628 East Franklin Avenue

[mulad]

The old apartment building at 628 East Franklin Avenue has been vacant since the mid-'90s, but the city has finally found a developer willing to take a shot at it.

http://www.startribune.com/long-vacant- ... 330400171/

Mark Orfield will buy the property for $75,000, which is over $100,000 less than the city paid for it three years ago. However, once the property is rehabbed, it is expected to bring in over $20,000 in taxes annually. The article notes that the lot has five on-site parking spaces, which has apparently been a barrier until now -- the developer is planning to offer spaces at another nearby property.

Geschwind and Thea LLC bought the building from the city in 2003 and put some effort into rehabbing the property, but that venture failed and the building went to Sabri Holdings LLC, who had helped with some financing for the previous effort. The rehab remained stalled, of course, and the city bought the property again in 2012.

[beige_box]

Is $1200 rent for a 1-bedroom asking a bit much? Don't comparable 1BRs in Loring Park and Stevens Square, including freshly refurbished ones, top out at about $1000? At least, a year or two ago they did...

[Wedgeguy]

Is $1200 rent for a 1-bedroom asking a bit much? Don't comparable 1BRs in Loring Park and Stevens Square, including freshly refurbished ones, top out at about $1000? At least, a year or two ago they did...

I'm just glad the city has gotten someone to finish fixing the place up. I think it has been in it's current state now for at least 5 or more years. I think it will be a great asset to the neighborhood once they get it fixed up and some landscaping done.

[EOst]

1524 Lasalle (which was renovated just recently) has one bedrooms going for $1300, and I don't think that's unheard of in Loring, but I don't think you'd see many 1BRs in Stevens for more than $1000. Certainly not in Ventura Village.

[lindastacy3]

Is $1200 rent for a 1-bedroom asking a bit much? Don't comparable 1BRs in Loring Park and Stevens Square, including freshly refurbished ones, top out at about $1000? At least, a year or two ago they did...

I think it is a bit much 1200 is too much.

[HiawathaGuy]

It really depends on the amenities. We get close to that for the 1 BR unit in the duplex we own, and that's near Bloomington & Lake. I'm pretty certain, based on the recent rent we got for the 2 BR we recently rented, that we could get close to that. It all depends on what's included and what the space is like.

[mplser]

doesn't the new-ish building at 24th and chicago charge about the same prices? they seem to do fine with all the nurses and doctors that work at Abbott and live there, but I have heard that car break-ins are a real problem in the ramp at that building

[trigonalmayhem]

Yeah 1300 is pretty standard market rate for a 1br these days. The ones that are cheaper are generally small, run down, or lacking in modern amenities.

I think everyone fell asleep a few years ago and didn't notice rents creeping up because of the low vacancy rate and shortage of rentals coupled with the improving economy here.

[Nick]

?????????

http://minneapolis.craigslist.org/searc ... inneapolis

[grant1simons2]

Adding 'Minneapolis' to the search bar gives you far less results btw. Missing over half of Minneapolis listings.

https://www.rentjungle.com/average-rent ... nt-trends/

[beige_box]

Yeah 1300 is pretty standard market rate for a 1br these days. The ones that are cheaper are generally small, run down, or lacking in modern amenities.

I think everyone fell asleep a few years ago and didn't notice rents creeping up because of the low vacancy rate and shortage of rentals coupled with the improving economy here.

Loring Park's renovated ornate older buildings, including comparable, new appliance-full 1br units, top out at about $1000: http://minneapolis.craigslist.org/searc ... oring+park

Stevens Square, probably on average a bit less-recently renovated, but still perfectly livable (I cringe at "modern amenities" what kind of person really demands only the shiniest, biggest, trendiest new appliances?), doesn't really seem to go for more than $800: http://minneapolis.craigslist.org/searc ... ens+square

And all that's after, in many cases, 10-15% annual rent increases that have been happening for a few years and probably displaced a bunch of folks. $1300 is absurd for the location, and the fact that the developer is only paying $75,000 makes it seem more like straight-up corruption here. Or a deliberate experiment in catering this type of building to a new, wealthier demographic. Uh-oh.

[FISHMANPET]

If only some hippie commune had divined the full asking price and the money for renovations so they could rent the units out for $1 a year or a jar of homemade jam.

My bet would be that if the developer paid full price for building then it wouldn't have penciled out at all. But maybe at $1300 a month it still doesn't pencil out, who knows. Hard to know what to do in a case like this where the market can't really do anything without a nudge and the price is just too high for the government to waste limited resources on for a few units.

[beige_box]

If only some hippie commune had divined the full asking price and the money for renovations so they could rent the units out for $1 a year or a jar of homemade jam."

Er, I thought you had some line you liked to use, about not distorting your rhetorical opponent's POV in order to succumb to the easy non-logic of us-versus-them, or something?

I'm just pointing out, sans any polemical vitriol, that the rent versus the selling price makes this renovation far above even the most charitable definition of "market-rate." It amounts to one guy in Edina getting a suspiciously too-good-to-be-true deal on this building. I dunno, serious question: where would you set the line between "fair price" and "this probably is what the word 'corruption' exists to describe"?

[beige_box]

Hard to know what to do in a case like this where the market can't really do anything without a nudge and the price is just too high for the government to waste limited resources on for a few units.

Giving "the market" "a nudge" is an expression I will remember, though. Here it is literally code for "sell a property at a massive loss in such a way that the buyer will stand to be making a wildly disproportionate, unheard-of return on his investment." Gosh I love these "public-private partnerships" these days! Such innovative policymaking!

[FISHMANPET]

If we believe the conceit that $1300 is just too much rent for this area (and it may very well may be) then what would be the purpose here? Yes, this guy bought it for less than its value (though the biggest determination of value is what someone is willing to pay for it). But he still paid money for it. And then will pay money to renovate it. And then it will sit empty because $1300 is too much. Not sure how anybody benefits from that arrangement, other than the one time infusion of $75k the city gets and maybe a year or two of these $20k property tax payments.

I guess if you believe that supply is what creates demand in housing then I could see how this is some evil conspiracy by the city to drive poor people out of this area. Maybe this guy is just an idiot and doesn't understand the market but gave a nice presentation to some people at the city that agreed to the sale. If that's the case that information should really be made public because it is a form of subsidy. But maybe he made up some pro-formas that said "I can make this work if I go uber luxury and you drop the price a bit and then it will cash flow." But then I'd like to see those pro-formas that led to the city discounting a couple hundred thousand off the price.

Likely these renovations are going to be incredibly expensive, and the finishes of the apartments are going to be a very small portion of the overall costs of this project. Maybe if the city had given it to him for $1 rents could be $1200 or something, who knows. Again, we'd need to see the pro-forma or whatever justification the city used to give the property at a discount.

I hope there's more reason than "Well he asked and nobody else is interested so why not." Maybe we'll be lucky and he'll go bankrupt (and by that I mean the shell corporation I'm sure he's created to develop this) and someone can pick up the building on liquidation for a reasonable price and charge something a bit more reasonable.

Or maybe these are going to be 1500 sqft 1 bedroom apartments and they'll really be worth $1300, but you're still back to the question of whether or not anyone wants to pay $1300 a month here.

But I guess I'm not really sure what the purpose of corruption would be, who would benefit from spending a pile of money to renovate a building and then not be able to pay back the construction loans?

[FISHMANPET]

<This is in response to a now deleted post about how it shouldn't cost that much to renovate and how more spartan finishes would make the building more affordable. But it's a good post with good info anyway so I'm leaving it>

Well like I said the finishes in the apartments are going to be a very small portion of the overall renovation budget.

It would be much cheaper to knock this over and build a 3 story stick building and then you'd have a hope at natural affordability but because of our society's values we're keeping the old structure around.

Once upon a time a bunch of us posters went on a tour of Lime when it was nearly finished, and got to ask some questions of the developer. I even asked how much he could lower rent if he used white appliances and IKEA cabinets and generally a much lower level of finish, and his answer was basically that there would be very little rent decrease (he may have said 6%-7% but I could be wrong on that number). The high rents in new construction are required to finance the actual construction of the building, including expensive things like underground parking. The luxury finishes are a result of needing to be in that market to command rents high enough to make the property cash flow. And obviously this project doesn't require the construction of new underground parking, but I'm guessing they're doing far more than slapping some paint on some walls and calling it a day.

Ultimately there's a lack of information here. I don't believe there's corruption and I believe that the renovation costs necessitate the purchase price subsidy and the high rents. And you think this is no more complicated than building a new building so there must be corruption. But really we're just going to argue from our ideologies unless we see some actual information. And if this was a private developer buying the lot from a private seller, or even buying it from the city at list price, I'd say we don't have any right to that information. But in this case the city has given the developer a subsidy, and I think that demands a more open process, particularly around the notions of cost of redevelopment, future rent, and cash flow. But sadly we don't have that information.

[beige_box]

OK but do we have to always call them "spartan finishes" as if not having granite or titanium makes it akin to a soldier's bunk or a monk's monastic chambers or whatever?

EDIT: Also, yes, developers always say that. I don't know why people think that calling up the person who stands to gain from the development, a.k.a. has conflict of interest, is going to give you anything but an answer that boils down to "what I'm doing is perfectly normal and it would be impossible for me to make any less money than the amount I want." These people are professionals and negotiating prices is their profession. They are never going to be like "ehhh yeah we're kind of raking in it because we got a steal on the property and figured out how to market it gullible careerists with disposable incomes" even if it's true, because they'd just be sacrificing leverage in the future.

[FISHMANPET]

I'm not trying to imbue any kind of value or worth to the phrase. I don't think there's any inherent value in luxury finishes over non-luxury or spartan or simple or basic or whatever you want to call it. Call it bagel finish for all I care.

[beige_box]

"Spartan" is just another way to stigmatize it. File somewhere on the scale that runs from "projects" all the way to "sketchy" or "ghetto."

Thanks for editing my previous posts, moderators. LOLZ u got me!!

[FISHMANPET]

EDIT: Also, yes, developers always say that. I don't know why people think that calling up the person who stands to gain from the development, a.k.a. has conflict of interest, is going to give you anything but an answer that boils down to "what I'm doing is perfectly normal and it would be impossible for me to make any less money than the amount I want." These people are professionals and negotiating prices is their profession. They are never going to be like "ehhh yeah we're kind of raking in it because we got a steal on the property and figured out how to market it gullible careerists with disposable incomes" even if it's true, because they'd just be sacrificing leverage in the future.

This is a really pointless debate to have because we're going to argue from ideologies, not facts. My ideology and my analysis of the situation says that a statement like that makes sense, but until someone shows a pro-forma it's not going to be "settled."

BUT in this case, where the city is involved, that pro-forma should be made public, if it was used in reasoning for the sale price. Or whatever reasoning for the sale price should be made public.