Published in The Day

By Elizabeth Regan

East Lyme ― A mix of 43 houses and townhomes bordered by 301 acres of preserved land is being proposed in the north end of town as part of what a project consultant calls an “open space play” that leverages land conservation and affordable housing.

The 12-acre property owned by South Carolina-based Duval Partners LLC was submitted to the Zoning Department in early March. It calls for 19 houses and four six-unit townhomes on Holmes Road near the Montville border. All the units would have two bedrooms.

Six of the houses and eight townhouses in the development would be designated affordable, according to the application. That means families making less than $90,080 at the low-income level or $67,560 at the very low-income level would qualify for reduced rent.

The neighborhood would be served by well water and individual septic systems. It’s located about seven-tenths of a mile from Route 85 in Montville.

Hundreds of acres comprising the adjacent Nehantic Nature Preserve were acquired last March by the East Lyme Land Trust for $1.58 million, according to the organization. The land trust said it used grants from the state's Open Space and Watershed Land Acquisition Grant Program, the Community Foundation of Eastern Connecticut and the Bafflin Foundation to buy the land.

Real estate investor and developer Stephen Harney, a former East Lyme resident now living in North Carolina, said he approached Duval Partners because he thought the investors would be good candidates “for another big open space play.”

Duval Partners held the mortgage for a prior owner of the property before taking it over in 2015 foreclosure proceedings.

Harney, who describes himself as a conservation intermediary, was involved in preserving 166 acres of land at the headwaters of the Niantic River in 2017. That’s when KSK Associates, where he is listed as principal, sold the land to a conservation group for roughly $1.2 million after grant funding, private donations and $350,000 from the town were secured. Harney was Board of Finance chairman at the time, but recused himself from the board’s discussion and vote on the $350,000 expenditure by the town.

“Put it in open space and take a big tax deduction,” he recalled suggesting to Duval Partners.

Between roughly $650,000 in grants and the appraisal price, Harney said the transaction yielded $1.1 million in tax deductions for the investors.

Harney said his ideal scenario would be for the current owner to donate the land to a nonprofit developer devoted to affordable housing. He said the possibility becomes more feasible if a housing development is approved on the property, because showing the land can be used profitably drives up the appraisal value and the potential tax deduction for donating the land.

“At the end of the day, the only way to deliver affordable housing is to get land at a very attractive price and then build units that are cost effective to build. Because there’s no magic here,” he said.

Zoning official Bill Mulholland this week said he had not yet reviewed the application. He said the application would be put on the March 16 Zoning Commission agenda to be scheduled for a public hearing, likely in May.

The land trust is currently the subject of an inquiry from the state Office of the Attorney General stemming from its purchase and financing of 120 acres known as the Hathaway property near Lake Pattagansett. The property was sold to the land trust by the Delaware-based Hathaway Farm LLC, an entity Harney said is controlled by his family. The company now holds the mortgage on the property for the land trust.