Town Makes Offer To Buy Surfside Lifesaving Station From Blue Flag

The town is making a strong effort to acquire the historic Surfside lifesaving station and former youth hostel property from Blue Flag Partners, the Current has learned.

A formal multi-million offer has been submitted to Blue Flag Partners on behalf of the town, according to a town government source and internal documents reviewed by the Current. If the town manages to secure a deal with Blue Flag, the funding would still need to be endorsed by Town Meeting voters and on the ballot.

The goal would be to utilize the former hostel and other buildings on the property for seasonal lifeguard housing and the creation of additional year-round housing units for town employees.

But the town’s offer has not met Blue Flag’s full asking price, and it will be competing against at least one other private party also pursuing the property.

It’s been more than four months since Blue Flag Partners announced its intention to sell the former lifesaving station at 31 Western Avenue with an asking price of $7.9 million, more than double the price Blue Flag paid for it in 2020.

The Select Board has discussed the potential acquisition of the property in several recent executive session meetings.

Here’s what we know so far about the negotiations:

• Last month, the town submitted an offer in the neighborhood of $4.3 million, which was rejected by Blue Flag.

• Last Friday, the Select Board was meeting in an executive session to discuss further a potential acquisition and the possibility of raising its offer to a previously authorized number of $5.5 million or more.

• Blue Flag has informed the town it already has an offer on the table from an unknown private party for $6.4 million

• The town has explored the possibility of utilizing a so-called “bargain sale” to acquire the property, which is an IRS program in which a property is sold to a qualified organization, typically a charity or non-profit, for less than the property’s fair market value in exchange for tax benefits. This is the same program the town’s Affordable Housing Trust utilized to acquire a property on White Street.

• The town hopes to reduce the amount of funding taxpayers would be on the hook for by utilizing Community Preservation Committee funding and a sale of a portion of the property to a third party, as well as the potential involvement of a non-profit organization in the deal.

• The town is weighing the Surfside lifesaving station/hostel acquisition against the potential development of a separate seasonal housing project on Waitt Drive.

Nantucket’s municipal housing director Tucker Holland, along with Blue Flag’s Terry Sanford and listing agent Carl Lindvall, all declined to comment for this story.

The property at 31 Western Avenue near Surfside Beach was purchased by Blue Flag in September 2020 for $3.55 million from Hostelling International. But two years later, Blue Flag Partners decided to sell the property, abandoning its original plan to convert the hostel into a hotel. The $7.9 million asking price, according to sources, reflects both the escalation of the real estate market since 2020, as well as Blue Flag’s investment of more than $1 million in design and permitting work for the hotel and a septic system.

“Blue Flag brought the project to a shovel-ready status for a full restoration and continued hospitality use,” Blue Flag co-founder Terry Sanford said in a prepared statement back in February. “Ultimately, we aren't going to be able to give the Star of the Sea the level of attention that we believe it deserves at this time so we are seeking a new steward who will carry forward our vision to back the grandeur of this one-of-a-kind property."

The property was not officially listed, as Lindvall and Blue Flag Partners said they wanted to allow some of the organizations and other parties who were interested in buying it back in 2020 to “get a first shot at it.”

The property includes the last remaining U.S. Life Saving Service building on the island, which dates back to 1874 and served as a lifesaving station through 1921. According to the Nantucket Preservation Trust, “the federal government retained ownership of the site until 1962, when Lilye Mason, a longtime housemother for American Youth Hostels, Inc. successfully bid to purchase the property and convert it for use into a hostel. In 1963, Ms. Mason sold the property to American Youth Hostels, Inc., now known as Hostelling International.”

It was then known as the “Star of the Sea” youth hostel for decades until the property was put on the market by the Hostelling International organization in the fall of 2020. Five bids were received, including one from the Egan Maritime Institute, but it was ultimately Blue Flag’s $3.5 million offer that was accepted.

At the time, former Egan Maritime Institute executive director Pauline Proch expressed disappointment that the property was not sold to the non-profit and said Egan was best positioned to be the next steward of the lifesaving station. Despite its own $3.5 million bid, Egan could not get the necessary contingencies in place before the closing, Proch said.

Egan announced in February that it would not be pursuing a purchase of the lifesaving station property from Blue Flag.

In the aftermath of the sale in 2020, the Select Board voted to transfer an existing preservation restriction on the property - which prevents any alterations to the exterior of the original lifesaving building - from the Nantucket Historic District Commission to the Nantucket Preservation Trust.