upon the value of the mortgage security.
The bondholders presented the opinion testimony of a real estate expert, Mr. Mason, that the fair market value of the interests to be conveyed is $295,000. He valued Parcel No. 1, the 100-foot strip directly beneath the (former) bridge, at $3.80 per square foot, or $186,610. He valued the slope easements and construction and maintenance easements, Parcels 2, 3, 4, and 5, at the rate of $2 per square foot, for a total of $108,038. These totals were rounded off to the aggregate sum of $295,000. The Debtor's evidence, via the affidavit of Mr. Gasparini and other supporting affidavits, was to the effect that the property has only "negative value." In my opinion, neither approach is entirely persuasive.
Mr. Mason's appraisal is flawed by his failure to take into account the cost of removal and relocation of existing facilities, which would be necessary in order to make the property saleable at all. Thus, his figure is at least $85,800 too high. Moreover, his basic square foot prices seem somewhat inflated, when compared with the allegedly comparable properties he referred to, all of which were in more favorable locations. More importantly, I feel that he failed to give adequate weight to the pre-existing perpetual easement which authorized the City of Boston to maintain the Summer Street bridge for public travel. To me, it is inconceivable that a purchaser could be found who would be willing to pay $186,610 for the 100-foot strip of land under the bridge, subject to this easement.
I found Mr. Gasparini's prices per square foot more realistic; however, it is clear from his affidavit that the "negative value" was arrived at by taking into account the obligation of the Debtor to pay one-half of the cost of reconstructing the bridge. For the reasons discussed above, that obligation does not affect the lien value.
Mr. Gasparini valued the 100-foot strip beneath Summer Street at $.60 per square foot, or $29,464. He valued the slope easements and other easements conveyed in Parcels 2, 3, 4, and 5 at $1.50 per square foot, or $82,500. Thus, according to Mr. Gasparini's appraisal, the market value of the interests to be conveyed is $111,964. I accept this figure as substantially accurate.
Subtracting from that figure the $85,800 which must be expended in order to make the property saleable produces a net value of $26,164. In my opinion, substitution of security in that sum is required in order to protect the interests of the lien holders.
I have concluded that the full cost of $85,800 is properly deductible from the gross market value for purposes of the issues now before the Court. While the actual cost to "strip" the land in order to make it theoretically saleable may be less than the sum mentioned, it seems reasonable to suppose that whatever "relocation" costs are included in the $85,800 figure would, to a large extent, represent "betterments" of the facilities retained by the Debtor. And even if these expenditures are properly chargeable to operations, the full sum should be taken into account in determining the effect of this transaction on lien value; the lien creditors are not entitled to have operational funds used in order to create or enhance market value of liened property.
For present purposes, I believe the factor of insurance need not be considered. The objectors apparently make no contention in that regard. In any event, the factor of insurance should not affect the result reached. In its overall settlement with the New Haven, the Debtor did receive proceeds from several insurance claims, of which $148,201 appears to have been allocable to the Summer Street bridge damage. Presumably, $85,970 of this amount was used in reimbursing the New Haven for the amount expended in removing the debris, leaving a balance of $62,231. It does not appear that the lien of the Divisional First Mortgage ever attached to these proceeds, or that anyone ever claimed that it should. No attempt was made in the 1969 settlement to restrict or segregate these proceeds. Needless to say, they are not now available to the reorganization Trustees.
For the reasons discussed above, an order will be entered requiring the reorganization Trustees to furnish substitute security in the sum of $26,164. This can take the form of a deposit in cash in that amount, pursuant to Order No. 78. However, if a cash deposit is not feasible, the Court will, upon application and cause shown, consider alternative methods of providing such security, in accordance with the principles enunciated in Central Railroad Company of New Jersey v. Manufacturers Hanover Trust Company, supra.