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Tuesday, January 3, 2017

Provincetown time-share complex on the auction block

Source: Cape Cod Times
By K.C. Myers

More than 1,200 time-share owners will lose their weeklong vacation spot, but the town may gain 26 year-round rentals if a deal to buy a bankrupt complex works out.

PROVINCETOWN - More than 1,200 time-share owners will lose their weeklong vacation spot, but the town may gain 26 year-round rentals if a deal to buy a bankrupt complex works out.

Harbor Hill at Provincetown, a 30-year-old time-share complex in the West End, closed in August after trustees filed for Chapter 7 bankruptcy. It is scheduled to be sold at auction early next year.

The 26-unit complex experienced a "classic timeshare death spiral," according to documents filed in U.S. Bankruptcy Court District of Massachusetts. The death spiral occurs "when a timeshare manager fails to match annual dues to necessary annual expenditures, and instead defers needed maintenance and other expenses in order to keep dues low," according to court documents written by Warren Agin, the Boston attorney appointed by the U.S Department of Justice to act as the association's Chapter 7 trustee.

Harbor Hill's death spiral was allegedly aided by Donna Zoppi, the former manager of Harbor Hill, who is accused to failing to pay local and federal taxes on the property for several years, according to court documents. Zoppi could not be reached for comment.

Her alleged mismanagement was discovered by two unnamed former trustees of Harbor Hill in late 2014. They found she failed to pay taxes, failed to maintain property business records, and had been repurchasing intervals on behalf of Harbor Hill, reselling them to new owners, and diverting the profits, according to the court documents.

"Employees were not being paid and telephone services was about to be canceled," court records state.

The Provincetown Police were notified in 2015 about Zoppi's alleged activity, Chief James Golden said. At the time, the state attorney general's Consumer Fraud Division was investigating the case, Golden said. A spokeswoman for the attorney general refused comment. The AG's office policy is to neither confirm nor deny investigations. It appears Zoppi has not been charged criminally.

Maryellen Joncyk and Marjorie Fitzgerald have owned a time-share at Harbor Hill since the property first opened, said Joncyk, of Oxford, Connecticut.

They discovered it had closed shortly before they arrived for their week in September, she said.

"Good thing we called first," Joncyk said. "Because we were bringing a guest and it would have been embarrassing to find the place closed."

The bankruptcy filing on Aug. 30 came a few months before the state Legislature approved Provincetown's Year-round Rental Housing Trust in November. The trust, the first of its kind in the state, allows a town to raise money to buy or place deed restrictions on properties so they can be rented year-round to middle-income earners. It's designed to help fill the need for housing in a town dominated by a hot vacation real estate climate that takes year-round units off the market in favor of seasonal rentals and raises rents beyond what even professionals can afford.

People qualifying for the trust housing would be earning between 80 and 200 percent of annual median income, a range of $47,550 to $107,940 for a single-person household.

Voters have already appropriated $1.5 million for the trust. But Harbor Hill - which includes two one-bedroom apartments, 23 two-bedroom apartments, and one three-bedroom apartment - is assessed at $6.8 million, Provincetown Town Manager David Panagore said.

It's comprised of four buildings on 1.2 acres of land, according to NRC Realty & Capital Advisors, which will conduct the auction.

A $150,000 bid deposit is due on Feb. 14

The town must hold a special town meeting and election in early February to approve the purchase.

The property is in great shape, said Selectman Tom Donegan, who toured it with other selectmen last week.

"It's perfect for middle-income housing," he said. "It may need some new carpets and drapes but otherwise everything is in place."

Parking for 27 cars is part of the deal.

The town is in the early stages of considering the purchase, Panagore said.

The municipality would need to bid against commercial buyers.

"We are competing with Goliath," Donegan said, referring to real estate investors.

The selectmen's goal is to have the Harbor Hill purchase be a self-sustaining enterprise, according to a press release from the board.

The rents paid by the tenants would need to cover the cost of the purchase and maintenance, so what the town can spend will be limited, Donegan said.

Harbor Hill owes the town $114,023 in back taxes as of Jan. 1 for the years 2013 and 2014, Panagore said. Taxes for 2017 are $31,178, he said.

When the shortfall was discovered, Harbor Hill owed more than $900,000 in back taxes to the town and Internal Revenue Service, court documents state. Increased assessments to time-share owners has paid off much of that debt.

When the property is sold, it will be free and clear of any tax or time-share owner obligations, said David Levy, the auction manager for NRC Realty & Capital Advisors. NRC is attempting to get 80 percent of the over 1,200 time-share owners to agree to terminate the time-share agreement, Levy said.

They will be compensated based on a ruling from bankruptcy court, Levy said.

- Follow K.C. Myers on Twitter: @kcmyerscct.

The original version of this story has been corrected: Due to a reporting error, a story on the Chapter 7 bankruptcy of Harbor Hill at Provincetown and possibly purchase of the timeshare by the town, contained incorrect information about the initial deposit needed to bid on the property at auction. A $150,000 bid deposit is due on Feb. 14

To see a list of convenience stores for sale and gas stations for sale, click here.