Don't Blink

"Every deal dies a thousand deaths before the ink dries on the contract." Those were the words of wisdom a good friend imparted to me years ago. He had just closed his first commercial real estate deal and had dropped by my house with cigars in hand to celebrate. He told me the whole saga of how his deal had looked dead several times. Now he sat with me and basked in the glory of his first commission check. A very concerned Hyde Parker contacted me over the weekend and wanted to know my thoughts on Antheus Capital's recent announcement that they are backing out of their plans to renovate 5 properties along Armour Blvd into market-rate apartments. He is rightfully concerned that having the the Bellerive, Park Central, Clyde Manor, Yankee Hill and Hyde Park Plaza remain vacant will continue to blight his neighborhood. He's right. But they won't remain vacant. This latest posturing in the press is one of those "thousand deaths" my friend told me about. The Planned Industrial Expansion Authority actually recommended denial of Antheus' abatement request. It seems even the PIEA has its limits. Not only did Antheus want abatement of property taxes on their improvements for 25 years (which they got) they also wanted full abatement on the current property taxes. Having just paid around $11 million for the five properties, by my rough calculations at the current mil levies that comes out to about $165,000 a year in property taxes. It's become a poker game now. The only problem is the City's cards are on the table face up, and nervous neighborhoods are pacing around whispering "Fold!" in the City's ear. The City needs to start playing hardball. First, enact a zoning ordinance for Armour Blvd that limits the amount of subsidized (Section 8) housing. This will eliminate Antheus' ace in the hole of threatening to make all the buildings into Wayne Minor-type projects. Section 8 was never intended to be densely concentrated like that anyway, but that's the subject of another post. Next, we go to Jackson County and make sure all five properties are re-assessed at their new value. They just changed hands for $11 million. There's no better appraisal than a bill of sale. Even the deepest of pockets will not be willing to endure the carrying costs of an $11 million commercial note and $165,000 per annum property taxes. Throw in utilities, maintainence and keeping the buildings within code compliance and I think you'll see the developer soften in their stance. Finance wonks like myself will always tell you it's a numbers game. It is. We just need to remember that there are numbers on our side too.