.

    Posted by Hung Wang July 3, 09 09:40 AM
  1. Nantucket is the most boring vacation spot on the planet - period.

    Posted by Mike Dulong July 3, 09 11:27 AM
  1. Sorry, but I have no sympathy for people who have made Nantucket cost prohibitive for me and my family to vacation. I used to love going there. I tried to rent a house there a few years back when things were booming and the RE agent acted like I was inconveniencing her by me wanting to give her business. I do feel sorry for the year round residents/merchants who are just trying to make a buck in the summer and who are innocent in all this expansion, because they feel the loss of tourism too.

    Posted by mooseanoodle July 3, 09 01:43 PM
  1. What's with all this hateful stuff about Nantucket. The vast majority of people are friendly. These developers took a risk, and if they lose money, that's the risk. Nantucket is definitely overpriced, if some people can afford it and are willing to be overcharged, then that's the free market. Developers like Karp have created a lot of jobs and brought a lot of money there. There is nothing else you can do there except tourism - it's 25 miles from shore. If Nantucket is too snooty for your taste, there are many other nice places to go. What else can they do on Nantucket for an economy - it's 25 miles from shore. How about they go back to whaling?

    Posted by bribeau July 3, 09 03:03 PM
  1. Nantucket holds a special place in the heart of everyone who's ever been in 3rd grade and just introduced to the concept of a limerick!

    Posted by Dave July 3, 09 05:21 PM
  1. I'm suprised no one is talking about the overall destruction of many historical properties of the island. The Point Breeze Hotel had character and history that was from another era and now due to the greed of many has been completely lost. This is also seen with the private individuals who have bought houses on the island and "restored" or "renovated" them into something completely different. It is a real tragedy for the island and a shame that the board of selectman cannot put their foot down and prevent such losses.

    Posted by Alex July 3, 09 05:30 PM
  1. "Sorry, but I have no sympathy for people who have made Nantucket cost prohibitive for me and my family to vacation."

    Posted by sceesic July 3, 09 06:38 PM
  1. Some of us save money in banks despite the low interest rates. The bank loans the money to a developer who walks away from the loan. Has the developer lost his house in this deal? Has he lost his kids' college education? Maybe he lost his car?
    He took a "risk" with borrowed money. I suspect he risked nothing.
    I only hope the bank gets back some of the savers' funds.

    Posted by single mom July 3, 09 08:47 PM
  1. Nantucket is the best place to be away from everything. period. Did I mention the sweetest scallops?

    Posted by sconsetbogs July 3, 09 11:07 PM
  1. "Fall out"...pfffttt. Nantucket real estate in the mid '80's could be had from $500K; today those same properties are worth multi-millions. Show me the fall out.

    Posted by Perceptive Listener July 4, 09 12:29 AM
  1. I'd rather go to Martha's Vineyard anyhow! It's more fun.

    Posted by anti-snoot July 4, 09 09:09 AM
  1. I'm sure Nantucket is nice and all, but it's still crummy New England. New England is a "vacation" spot, while places like Florida and North Carolina's OBX and even Long Island and the Jersey Shore are VACATION spots.

    The problem with "vacations" in New England, is that most of these "old" and "charming" places are boring as h*ll.

    Posted by Mikey "Menudo" Monkeypants July 4, 09 11:12 AM
  1. There was a pretty developer from Nantucket
    Who poured monies galore into said leaky bucket.
    When the economy went South and awash in the sea
    she said, "Guess I'll just have to punt and declare bankruptcy."

    Posted by TexLeeger July 4, 09 01:05 PM
  1. Nantucket is great but has a bit of an identity crisis IMO. Been renting with a young family for a few years now. It's expensive and I'm lucky it's in the budget. The thing about the place is I'm not sure if it's a New England Beach Town, a wanna be liberal utopia, or a world-class resort like Aspen... The money on construction has all but stopped and I'm sure the mere millionaires that drove the place are hurting.
    FWIW... There is no better place to see the stars on a clear night.

    Posted by madaketmysterytour July 4, 09 07:17 PM
  1. Geez, and to think that at one point (back in the 1600's), my family owned the entire island. It's a shame that I'm unable to spend any significant amount of time at the place of my heritage.

    Posted by Chloe Macy Harrington-Smythe July 4, 09 10:41 PM
  1. Nantucket is a beautiful little island. Some great restaurants. Beaches are nice, but if you want a really nice clean warm beach then nothing compares to Aruba.

    When I saw old, wooden sheds on a pier selling as lofts for 1.3 million dollars (note this doesnt even really include land), it was obvious the gig was up.

    Posted by Middle July 5, 09 07:27 AM
  1. nary a more inspirational surface of the earth can be found!(off season)

    Posted by Herman Hickenlooper July 5, 09 08:02 AM
  1. This developer has done the same thing in palm beach florida. This guy would have been in trouble even if the economy had stayed strong .HE IS A CROOK !
    He has not yet paid any personal price for his misuse of funds. I hope the banks look carefully at his loan documents.

    Posted by palm beach builder July 5, 09 10:28 AM
  1. The underground drug community will have to fund the real estate renaissance. Millionaires are not very dependable or community oriented.

    Posted by whale bones July 5, 09 02:13 PM
  1. "... character and history that was from another era and now due to the greed of many has been completely lost. ... private individuals who have bought houses on the island and "restored" or "renovated" them into something completely different."

    For 350 years, Nantucket has been driven by exploitation and free-market forces. Homes and commercial properties have been added to, transformed, renovated and torn down repeatedly over that entire period for all kinds of motivations. Still, many like the above poster hold onto a foggy nostalgia and the false notion that "Things used to be better on Nantucket." Most of us who live here know better.

    Posted by ricklapel July 5, 09 04:19 PM
  1. The heady times of making a buck on image alone are long gone. There are areas just as quaint, cheaper, more convenient and free of John Kerry sightings all over New England. Obamanomics with trickle-up poverty will seal its fate for years to come.

    Posted by Melinda J July 5, 09 06:16 PM
  1. This is just a story about a guy who made the decision to invest at the wrong time in the business cycle. The same thing is happening in your back yard, but the decimal point is further to the left. Nantucket will always be a special place and a special destination. It will still be there for those who choose to be there and for those who choose to own property there, including the folks who live there year round.

    Posted by skignatio1 July 5, 09 06:35 PM
  1. Please feel free to not come to Nantucket. Washashores have all but ruined my home. I'd like to see it go back to the way it was in the 90s -- the 1890s. Squalid, poor and isolated.

    Posted by Owen Chase July 5, 09 07:36 PM
  1. I'D rather go to YORK beach , nice and cheap!

    Posted by KOKO July 6, 09 06:31 AM
  1. TexLeeger :) haha

    You know i have only been there once and it was for just a day. i find that vacations of leisure are my cup of tea.

    If you want fast paced craziness than nantucket is not for you. it is expensive but what are you going to do? lol There are many other places that are cost effective and relaxing..

    It is sad to see history getting ruined. i would rather stay in a historic building with character than a hotel that's for sure :(

    Posted by MyTwoCents10 July 6, 09 08:33 AM
  1. I don't think Nantucket real estate is that hurting much. I have not noticed any drop in prices for homes. As for being boring... that all depends on how you want to spend your vacation. If you're looking for nightlife or amusement parks then you're right, Nantucket is not your place. If you're looking for a place to kick back and relax and enjoy good eating then Nantucket is a great place. I also like that it's an island. It may be a little incovenient to get there, but like most things in life... a little effort up front usually provides greater rewards in the end.

    Posted by John Tsoukalas July 6, 09 11:14 AM
  1. I highly doubt Mr. Karp lost a dime. These guys are way smarter than the rest of us. I'm assuming his business was probably a corporation which paid himself a multimillion dollar salary. Only a fool invests their own money in these projects. He will probably just walk away from this bankrupt business and start another construction/developer company across the street while the bank and private investors take the loss.

    Posted by bahhhoo July 6, 09 12:36 PM
  1. I am a homeowner on Nantucket and still consider it to be a beautiful, unique geographic location. It is an island but not difficult enough to get to! The island has lost much of its character since the influx of jet-setting NYC investment-banker types arriving by private jet. However, since they are willing to rent my house during the summer weeks, I can't really condemn them too much! IMHO the town of Nantucket is extremely poorly run, interested in outrageous tax collection, and should never have allowed this level of development - 32 condos right in the downtown area that dump more cars, people, and renters is outrageous - hopefully some altruistic gazillionaire will buy the property and donate it as open space. And I'm a capitalist pig, but local limits on development in the end preserve the quality of a space so that people actually still want to visit it and spend money there.

    Posted by Susan July 6, 09 03:32 PM
  1. Booked a 3 night stay for next week. Can't wait. LOVE IT

    Posted by bobas July 6, 09 04:38 PM
  1. I agree 100% with Single Mom.
    The banks are lending other people's money. They don't care whether they get the money back or not.
    The lender always loses!
    For example, the lender lends at 7%. The borrower, a businessman is successful and makes a 60% profit on the money borrowed. The businessman keeps all the profit. He does not share the profit with the lender. If the business fails, the lender loses all the money lent. Either way, the lender loses!
    The moral of the story: Never lend money!

    Posted by JalDesai July 6, 09 05:50 PM
  1. "I highly doubt Mr. Karp lost a dime."

    This is NOT a Karp project. It's Bob Matthews.

    Posted by ricklapel July 6, 09 08:16 PM
  1. How did the Nantucket Historical Preservation group allow such a development in the first place! Money talks I suppose.

    There isn't a place on earth comparable to Nantucket - from downtown to the moors to the beaches from one end of the island to the other-

    I was fortunate to live there for awhile in the eighties, and the native Nantucketers used to say the island had been ruined back then - I can only imagine what it's like now -
    Ahhhhh, those $45K lots in TomNevers back in '88......Coulda woulda shoulda....

    Posted by rem July 7, 09 07:55 AM
  1. Nantucket was and still is a magical place. Stay in a cottage atop a cliff at Sconset, in a classic upside down house in Madaket, or in a historic inn and then tell me it's crummy. Yes, in the height of the summer downtown is over-crowded just as Edgartown on the Vineyard, Hampton Beach, NH and Charles Street in Beacon Hill. Nantucket has historic roots and I couldn't care less if the NY jet-setters have thrown big money at the island. With out those dollars, Nantucket would be all but abandoned by the same commercial businesses who keep the locals and the long-running visitors happy.

    I agree with Susan in comment 28. The problem is that the local development and zoning boards have allowed for an unhealthy rate of expansion. I hope Nantucket can get the right people in town government to help preserve Nantuckets integrity.

    Posted by anonymous July 7, 09 11:41 AM
  1. magical declines are more like it...

    From today's NYT
    About 600 properties, or 6 percent of all those on the island, are for sale, but almost nothing is selling. “The damage is huge,” said Flint Ranney, a real estate broker on the island for 30 years and president of Denby Real Estate. “The market value of the real estate on the island was about $20 billion in 2008. Now it is about $14 billion. This is much worse than 1987. That decline came from the savings and loan crisis and it was more contained. This is the stock market and it affects everybody’s wealth.”

    Add one more place to the "it's not different here" list....

    Posted by Hung Wang July 8, 09 05:12 AM
  1. For structural reasons Nantucket Town is rather more crowded than Edgartown.

    Note - I like Nantucket.

    Posted by charles July 8, 09 12:19 PM
  1. “The damage is huge,” said Flint Ranney, a real estate broker on the island for 30 years and president of Denby Real Estate. “The market value of the real estate on the island was about $20 billion in 2008. Now it is about $14 billion. This is much worse than 1987. That decline came from the savings and loan crisis and it was more contained. This is the stock market and it affects everybody’s wealth.”

    iHis statement is almost silly. For the 94% that own their homes and have no intention of selling, how have they lost wealth? Blanket statements like this annoy me because they aren't correct , and are just sensationalizing what is really just a market correciton. They happen, they happened in the 80s, they are happening in 2000s, and they will happen again.

    I also love Nantucket.

    Posted by buyerandseller July 9, 09 04:49 PM
About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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