1 North Broadway in Salem

John Kakavitsas has invested $1 million in this building at 1 N. Broadway since 2007, now the state is offering just $800,000 to acquire it for a road improvement project on Route 28. 

SALEM — Property owners with land being taken to improve Route 28 say the state Department of Transportation is low-balling them.

In some instances, the offers DOT calls “fair market value” are tens of thousands of dollars below what owners paid years earlier, they say.

John Kakavitsas owns 1 N. Broadway, a retail building with five storefronts, including a tattoo parlor, nail salon and used video game store.

“They put me in a bad position right now,” the landlord said.

Kakavitsas bought the building in 2007 for $910,000. Add in closing costs, legal fees, and another $98,000 in repairs and improvements, and he has more than a million dollars in the investment. Last fall the state offered him $800,000 for it.

On Feb. 8, the state gave Kakavitsas notice that if he does not accept the offer in 30 days, it will file a Declaration of Taking under the state’s eminent domain law.

Kakavitsas, 60, grew up in Salem and once owned a chain of pizza shops in Salem and neighboring towns that he sold about 2006, and with cashing out his 401K retirement savings was able to buy his commercial property. He still owes about $240,000 between two banks, he says.

“This is the only income I have,” said Kakavitsas.

His building is about 5,000 square feet. Kakavitsas has looked for a similarly-sized retail property, but they average about $2.2 million and nothing is selling for less than $1.8 million.

Kakavitsas said he was offered $1.6 million for his property in 2012.

Asked why the state would pay so much less, DOT spokesman Bill Boynton said the offers are based on “fair market value as determined by a real estate appraiser.”

“Property owners are encouraged to have their own appraisals done, which the department will take into consideration,” he said. “Ultimately, if the property owner and the department can’t come to an agreement on fair market value, the matter is turned over to the Board of Tax and Land Appeals where the owner can present their appraisal to make a case for additional compensation.”

That process is no better than the offer, according to Kakavitsas.

“It’s not fair at all,” he said.

The state plans to acquire seven properties outright along Route 28 in an area known as Salem Depot and pieces of another 22 parcels. All seven of the parcels DOT wants in whole are commercial properties. So far, according to Boynton, there are deals on two.

The $12.2 million project planned for the summer of 2020 will widen the intersection at Route 28 and Main Street.

Jim Desjardins, owner of Daisy Cleaners at 14 S. Broadway, has been aware of the project for years, but is disappointed with how the state is treating property owners.

“We’re actually the oldest running business in the Depot,” Desjardins said. His family started the business in 1963 and he bought the building for $350,000 about 17 years ago. The state has offered $345,000.

“So, not a good deal for me,” he said.

A fair deal, Desjardins believes, would provide him a property of similar size and value nearby, which he sees as unlikely.

Desjardins and Kakavitsas are working to get independent appraisals to counter the state with prices that better represents fair market value, in their view.

Desjardins believes his is worth close to $600,000 with the nearby Tuscan Village development shifting the landscape in downtown Salem. He has plans to move his business to a leased space at 160 Main St.

The state will help cover up to $100,000 in certain costs associated with relocating a business, but they need to pay for any expenses up front and later ask for reimbursement.

The landlords and property owners aren’t the only to be affected. Some of those leasing commercial space in buildings the state would demolish are likely to pay higher rents elsewhere.

The businesses at 1 N. Broadway are in various stages of moving. The tattoo parlor is moving to 223 N. Broadway and the game store and nail salon are moving to different units at 221 N. Broadway, according to signs on their front doors.

John York, the owner of Allegra Marketing Print Mail, one of the tenants previously located at 1 N. Broadway, said the recent move to 11 Industrial Way resulted in a rent increase from $1,300 to $3,000 a month plus additional utility costs. The space also increased from 950 square feet to about 3,500 square feet.

The state is covering the difference in rent for the first two years, as well as some additional marketing to inform clients of the move, York said. There will be less traffic and visibility at the new location.

“Now we have to work a little harder to get our name and our process and what we do out there,” he said.

Other business owners who didn’t wish to be named said their rents would roughly double at new locations.

Eileen Llyod, 55, owner of Not Just Curtains, is under agreement to sell her property at 28 S. Broadway to the state for $380,000 after an initial offer of $290,000, she said, for a property she considered her retirement plan.

“Since July, I’ve been fighting and grovelling,” she said. Lloyd bought the property for $260,000 in 2010 and including renovations estimates she has $340,000 invested in total.

Lloyd said the governor’s office and Sen. Chuck Morse of Salem ultimately had to intervene on her behalf to reach her agreement with DOT.

“It was mind blowing when I started the process,” Lloyd said. “Lots of sleepless nights.”