Thank you for the various questions we’ve received regarding the proposed parcel trade announced on Aug. 15. It won’t always be possible to answer in real time, but we’ll continuously update these FAQs and disseminate through multiple channels. The initial feedback generally fell into several categories, including questions about Captain Sam’s, questions about value received for value given, and future use of the property. Those are covered in detail below.
First, however, a few general comments: In addition to the practical value associated with the operational parcels KICA stands to acquire with a positive vote, this is really about three things:
It’s about preserving the entrance to the island. Preventing the development of the “finger” parcels just over the bridge and to the left of the Kiawah Island Parkway is something we can hopefully all agree is a worthy endeavor. If those are developed, the arrival experience to Kiawah would be very different than it is today. By placing conservation easements on these developable parcels, it removes that concern forever.
Second, it’s not about Captain Sam’s. The KICA board understands the community’s feelings about Captain Sam’s and would not support this deal if it enhanced the possibility of development there. Working with the Kiawah Conservancy, we concluded the best way to take this issue off the table was to put a deed restriction on the property that prevents it from being used for an access road.
Third, we are proud of the fact that we’ve been able to bring the association, the conservancy, and others together on an initiative that benefits Kiawah as a whole.
To learn more about the preservation value, please visit the Kiawah Conservancy’s Say Yes to Kiawah page.
The KICA board understands the community’s feelings about Captain Sam’s and would not support this deal if it enhanced the possibility of development there. That’s why KICA insisted on the deed restriction. Kiawah Partners (KP) agreed to that condition, and that is what you are voting on. Since this action requires a vote of the membership, you are voting the proposal up or down as presented, and as presented the proposal transfers the 4.62-acre parcel back to KP with a deed restriction. If you vote in the affirmative, KICA cannot transfer the property without the deed restriction. KICA legal counsel has been asked to draft language for the deed that specifically includes a restriction prohibiting utilizing any portion of the 4.62-acre parcel for access to and from any portion of the adjacent “Captain Sam’s” parcel, if any, that may be developed. The deed language is important, but the intent is clear.
Assessing the values of these parcels is complicated, because they are different depending on who you are. Through a legally binding development agreement, KP is the only entity that has the authority to develop any of the properties in question. Without development rights, there’s no way to monetize the properties. In other words, there is no “market value” without development rights.
To KICA, there is no monetary value to the 1.7 developable acres on the ocean front because it has no development rights. Further, KICA does not have access to the parcel because it is surrounded by property already owned by KP. Obviously the property is worth much more to KP, because they have development rights and access.
The value of the other exchange parcels is again measured differently depending who you are. The developable parcels are currently worth much more to KP than to anyone else (again, development rights). These parcels have zoning for 44 units, which holds significant value to KP. However, if those are transferred to KICA or the conservancy, they’d have no direct financial value in that they’d have conservation easements prohibiting development. However, the board believes the value in protecting the entrance to the island is significant both from an aesthetic and environmental standpoint.
Any appraisals on these parcels would require the application of a hypothetical condition assuming development rights. Since that is so unlikely, KICA has evaluated the value proposition for the community as follows:
· KP is gaining property that is valuable to them, but it is giving up property that’s valuable to them as well.
· One of these two areas will be developed – either the “finger” parcels at the entrance to the island which have the potential of up to 44 units, or the 1.7 acres on the ocean with up to around 10 units. We believe the ocean front parcel makes more sense for several reasons:
o The undeveloped arrival experience to the island is preserved in perpetuity.
o The ocean front parcel will have development all around it, whether this transaction is approved or not. Incorporating that parcel into the overall land plan there will likely result in a better outcome.
o 10 additional units is preferred to 44 additional units.
· More than 700 additional acres of critical habitat are placed into conservation.
· In addition to the beach parking and community center parking parcels KICA stands to acquire, it would take ownership of a valuable maintenance parcel. Currently, the only property KICA owns to house its maintenance division is a 1.2-acre site on Kestrel Court. This location is home base for 50 employees working in landscaping, lakes, major repairs and general maintenance divisions, as well as the mechanic shop. All 50 employees park their personal cars here, in addition to the various KICA trucks, trailers, maintenance equipment sheds, office space, etc. The site is so crowded that KICA has leased the adjacent parcel from KP (currently $1/year) for its greenhouse as well as overflow parking and storage. As part of this transaction, the leased parcel would be deeded to KICA.
While there is obvious practical value to the day to day efficiency of owning the maintenance parcels, KICA believes there is significant financial value by way of future cost avoidance. Were these parcels unavailable to KICA, the likelihood that on-island alternatives would be available is minimal, and if available, they’d be costly. Should KICA have to look off-island to provide some of these functions, not only would there be direct cost associated with ownership or leasing, there’d be daily cost associated with travel time, additional wear and tear on association vehicles, and fuel costs. An estimate of the potential costs of moving significant portions of the maintenance operation off-island totals between $2.7 and $3.33 million over the first 10 years, including initial land acquisition costs between $500,000 and $1 million, and ongoing costs of approximately $230,000/year.
Based on these facts and unique circumstances, it’s hard to take a “market value only” approach to determining value to the community.
What KP might develop on the ocean front parcel is dictated by Town of Kiawah Island zoning. As a standalone 1.7 acre property, the highest density use of the R3-C zoning would result in about 10 multifamily units (units, not buildings).
The developable parcels at the entrance to the island that KP will give up will no longer be developable, because they will have conservation easements on them.
A number of questions have come up relative to why Kiawah Partners is willing to exchange these properties, and why the vote has to happen now. We can’t speak for Kiawah Partners, but here are some facts:
Kiawah Partners is in the business of developing land for a profit, and they have very little land left to develop. With some minor exceptions, its remaining developable land consists of Captain Sam’s Spit, an ocean front parcel adjacent to the Timbers development, and the “finger” parcels at the entry to the island just after crossing the bridge. While Ocean Park still has home sites for sale, the majority of development activity and installation of infrastructure is done.
Of the land remaining, Captain Sam’s is tied up in the courts and the ocean front parcel is complicated by the 4.6 acres the courts have declared to be owned by KICA. While it’s possible to develop around the 4.6 acres, it would make for a suboptimal land plan. That leaves the finger parcels as the only real options for development activity at this time.
Last year the sale of 22 lots on Oyster Rake near the Main Gate was a wakeup call that the last remaining parcels are likely to be in development sooner rather than later. When KICA and the conservancy became aware that land planning was underway for the finger parcels, we began discussions on how we could work together to preserve the entrance to the island. We agreed that time was of the essence, given the possibility that the finger parcels could potentially be unavailable in the near future. Further, while KICA has prevailed multiple times in the courts, the issue remains on appeal and there’s no guaranty as to future outcomes.
It has been suggested that the 4.6 acres was “under water” at the time of the conveyance. This is not the case. Portions of the property were likely more seaward of the building setback line than they are today, but the property was not under water. Regardless, it’s not germane to the proposed trade. The property was legally conveyed to KICA as ordered by the judge during the trial. Specifically, the judge’s order states that the 4.62 acres “are owned by KICA.” The judge further states that the members must approve a transfer of the property. As such, the board has proposed trading this property to KP, subject to a member vote as outlined in the proposal. As a reminder, this are approximately 1.7 acres of developable property (with a maximum of around 10 units in a location already under development) in exchange for up to 20 developable acres at the entrance to the island (with a maximum of around 44 units), plus all the conservation easements, plus the various parcels that benefit KICA’s operations and prevent future expenses to the association and its members.
There continue to be number of comments and questions about development rights, and several have questioned why KICA can’t get development rights. As previously stated, development rights on Kiawah are conferred by a development agreement between the Town of Kiawah and KP. Development agreements are not unique to Kiawah, but are used in master planned communities all over the country. This is a legally binding contract that provides a level of certainty to the town and the developer. For the developer, part of that certainty is that they will be the “master developer,” meaning they are free to execute a long-term development plan without concern for competitors. This is generally good for the community as well, because developers can take the long view as opposed to having a need to maximize profits as quickly as possible. A part of being the master developer includes controlling development rights. On Kiawah, those development rights are limited to KP, and whomever they assign them to. In this instance, they have the development rights on the 4.6-acre parcel.
As a reminder, the 4.6 acres were conveyed to KICA as part of a much larger parcel – the 10-mile stretch of land along the ocean front. This conveyance was done for one purpose, and that was to ensure that whatever was considered “beachfront” in 1996 would always be considered beachfront. Without this preventive measure, Kiawah’s healthy and accreting beach could have become tempting for development of another row of homes. Based on the sole intent of the conveyance, it is clear that KP would never have assigned development rights to this parcel. To believe otherwise would be to believe that KICA has development rights for the entire 10-mile strip.
Development rights, by definition, are not limited to “for-profit” activities. A second Sandcastle, for instance, could not be constructed there without development rights.
Prior to submitting this vote to the membership, KICA discussed the development rights issue as well the lack of access to the property with our legal counsel in great detail. We have said previously that we think we could likely get access to the property by filing a legal action. How long this would take and what it would cost isn’t known. We could also take legal action in an attempt to acquire development rights. Counsel suggested that this would be a long, expensive process, with a limited chance of success.
Several have asked how many votes KP has to cast in the election. They have 261 votes out of 9,086 eligible to be cast
We continue to get a number of questions about what KP can do with the property, and specifically can they build a “Beach Club” type facility. While residential is the most likely scenario, the Town Zoning (R3/C) has a variety of allowable uses and a recreational facility would be allowed. This is the same zoning on all the surrounding parcels, so KICA continuing to own the parcel certainly would not influence the type of development in the general area. The Town of Kiawah may answer detailed questions on zoning. View the Town of Kiawah zoning code.