A downtown St Paul 16-story tower is closing because the owner failed to pay utilities. Major areas of bldg empty, but remaining smaller tenants have until end of March to vacate. Owned by Madison Properties, but the elderly owner died last year (?) and 16 (?) properties are now on the market, some condemned (at least one 100+ unit renting to low income people downtown).
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Partly this and other downtown shock cases are economic phenoms, but this primarily resulted from digital meeting capabilities meet covid.
I see this as a warning that we investors need to wake up to many ancient reliable patterns and valuations becoming very fragile.
Downtown prime Real Estate is just the canary in the digital coal mine, and there it is dying in its cageâŚ. and we miners are still mostly heedless in the mine.
I think we are in for a turbulent investing epoch, but one with multiple new opportunities as well as dangers.
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Does this have anything to do with it?
The African American communities are moving quickly in cities across the nation to stop racist policies. The lawyer who wrote this book is brilliant. The show on NPR was well done.
https://www.wabe.org/new-book-examines-how-racist-policies-stifle-black-homeownership/
For instance, Detroit, ground zero for racist policies, went bankrupt but Wayne County made money off the foreclosed upon homes in Detroit. The people foreclosed upon in a city that is 97% black were generally black but the people buying for pennies on the dollar were black and white and everyone else outside of Detroit.
Her thesis it is more effective to work against a policy than to call for systemic change. What is systemic? If anything the policies but systemic makes things vague. Policies are clear to anyone particularly to African Americans who can control many cities.
Why has there been long term blight in the inner cities? Because lenders wonât make home improvement loans. So property values drop and crime rises. The lending policies need to be changed. People want to invest in their homes.
https://www.wabe.org/new-book-examines-how-racist-policies-stifle-black-homeownership/
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Speaking of Detroit, after years of dilapidated old buildings being renovated, Detroit now has a surplus of space. GM is moving itâs HQ to a new, smaller, office tower nearby, making the vacancy issue at the Ren Cen, on the riverfront worse. The Ren Cen was built in the 70s. So, the âJCsâ want to tear down the two square towers closest to the river. They will put up a Million, and put the bite on taxpayers for another $400K, for the demo.
Steve
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Fast forward ten or twenty years when humanoid robots have taken over 80% of all menial workâŚ
The most productive part of Capitalism is business. Investing is shuffling the chairs. Move your chairs to the best business and hope you got it right. Store of value is fiction. There is no store of value, only an accounting for value. Value is ephemeral. ¿¿¿Fragile???
Invest accordingly.
The Captain
Are the pitchforks are out to get Elonsteinâs Monsters? That might sink an investment vehicle.
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No. He owned good properties in downtown St Paul before the Covid Plague. Lots of empty buildings in downtown St Paul nowâand nobody interested in renting them. One saleâat massive loss. Downtown Minneapolis office tower (31 storiesânow empty) sold for about 5% of its build/buy price ten years ago. Company moved to suburbia and abandoned downtown.
Related to yesterdayâs thread âNew food desert in downtown St Paul, MNâ.
DB2
Sort-of. The businesses will move to nearby locations. But the commuter workforce is mostly gone from downtowns nationwide.
All sorts of real estate must be in chaos now. Commercial real estate especially. Work at home from Covid reduced need for office space. Now companies are asking people to return to office. Govt is selling surplus office space. Reducing staff. Asking others to return to office. Its a time of change and uncertainty.
Residential space is probably most reliable. We have a housing shortage. High interest rates, high prices, low availability as owners donât want to give up low interest rate mortgageâall slow things down. Tariffs on lumber. Labor shortage. Deportations. All seem to favor renting. Investors buying up residential properties as investments to rent also keeps prices high. Buyers are bidding against all cash offers with deep pockets. And then we have fires and storms calling for much more construction to rebuild. I think we expect this to be a temporary situation that will recover in a few years.
You would think an apartment building in St Paul would have no trouble finding a buyerâunless there is some problem with the property.
The lack of reinvestment in our cities has been going on for decades.
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Essentially not maintained recently at all. Front door not secure, rodents, bugs, etc. Problems with heat, water, and so on. The apt building was eventually condemned by the city and everyone kicked out.
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I suspect that depends upon the city and its population trends. St. Paul has fewer people than it did in 1950.
In addition, the Twin Cities suffered hundreds of millions in damages from the George Floyd riots.
DB2
On the other hand, Detroit has has a massive amount of renovation and new construction. In the last census, Detroit had a population gain for the first time in something like 50 or 60 years. But they renovated so much office space, that the Ren Cen is now surplus.
Steve
The 2020 Census still showed a decline which continued until 2022. Since then the population is up by 5-6K.
I guess it doesnât pay to get overexcited.
DB2
Maintenance very much depends on renters who show up and pay their rent. Many things can get in the way. Crime. Tenants who damage the property. High costs. Local regulations, etc.
There is a shortage of quality housing. If done right should do very well.
Lots of maintenance was neglected, so the building was condemned. IMO, it needs to come down because it is not reasonably salvageable.