Thinking about buying an entire town? A few things to consider before closing

In 2017, something unusual happened in Nipton, California. The town, which is located in San Bernardino County on the edge of the Mojave National Preserve, was purchased by American Green Inc., a cannabis company, for a mere $5 million dollars. For less the cost of purchasing many luxury condos in New York City, American Green Inc. got 80 acres and just about everything in the 80 acres, including an old-West-style hotel, RV park, a few homes, and a coffee shop. What American Green Inc. didn’t get were many residents—by the time of purchase, Nipton had dwindled to a couple dozen residents.  

According to Realtor Magazine, American Green Inc. has grand plans for Nipton. The company plans to turn Nipton into “an energy-independent, cannabis-friendly hospitality destination.” In addition to expanding the town’s existing solar farm that already provides much of its energy, the company hopes to use the town as a base to start bottling and selling cannabis-infused water. American Green Inc. is also contacting other cannabis businesses in a bid to get them to relocate to Nipton, which they hope to eventually turn into a cannabis mecca.

While purchasing an entire town, especially at a bargain-basement price, might be a good business move, is it ethical? Also, when entire towns go on the market, what additional questions should investors consider before closing any deals?

Company Towns and Ghost Towns

While Nipton may be one of the most recent towns to be purchased by a company, it is certainly not the first example of a “company town.” In the United States, there is a long history of company towns, though in the past, they were typically established not purchased. Examples include Hershey, Pennsylvania, which was established in the early 1900s by the Hershey Chocolate Corporation, and Playas, New Mexico, which was established by Phelps Dodge Corporation in the 1970s. In addition, there are company neighborhoods, such as Steinway Village in Astoria, Queens, which was established by the piano manufacturer Steinway & Sons in the 1870s.

Today, it is more likely for a company to purchase than establish a town, and cannabis entrepreneurs aren’t the only people on the market. In 2017, Johnsonville, Connecticut was purchased by Iglesia Ni Cristo—the Church of Christ—for $1.85 million. Notably, this wasn’t the first time Johnsonville had been bought and sold. The town was originally purchased by Raymond Schmitt, the CEO of AGC Corporation, in the 1960s. Oddly, Schmitt not only bought the town but later bought and relocated several Victorian-era buildings to make his town look older and quainter than it was in reality. Another recent town sale is Tiller, Oregon, which was purchased in 2018. The new owners of Tiller have asked to remain anonymous, so it is unclear if the town was purchased by a business or individual, but the new owners have made a few things clear—shortly after the town’s sale, they told the Oregonian that they are neither a cannabis company nor nudists.

For anyone currently looking to purchase an entire town, there are still bargains like Johnsonville and Tiller on the market. In 2016, Cal-Nev-Ari, Nevada, which includes an airstrip, diner, and casino went on the market for $8 million and to date, there is no record that a deal has been closed. Another potential option is Millican, Oregon, which is currently not on the market but has recently been listed on two occasions for just under $1.5 million. If Millican, which only had four residents at last count, is too sleepy, however, you might want to consider Toomsboro, Georgia. This active listing—for more details see the town’s promotional video—is home to 700 residents and includes a syrup mill, opera house, cotton warehouse, and grist mill among many other buildings. As of September 2018, the entire town was up for grabs for a mere $1.7 million.

Considerations Before Buying a Town

While buying a town may sound appealing, before you start shopping, it is prudent to consider a few potential challenges and ethical questions.

First, if you’re purchasing a remote ghost town, it is likely the town is off the grid. While you may be able to rely on wind or solar power, depending on the location, other essential utilities, including water and broadband access, may be harder to come by. While inspections and land surveys are a standard part of any real estate purchase, when purchasing a town, expect this stage of the process to be far more extensive and expensive.

Even more complicated than purchasing a ghost town, however, is the decision to purchase a town with living residents—for example, a town like Toomsboro, Georgia. In this case, beyond inspections and land surveys, the onus will also be on you to determine what services—for example, public schools and roads—you’ll be expected to keep up and running. If you’re purchasing a town to set up a new business, it will also be important to consult current residents. While they may not be able to dictate what you do with the town, having the support of existing residents will certainly make your life and business venture easier.

Finally, and perhaps most importantly, it is important to consider the broader ethical questions raised by any town purchase. Given the very long history of company towns in North America, there is certainly nothing unusual about corporations owning entire towns. Yet, this history also reveals that corporations have also not always been reliable landlords. Indeed, most ghost towns are towns that were once owned by companies, usually mining or lumber companies that abandoned the towns in question once the resources they sought to extract were depleted. The ethical question to ask before investing in a town seems rather obvious: What are you prepared to invest in the town beyond the initial purchase price and how long-term is your investment and commitment?

Lead image via Wiki Commons