Mar 30, 2023
Wealthy Connecticut Town Sells Bonds for $85 Million Island Purchase
(Bloomberg) -- Darien, a town along the Connecticut coast that is one of the nation’s wealthiest municipalities, is selling about $115 million of debt next week, the bulk of which will finance the acquisition of a private island on its shoreline.
Municipalities sell bonds and notes all the time to buy open space, but this site — called Great Island — is, well, pretty spectacular, like something out of “The Great Gatsby.”
The 60-acre property on Long Island Sound includes a 13,000-square foot, 10-bedroom, 8-bathroom mansion built in 1905 for “baking powder magnate William Ziegler,” as Town & Country magazine put it. The island has been in the family all that time, and first went on the market in 2016 for $175 million.
The site also includes a guest house, a caretaker’s cottage, a farmhouse, a seaside cottage and an equestrian facility with tiled ceilings created by the same engineer who designed the vaulted tile arch system used in Grand Central Terminal, the magazine said. There’s also a pool, a couple beaches, some nice terraces and a dock that can accommodate a 100-foot yacht. The island is connected to the mainland by a causeway.
“With this purchase, we have prioritized the conservation of this magnificent property, saving it forever from intensive development,” First Selectman Monica McNally said in a press release this month.
In a “Visioning Plan,” Darien officials called for part of the island to go toward community activities, including equestrian uses, a seasonal marketplace, croquet courts and the inevitable pickleball facility. A portion could be for a museum, an arts center and a farmers market, while another would be used for conservation and education. The existing beaches and shoreline may be used for recreation.
Darien is about 40 miles (64 kilometers) up the coast from Manhattan, in an affluent area where hedge funds and other finance firms have expanded operations. It was named the 10th-richest place in the country in a 2020 Bloomberg ranking, with an average household income of $352,839.
The town initially agreed to buy the island for $103 million in 2022, and negotiated a final price of $85 million after due diligence, according to the press release this month. The sale is expected to close in May.
Darien renegotiated the price after Federal Reserve interest-rate increases starting last year softened up the real estate market, according to James Palen, chairman of the town’s board of finance.
The municipality is scheduled to sell about $72 million of general-obligation bond anticipation notes at auction on April 6, the same day as a roughly $43 million bond offering. The notes mature in April 2024, when they’ll be replaced by long-term debt. That will give the town a year to plan the island’s use, which will determine the taxable and tax-exempt composition of the final issue.
The town is using almost three-quarters of next week’s proceeds for the island acquisition. The remaining $30 million will pay for work on an elementary school and other projects, according to Palen.
In rating the town Aaa in 2022, Moody’s Investors Service cited its “well sized tax base and exceptionally strong resident wealth.” The full value per capita in 2021 — the value of all taxable real property in a municipality divided by its population — was $572,946. The US median is $97,657.
In the words of Moody’s, the town of some 21,500 is in a “solid fiscal position.”
The acquisition adds to Darien’s debt and at the same time removes the island from property tax rolls. But Palen said this would be offset by three mixed-use developments coming on line in 2023.
Moody’s declined to comment on whether the acquisition would have any impact on the credit rating. Palen said that in discussions with Moody’s both recently and last year, no red flags had been raised in connection with the acquisition. He said he didn’t expect it would affect the rating.
“This is the largest private island ever to be offered for sale on the East Coast and represents a once-in-a lifetime opportunity,” says the listing on the Douglas Elliman website.
It’s the kind of place of which my mother used to say, “See this? If you work really, really hard, you can live here someday.”
(Joe Mysak is a municipal market columnist who writes for Bloomberg. His opinions do not necessarily reflect those of Bloomberg LP and its owner, and his observations are not intended as investment advice.)
--With assistance from Kenneth Hughes.
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