Buying a century-old piece of real estate with an agreement to do a short term lease to the RNC which will be flush with cash is indeed a great way to make a quick buck.<\/p><\/blockquote>\n
Of course, in a depressed commercial real estate market like downtown Saint Paul, a “quick buck” is hard to find under any circumstances.\u00a0 But once you get into the actual <\/em>circumstances…<\/p>\n…well, we’ll get back to that.<\/p>\n
The commenter also sniffed…:<\/p>\n
Talk about making assumptions. You do understand the difference between renting an apartment and staying in a hotel right?<\/p><\/blockquote>\n
I don’t do a lot of either.\u00a0 But I digress.\u00a0<\/p>\n
Since I hate making “assumptions”, I did a little poking around.<\/p>\n
Yesterday and today, I got emails back from a person with long-standing ties to Saint Paul politics and urban development (who shall remain anonymous).\u00a0 He was involved in the 1981 sale of the two buildings (and the adjacent Jackson Street Ramp), a transaction worth $5.6 million at the time.\u00a0<\/p>\n
\u00a0> They just sold again
\n> for $10.00 TOTAL.<\/p><\/blockquote>\n
I assumed it was a typo.\u00a0 It had <\/em>to be $10,000,000.\u00a0 Right?<\/p>\nWrong.\u00a0 Ten dollars.\u00a0 A single Alexander Hamilton.<\/p>\n
I asked what the story was – a nifty (judging by external appearances) old building, a historical landmark (it used to house the anscestor of the Pioneer Press) and piece of decent (to the layman) office space, going for less than the cost of taking two kids to Wendys?<\/p>\n
The two things I figured were possibilities – a huge blog of debt, or political favoritism.<\/p>\n
The answer, naturally, was neither.\u00a0 My source wrote again (I’ve added some emphasis):<\/p>\n
There was no debt for the buyer of the three buildings and parking
\nramp.\u00a0 Commercial property is primarily valued by the annual net operating
\nincome\u00a0the property provides.\u00a0 This is true for both property tax and market
\npurposes.\u00a0 The only real income produced is from the parking ramp.\u00a0 The
\nrest of the buildings are 98% vacant. On a cap-rate approach to value, the property would have a negative value.<\/strong>\u00a0 This happened because the US Bank\u00a0knew about 10 years ago they would not renew their master lease of the
\nproperty.\u00a0 They occupied most of the buildings.\u00a0 For all those years they
\nspent a minimum on maintenance.\u00a0 The current income doesn’t come close
\nto paying for even the operation no less improvements to the property.\u00a0<\/p><\/blockquote>\n\u00a0In other words, in a market clogged with under-occupied big-buck property, the Endicott\/Pioneer buildings came on the market out-of-date and poorly-maintained.<\/p>\n
Corporate welfare, he says, is the culprit:<\/p>\n
This is a good example of a public subsidy for a private corporation
\nwhich seriously damaged the city. The city provided $15,000,000 in TIF to
\nhave them move out of the Downtown, across the river.\u00a0 The new building
\ndoesn’t even cover its own taxes; no less contribute to the city, county or
\nschools. The bank also vacated substantial space in the First National and First
\nTrust Center buildings, in the process seriously devaluing those
\nbuildings.<\/p><\/blockquote>\n
In other words, the city abated millions in taxes to keep US Bank in the city, in a new facility, on which the bank will be paying reduced taxes for quite some time.<\/p>\n
The Pioneer, Endicott buildings are worth nothing.<\/p><\/blockquote>\n
So in other words, the choice was:<\/p>\n
\n- Have a couple of worthless empty buildings in a glutted office space market continue to provide no revenue<\/li>\n
- Have a couple of worthless empty buildings provide a years’s worth of pretty decent revenue due to an accident of proximity, in a glutted office space market.<\/li>\n<\/ol>\n
After the convention, the market will still be…glutted!<\/p>\n
A quick buck beats no buck at all…<\/p>\n","protected":false},"excerpt":{"rendered":"
A week ago, I wrote about the sale of the local “Endicott\/Pioneer” buildings. The new owner plans to evict the current tenants (more on them later) and lease the building to people working on or about the upcoming GOP Convention.\u00a0 My tone of approval for the deal drew one of my regular commenters, who took […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"class_list":["post-964","post","type-post","status-publish","format-standard","hentry","category-st-paul"],"_links":{"self":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=964"}],"version-history":[{"count":0,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/964\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=964"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}