The Renaissance Rip-Off (UPDATE)
Posted by Jeff Pruitt - 7/19/09 @ 9:46 pm - Filed Under Featured, Local Politics
UPDATE 7/21/09: Moody’s released an update the day after this post and it’s worse than expected:
Commercial real-estate prices fell 7.6% in May … The indexes are down 29% from a year ago and 35% from their October 2007 peak.
No word yet from the administration as to whether they are going to lower their offer for the Renaissance Square property based on the economic climate.
One reader asked for a better explanation as to why I feel the city (and now possibly the county) would be overpaying for the property if they paid $7.3 million. That’s a fair question, although the anecdotal evidence regarding its lack of tenants should suffice, let’s look at some data.
The most recent assessment, March 1, 2008, puts the building and land value at $7.2 million (plus another $1.1 million for other land although it’s unclear to me whether or not the city’s plans include that land). However, it’s important to remember that assessments are done on data 2 years old. So let’s take a look at what’s happened to commercial real estate prices over the past couple years:
Granted this is national data but Fort Wayne has not been immune to overbuilding in the commercial real estate market over the last decade. I think you can see where these prices are going - probably back down to the 2001 levels or worse which would be a 40-50% decline. In fact, the first quarter 2009 data shows prices are already down 25% nationally.
So ask yourself this - why in the world would local government spend $7.3 million for Renaissance Square when it’s likely already worth 25% less and probably going to fall another 25% before this crisis levels off. Add to this the fact that this building has had no serious private market tenants (or offers from what I’ve heard) for years and you start to see what a rip-off this truly is. Does anyone seriously believe that a private sector bidder would offer $7.3 million for this property in this economy?
Buy why not overpay for the building - after all it’s not the mayor’s money. It’s only your Community Economic Development Income Tax Money. And what better way to drive economic development than for the government to vastly overpay for a new city hall…
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4 Responses to “The Renaissance Rip-Off (UPDATE)”
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I really don’t remember any of this being apart of Mayor Henry’s campaign platform, and there is probably a good reason for that: None of us would vote for him.
Interesting point! What say the City Council pass an ordnance extending the leases on the CCB space and police department until say July 2012? It would be an interesting issue for the next municipal election.
There is little doubt in my mind that the City will pay far more than this building is worth.
I doubt that an honest appraisal would show that the property is worth more than 4-5 million dollars; at best.
Mike Sylvester
I have personal knowledge of an appeal on a residence that was purchased 11 years ago for $110K, appraised this year for $92K and was adjusted on the 2008 tax rolls to 2007 comparables at $123K. Obviously real estate prices have taken a tailspin. The new caution that has descended upon lenders has driven down the market through much lower appraisals.
Of course, the Mayor will argue that the new price tag for RS reflects the current price decline. Everybody knows that commercial real estate brokers in this town are all friends of the mayor . . . whatever that means!