Whitney estate owner says tax pressures among reasons to divide land

By Gwendolyn Craig

The challenges of owning 36,000 acres of prime Adirondack real estate, along with new pressure from the Internal Revenue Service, are part of what John Hendrickson says motivated him to pursue subdividing the historic Whitney estate near Long Lake.

Conservationists and recreationists have long coveted the property for addition to the public Adirondack Forest Preserve, though Hendrickson has said he’s not selling to the state. Instead, his proposal could be one of the most significant tests of the Adirondack Park Agency’s large-scale subdivision permitting process, which many environmental advocates believe fails to prioritize natural resource protections. Legislation that they say would strengthen the agency’s authority over big subdivisions has stalled in the state Senate and Assembly this year.

Unable to write off business expenses without cutting more trees, and so far unable to find a single buyer for the woods and waters at his $180 million asking price, Hendrickson now says he’ll attempt to split the property into 11 lots and sell for up to $238 million in all. 

It’s a price that some have scoffed at, but that Hendrickson believes he can command, in part because each property would have at least one lake.

Hendrickson, widower of Saratoga Springs philanthropist and socialite Marylou Whitney, listed the property last year but said interested buyers were overwhelmed by the parcel’s size. 

“It’s 2 ½ times the size of Manhattan,” Hendrickson said. “It’s a country.”

Recently, the IRS has also started an audit on Hendrickson’s company Whitney Industries, Hendrickson said. Though the IRS has not made a final determination, Hendrickson said the federal agency has told him his company is not making enough revenue to write off business expenses. Some of those expenses, he said, include maintaining 100 miles of roads and employing accountants and foresters.  

The Adirondack Park Agency’s rules and regulations, along with the area’s poor soil types and a relatively short growing season, can make sustainable timber harvesting difficult, said Craig Vollmer, a forester and the executive director of the New York Forest Owners Association. A tree-killing microburst storm, which Whitney Industries noted in a 1990s subdivision proposal for nearby land that the state eventually bought, could also complicate the operation.

Usually, though, timber companies have long-term plans that satisfy IRS requirements. Vollmer said those plans would have every piece of the property mapped out with harvesting schedules, projections of income and detailed information on what kind of tree growth is in place. 

“You still have business expenses to operate the property,” Vollmer said about the potential lag time when harvesting may not be possible. “That (a long-term plan) would demonstrate to the IRS you’re not just treating it as a big write-off, but it’s actually a business (that’s) just not yielding income.”

The IRS, Hendrickson said, has suggested that Whitney Industries could be deemed a “passive business,” which he said he plans to fight. If deemed passive, he would no longer be able to claim the tax write-offs that he said the business has always had. He wondered why the 123-year-old family business is being targeted now, shortly after his wife died in 2019. Nothing has changed with how the company operates, he said. 

An IRS spokesperson said federal law prohibits the IRS from commenting on specific taxpayers and companies.

Whitney estate: Recent coverage

• July 30, 2020: The initial news about the Whitney estate property going up for sale
• Aug. 18, 2020: Owner John Hendrickson confirms that he will not sell to developers or the state.
• May 29, 2021: Hendrickson announces new plan to divide the property into 11 parcels.

Photo courtesy of John Hendrickson

The federal government’s attention has spurred Hendrickson to look at how else Whitney Industries could make money, and additional logging does not appear likely.

Among the challenges with logging the property, Hendrickson said, are its 22 water bodies. Whitney Industries has to abide by shoreline setback requirements when cutting timber. The company also cuts selectively to create a variety of tree sizes and species, instead of by clear-cut. 

“It’s impossible,” Hendrickson said of logging more to make more money and satisfy the IRS. “It’s a unique piece of property, and I feel very blessed and burdened owning it.”

Hendrickson said he may create a real estate subgroup of Whitney Industries in order to make more money, or he may convert the whole business to real estate. His sales plan would create 11 lots of 3,200 acres each. Camp Deerland, the Adirondack great camp on Little Forked Lake, would be listed at $50 million. Hendrickson would still like to log the land, at least until the properties are sold. He also wants to put some kind of conservation easement on each of the parcels so that property owners may not further develop them. 

Whitney Park, as it is sometimes known, was originally more than 80,000 acres, with the first 68,000 acres purchased in 1897 by William C. Whitney. Marylou Whitney’s previous husband, Cornelius Vanderbilt Whitney, left the property to her after he died in 1992. 

In 1997, the family planned a 40-home subdivision around Little Tupper Lake. Then-Gov. George Pataki stepped in and paid $17 million in state funding for about 15,000 acres of Whitney Park. Though it failed to come to fruition, that 1997 subdivision proposal sheds some light on what Hendrickson will have to see through his new proposal.

He will have to submit a master plan and subdivision permit application to the APA.

There have been few proposals to require a master plan. But in Whitney Industries’ 1997 master plan, the justification for subdividing is nearly the same as Hendrickson’s today: timbering was not economically viable to sustain the property.

“Portions of the property are currently undergoing a necessary timber regeneration phase projected to last 30 to 50 years,” the 1997 master plan reads. “Since sustained yield cutting practices have never been able to support costs of operating Whitney Park, and, with few good trees currently in that growing stock for at least the next 30 years, a sustained yield would produce negligible amounts in financial return.”

The former master plan also pointed to the 1994 microburst that blew down a number of trees in the Adirondack Park. Whitney Park suffered losses, though the plan does not say how much. By that master plan’s accounting, too, Hendrickson’s company is still a few years away from the earliest regeneration of trees, and more than 20 years away from the latest estimate.

“It’s a unique piece of property, and I feel very blessed and burdened owning it.”

— John Hendrickson

Throughout his career, Vollmer, of the forest owners’ group, has followed the Whitney property. He has visited it once, and has known foresters who used to work there. If he owned those 36,000 acres, he said, he would try to sell it outright rather than to subdivide it. But he would not put any easements on the property. Vollmer said there are timber investment management organizations that buy up timberland, sell off the high-valued lakefront for real estate and log the areas that can be logged. 

Selling the property to someone who won’t log it will be difficult, Vollmer said. It would take a billionaire who feels nostalgia for owning one of the historic great camps, and who is willing to hire a team to manage the property and keep it as a getaway.

“That’s a very small market,” Vollmer said. “There are only so many Oprah Winfreys and Bill Gateses in the world.”

Vollmer thought Hendrickson’s $180 million price tag was high, at least for the types of trees to be harvested on the property. According to the 1997 master plan, maple, birch, beech, spruce, fir, pine and hemlock dominate the tree stands. Vollmer guessed the timber value per acre could range from $500 to $2,000, but adding in historic buildings and lakefront real estate could push it higher.

John Sheehan, communications director for the Adirondack Council, told the Times Union of Albany that he still thinks Hendrickson’s $5,000-an-acre asking price for the full 36,000 acres is too high, and the subdivision asking prices are even more inflated.

Sheehan said that in Long Lake, one acre is valued at approximately $1,600. Using that figure, he estimated that Hendrickson should be asking for $56 to $58 million for the Whitney property.

The subdivision plan could work, Vollmer said, but he did not think buyers would want an easement on their land.

Hendrickson expects the new master plan and subdivision permit application for the APA to take 1 ½ to 2 years to complete. He has been in touch with APA staff about beginning the process, he said.

“Ultimately if one person wants to come in, that would be ideal,” Hendrickson said, about a buyer for the full 36,000 acres. “I just had trouble finding that person last year.”

The new subdivision proposal had advocates in an uproar. Protect the Adirondacks, Adirondack Wild, the Adirondack Mountain Club and the Adirondack Council have all called on the state to buy the land since Hendrickson first announced it was for sale. The groups also used Hendrickson’s latest proposal as a rallying cry for state lawmakers to pass the conservation design bill before the end of session on June 10. The bill would require “the APA design large subdivisions like this one to concentrate the new homes near existing roads and other infrastructure while maintaining intact the lakeshores, wetlands, and blocks of forest for wildlife, forestry, water quality and open space recreation,” according to a letter environmental groups jointly issued to lawmakers.

David Gibson, managing partner of Adirondack Wild, quoted the adage, “Never let a good emergency go to waste,” in hopes that Hendrickson’s proposal would draw attention to senators and assembly members in the last flurry of legislation passage. The bill did not pass this year, and the groups will have to lobby again next year. 

Hendrickson, however, says his proposal is the best possible outcome for the Adirondacks and the environment.

“I firmly believe this is better protection for the land than just opening it up to public use, run by the state of New York,” Hendrickson said. The state struggles to manage what it already owns in the Adirondacks, he said. “I think they’re well-intentioned, but they just don’t have the resources to back up what they need to do for managing the land.”