Another ‘big’ building bites the dust…
So let’s suppose you borrowed half a billion dollars on a luxury high-rise with all the goodies — multimillion-dollar condos with amazing views, a Ritz-Carlton hotel, prime office space, the works. Now let’s also suppose you broke ground on your 35-story tower in 2019, less than a year before COVID and the resulting lockdowns hit.
You might start feeling a little nervous because you borrowed $510 million for a $600 million building — and your creditors would very much like their money back.
Finally, let’s suppose your primo high-rise went up in downtown Portland, just in time for the George Floyd riots — and downtown’s resulting slide into a permanent vegetative state. Business is bad. Very bad. You’ve sold just a dozen of the 132 luxury condos, leased less than a quarter of the office space, and hardly anybody wants to book a room at the Ritz.
Full article, HERE from PJ Media.
And the same thing is happening in SFO, HERE. I wouldn’t be surprised if the same isn’t true in NYC, Boston, Philly, and other major blue cities…
The truly sad part is the locals will see their taxes go up to ‘cover’ the loss of tax base from the fire sale of those buildings, OR the city services will decline due to lack of $$$ to pay for services like fire, police, EMS, etc.
And it is only going to get worse, IMHO. Investors are losing their asses, and there isn’t any good news on the horizon any time soon, as far as I can find out.
The same thing is also happening on a much smaller scale with homes where ‘investors’ were buying rental properties above market value, and now there aren’t any renters who can afford them. Also the house flippers are in trouble because they got low rate mortgages planning on flipping the houses to make money before the balloon payment requirement hit. Now…well, sucks to be them…
And we’re all seeing our house values (and property taxes) go up to fund services, with some folks seeing a doubling of house value in 10 years or less. But…most of us have very low rate loans, and those are history, plus the nicer houses we might have aspired to get or that 10 acre ranch property with the nicer house are now out of our ‘new’ price range, even if we could sell at 6-7% mortgage rates.
Best to just hang on to what we have and hunker down… Or at least that is what ‘I’ am going to do..
Hey Old NFO;
I plan on moving out of my blue county as soon as it is feasible, as tempting as it is because my house is about paid off, but I am looking Ahead and I don’t want to be like my Dad was, nice house in the next county over trapped in a very blue county and can’t leave. and add to the glut of illegals and blackrock sucking up the available houses under construction, and there is a glut of demand and that is pricing the middle class out of home ownership and into leasing and renting and I am of the belief that this is be design, owning a home and the resulting equity is a huge part of the wealth of the American middle class, if that is gone, then all there is will be the rich and poor people.
Ron White pretty much nailed the problem.
You can’t fix stupid.
OTOH, a building like that would make a GREAT federal prison aimed straight at government criminals. Minus the amenities of course. Bunk beds, MRE’s, communal bathrooms, ‘Exercise’ is running the stairs. Make it all a permanent PPV channel to cover costs. *I* would pay to watch Congressmen scrub toilets.
The goal is to drive almost everyone out of property ownership and allow a handful of corporations like BlackRock and Vanguard to own almost everything. Then EVERYONE is a renter. And it’s much easier to control and if desired make a renter homeless.
The covid panic worked out well for us. Downsized from a house the size of a B-52 hanger to a small almost starter home. For some very odd reason, we financed a few hundred thousand at a VA 2.25%. The bank takes a huge loss on us and I doubt an interest rate glitch like this will ever happen again. The window was for about 3 weeks.
I live in an “Affordable Senior Apartment” and pay 80% of the average rental price of similar apartments in the area. Next renewal will be 70% higher than when I moved in seven years ago.
I can easily buy a home in rural Eastern Colorado or parts of Nebraska. At age 80, that might not be a good idea. Access to medical services is a necessary consideration. I’m fortunate to still be able to work, and have a long term relationship with a company that gives me contract assignments.
Solution? Stay where I am and bitch a lot.
I’m in Columbus, OH, where the property taxes skyrocketed into the stratosphere because the public school system needs more money. A lot more. Residents can’t afford to move due to the cost of housing. I get calls about three times a month from phone solicitors wanting to buy my condo. I tell them it’s for sale, and the first $350,000 takes it (I paid $65,000 cash about seven years ago). No takers so far, but I’m optimistic.
Not that anyone would loan me five hundred large and change, but the way to handle the situation is to plan for the building to be underwater before you break ground. Get the ground floors operational ASAP and include security that will have everyone calling you, the developer, a violent racist. Have a security team beat the living snot out of anyone who dares vandalize your property, and what you can offer is safety – which might be enough.
Meanwhile, all the SJWs are incessantly whinging about affordable housing, and the very last thing everyone with experience and an IQ over 90 wants is another Cabrini Green. Don’t mumble, don’t prevaricate, just tell it like it is. You want high crime? Just get affordable housing started along with DIE.
Finally, when the whole thing goes sideways and the money lenders start making demands, just tell these money grubbing little tightwads the truth: The money is gone. There is no money, so they can all decide how they feel about bankruptcy and ten cents on the dollar, OR they can advance you another loan for, say, four hundred large, and you’ll finish the project and we can all go home with a few bucks.
Like California, Portland is dying. Because Portland’s media is controlled by the DNC, the cause of death will never be admitted: Incurable voting habits.
City/urban planning is basically nuts.
First, because modeling the future use cases is population. I understand that the population stats are too noisy for forecasting to work very far out.
secondus, because the people trying to do the tasks are used to sticking in their mental lanes, and unable to renavigate when silo-thinking and groupthink are causing foreseeable disasters which would impact the use cases years out.
Beyond that, various overseas populations are used to thinking of the US as a safe and stable place, and places like the PRC where there are people desperate for an escape hatch, have pumped a bunch of spending into US real estate that makes no sense in the economic calculus within the US.
I’ve been hunkering down since late 2020. I’ve been telling myself that ‘now’ is the best time but for these several years I don’t believe it.
For every commercial building going belly up, there have to be thousands of private projects failing. I know of a dozen or more. Too expensive loans or labor costs, or logistic delays, does it make a difference?
Investing in urban real estate has always been boom or bust. Ask The Donald. You couldn’t get properties in SF or Seattle at 10% over list price a few years ago and now they may be had at 60% of the same value. Growing up Manhattan properties were the place to live, now Brooklyn is. It’s a market that is very easy to get caught up in and very easy to bankrupt yourself as well.
As for cost going up, I would submit it’s the value of the dollar going down. I will agree Blue run cities never can have enough of people monies to spend.
The thing about those huge buildings that most don’t know is… the owners don’t pay property tax, often for decades or forever, because they got a deal from the local and state governments.
Yet, as you said, the local and state governments will increase taxes on everyone. They’ll increase everyone’s property taxes to cover the loss of taxes when they make that sweet-heart deal with the developers. And then increase taxes to ‘cover’ the supposed ‘loss’ of taxes (that they never got anyways) because the grift.
All- Good points, and IMHO, no real way to ‘win’ so to speak. Us peons are gonna lose in the long run, the best we can do is hunker down and stay within our means.
All the new housing I see around town are large houses on small lots. There are very, very few “starter homes” for sale, even in older neighborhoods. The older, smaller places are going through the family from hand to hand, or are sold private treaty without being advertised, according to what I’ve been told. YMMV.
Two proposed developments screeched to a halt after someone asked, “Where are you getting water?” The developers were from out of state, and did not know about Texas water laws and the underground water districts. Oops. *Evil kitty smirk*
You are absolutely over the target with the observation regarding all the new “large houses on small lots”.
The thing I have noticed, having younger extended family members in their twenties, is the totally unreasonable expectations (and demands) the younger folk have.
I don’t know of a couple in that age bracket, just getting started, that doesn’t want, expect (or even DEMAND) a four bedroom, two bath home, with a theater room, outdoor living area, high-speed internet, and all the other bells and whistles.
When I point out how unreasonable it is for them to complain that they can’t afford what they want, they respond with “… but YOU have that!”, completely ignoring that we started small, and saved our way up. No Sunday brunches, no nights out, a total entertainment budget of $20 a week (typically spent on half-price pizza-and-a-movie night or saved for the next week), paying LOTS more than the minimum on the mortgage, etc.
They usually pipe down when I point out that interest rates when we got our first mortgage were 18%+, but the rank jealousy shines through their eyes.
TXRed- Concur…
Texas property taxes are getting ridiculous. Our home is very plain and last year valued at approximately 120,000. The anticipated tax rate for 2025 is 169,000. No improvements since 2018 (we re-roofed as roofing had reached its 25 year limit). So 49,000 for absolutely no discernable reason. Yeah, we filed for a dispute but we’re not optimistic.
@Beans – I’ll add this is why businesses are forcing the “Return to Office (RTO)”. The local Gov’ts expected a whole bunch of workers spending money in the downtown area to cover the tax deal they made with the businesses to get the buildings located there. I think they also expect the workers to live in one of the downtown apartments, but when I looked at the cost (curiosity) the a single-bedroom apartment was twice what I was paying for my mortgage. Family apartments were simply unaffordable.
COVID allowed engineers to work from home, and in some cases, hire engineers from states away. However, we need to RTO in person so we can “interact”, “collaborate”, and have “synergy” with each other [management is apparently quoting straight out of the 4-color management glossy]. The management never seems able to explain how we’re accomplishing that with our counterparts in India since they aren’t here, but never the less, we need to RTO.
I’ll note on the worker satisfaction front, working from home allows the workers to avoid a daily long commute. You have more personal time because you aren’t stuck on the highway, and you have more money (effectively a pay raise) because you aren’t spending on gas. As long as the work is getting done, there is no need for RTO.
After COVID was over my company took my group and cleared it out. Replacing it with people barley able to answer the questions asked by the customers. We were tier 2-4 Engineers but too costly. I was retirement age and had set up this part of the company so I retired.
Me and my wife decided to move from our North Atlanta suburb to live close to our oldest son and his family in Charleston, SC. We sold our house which was we owned on 2/3 acre and moved about 15 minutes from our son and downsized into a condo. Our youngest still lives in a house in the North Atlanta suburbs. In Atlanta the most expensive county is Fulton, which houses Atlanta and we had lived in Alpharetta which is in Fulton County and parts are in Forsythe County. When we moved to Georgia in 2005 and bought our house the property taxes were about double in Fulton County, but we bought the house just over the county border in Forsythe County and our taxes were about $3k per year and they rise about $500 per year.
Charleston area property taxes are very much lower compared to the Atlanta area. Traffic is worlds better although there are main congestion points thru the Charleston metro area. My son has a 3 bedroom 2 bath ranch in a suburb and his property taxes are $400 per year. My Condo is smaller but property taxes went up to $1k per year after 3 years.