Experts: Detroit's real estate options appealing

[begingri]

Residential and commercial development in Detroit remains extremely challenging, but opportunities are emerging in both residential and commercial real estate, according to a panel of experts that spoke today at a University of Michigan Ross School of Business conference about revitalizing the city.

“We’ve lost 30% plus in valuation over the last 10 years,” in residential real estate in Detroit, said Eric Larson, president and CEO of Larson Realty Group said at Revitalization and Business: Focus Detroit, which was attended by about 500 business school students.

Even in strong neighborhoods like Palmer Woods, housing values have declined from more than $400,000 a few years ago to $150,000 to $350,000, said Austin Black II, president of City Living Detroit.

But while commercial and residential development in the city remains at a crisis level, the low prices are attracting buyers.

“I’ve been selling real estate in the city for six years and this year has been the best year,” Black said.

One of the city’s main assets for both commercial redevelopment and for residential development, Black said, is the unique architecture. Hundred-year-old homes in Palmer Woods, for example, appeal to buyers because the architecture cannot be replicated.

“Detroit is getting into that stage right now where …settlers are moving in. Not just pioneers,” said Randy Lewarchik, a real estate developer.

Nevertheless, Black said, major barriers to residential and population growth in Detroit are the lack of services and high costs that discourage the middle class from moving back or remaining in the city.

Those issues include high insurance rates, the lack of retail such as grocery stores and a dysfunctional school system.

“We need to bring that middle class back,” Black said. “And the only way to do that is to remove all of those barriers.”

Another barrier for both residential and commercial development is the perception of the city as a bad place to invest money, said Richard Hosey, senior vice president of Bank of America’s Detroit office.

Hosey ran into that perception as he tried to pull together the financing for the redevelopment of Broderick Tower in downtown Detroit.

“There was a perception that it was not going to work even though the numbers said it would work,” Hosey said.

To sell the project to banks and investors, Hosey had to make the numbers work even under the worst scenarios.

“At the time, GM was declaring bankruptcy and Chrysler was declaring bankruptcy,” Hosey said. “But we pushed and pushed and pushed.”

In December, financing was completed for the renovation project with Bank of America agreeing to contribute $34 million to the $55-million project. Most of the remaining debt was financed through tax credits and long-term bonds that later can be converted into equity.

Plans call for the building to be converted into about 127 apartments with 14,000 square feet of office space and 11,000 square feet for restaurants for the building at Woodward Avenue and Grand Circus Park.

Still, Larson said major commercial developments remain rare.

“Large-scale development is very, very difficult,” he said. “Clearly you are at a crisis stage and you …we have to figure out how to generate market rate opportunities”


Source: http://www.freep.com/apps/pbcs.dll/a...te=fullarticle

[DetroitDad]

Turn that peg until you can hit the chord you want... Be careful! Too much too fast, and you'll snap the string. Back it, up. Now a little more. Now pluck it! Oh yeah, now you're hitting that note. Now just five more times, and you'll be on your way to playing a song.

Once people fill what is available now, and start getting in line for what is proposed, things will change. The tipping point of Detroit is when the people start letting you know what's right. When they hear that guitar play the right tune, you won't be able to keep 'em away.

[erikd]

Nevertheless, Black said, major barriers to residential and population growth in Detroit are the lack of services and high costs that discourage the middle class from moving back or remaining in the city.

Those issues include high insurance rates, the lack of retail such as grocery stores and a dysfunctional school system.

“We need to bring that middle class back,” Black said. “And the only way to do that is to remove all of those barriers.”

This is a common statement about what Detroit needs to do to attract the middle class back to the city, but it isn't possible to fix all of the problems first, and then attract the people.

It will be virtually impossible for Detroit to offer a high quality school district, low insurance rates, and a plethora of retail options BEFORE the upper/middle class population moves back into the city, because these are symptoms that have been created by the lack of a significant upper/middle class population in the city.

The largest barrier, which is also the one that the city has the most ability to fix, is the substandard city services, especially police/public safety.

There is a very large percentage of the upper/middle class population without school age children who will live in a city with substandard schools. There are many upper/middle class people who will live in a city with a shortage of retail, especially if is offset by proximity to cultural institutions/events and entertainment. There are many upper/middle class people who will pay higher insurance and tax rates if it is offset by lower prices for real estate and/or rental rates.

However, there are very few upper/middle class people who will live in a city where they feel unsafe. As long as the DPD remains unresponsive and useless, there will be no significant influx of upper/middle class people into the city.

The only way Detroit can make a true turnaround is by focusing on the very basic, core city services. Everything else is secondary.

[daddeeo]

Amen Brother!!!

[rhythmc]

This is a common statement about what Detroit needs to do to attract the middle class back to the city, but it isn't possible to fix all of the problems first, and then attract the people.

It will be virtually impossible for Detroit to offer a high quality school district, low insurance rates, and a plethora of retail options BEFORE the upper/middle class population moves back into the city, because these are symptoms that have been created by the lack of a significant upper/middle class population in the city.

The largest barrier, which is also the one that the city has the most ability to fix, is the substandard city services, especially police/public safety.

There is a very large percentage of the upper/middle class population without school age children who will live in a city with substandard schools. There are many upper/middle class people who will live in a city with a shortage of retail, especially if is offset by proximity to cultural institutions/events and entertainment. There are many upper/middle class people who will pay higher insurance and tax rates if it is offset by lower prices for real estate and/or rental rates.

However, there are very few upper/middle class people who will live in a city where they feel unsafe. As long as the DPD remains unresponsive and useless, there will be no significant influx of upper/middle class people into the city.

The only way Detroit can make a true turnaround is by focusing on the very basic, core city services. Everything else is secondary.

Very true.

[BrushStart]

If I had more disposal income, I'd be pouring money into Detroit real estate in certain areas.

[DetroitDad]

If I had more disposal income, I'd be pouring money into Detroit real estate in certain areas.

I'm in BrushStart! Let's play! Can I be the shoe? Unless you really want to be the shoe, then I'll be the hat.

[canuck]

Yes to erikd's basic services, and increased security. There needs to be, an increased police force as maybe the single building block to retaining and attracting new residents. In the Clinton era, a lot of cities in the US got help from the feds to achieve this and it made a big difference.

[BrushStart]

I'm in BrushStart! Let's play! Can I be the shoe? Unless you really want to be the shoe, then I'll be the hat.

Haha, I'm usually the wheel barrel, so I can use it to cart away all my profits.

There's several properties I'd make offers on right now if I had the money. I'd say that they are almost sure things if the trends I'm seeing continue.

[Ocean2026]

Detroit may be the only place in the country where a house selling for $5k has almost that amount in yearly taxes. That and the exodus of people and generally poor economy do not make for an exciting real estate market.

[BrushStart]

Detroit may be the only place in the country where a house selling for $5k has almost that amount in yearly taxes. That and the exodus of people and generally poor economy do not make for an exciting real estate market.

Obviously, you have some insight that was not available to the panel of experts at UofM's Business School.

[English]

This is a common statement about what Detroit needs to do to attract the middle class back to the city, but it isn't possible to fix all of the problems first, and then attract the people.

It will be virtually impossible for Detroit to offer a high quality school district, low insurance rates, and a plethora of retail options BEFORE the upper/middle class population moves back into the city, because these are symptoms that have been created by the lack of a significant upper/middle class population in the city.

The largest barrier, which is also the one that the city has the most ability to fix, is the substandard city services, especially police/public safety.

There is a very large percentage of the upper/middle class population without school age children who will live in a city with substandard schools. There are many upper/middle class people who will live in a city with a shortage of retail, especially if is offset by proximity to cultural institutions/events and entertainment. There are many upper/middle class people who will pay higher insurance and tax rates if it is offset by lower prices for real estate and/or rental rates.

However, there are very few upper/middle class people who will live in a city where they feel unsafe. As long as the DPD remains unresponsive and useless, there will be no significant influx of upper/middle class people into the city.

The only way Detroit can make a true turnaround is by focusing on the very basic, core city services. Everything else is secondary.

Nailed it exactly. The safety issue is the ONLY reason I chose to wait a year before committing to a place, and the places that I've narrowed it down to all have on-site security, gates, and alarms. But what we really need is more effective policing AND ways to disincentivize "broken windows" crime like scrapping/stripping homes.

[DetroitDad]

Erik,

With all do respect, we must do the impossible. Detroit as a whole probably cannot fix everything at once, that is why we need to concentrate on one to three individual neighborhoods, fixing everything on the micro scale, as well as having a strong business and mixed use district, serving as destinations people want to live near right now, today. That neighborhood's success can then be duplicated.

In countless other cities, this has been the way it was done. I'll compare the process to Dr. Frankenstein's Monster. You know, how he made a living being from various odds and ends borrowed from the dead? you have to get vital operations [[safety) and organs [[Downtown) functioning in order to make anything happen at all. After that, you can start dealing with the diseased limbs and discolored skin by injecting a self replicating vacine into the right cell [[neighborhood/set of urban blocks) and it will take over the virus [[blight, crime, etc.). But, all the organs have to be present and functioning on some level. You can't inject the vacine into a dead organism, nothing will happen.

And yet another way of looking at this is through a barrell. No, not a gun barrel, but Liebig's Barrel Minimum to be exact. Liebig's law of the minimum applies here. View Detroit as a stand alone ecosystem. How can she sustain herself?

This is a common statement about what Detroit needs to do to attract the middle class back to the city, but it isn't possible to fix all of the problems first, and then attract the people.

It will be virtually impossible for Detroit to offer a high quality school district, low insurance rates, and a plethora of retail options BEFORE the upper/middle class population moves back into the city, because these are symptoms that have been created by the lack of a significant upper/middle class population in the city.

The largest barrier, which is also the one that the city has the most ability to fix, is the substandard city services, especially police/public safety.

There is a very large percentage of the upper/middle class population without school age children who will live in a city with substandard schools. There are many upper/middle class people who will live in a city with a shortage of retail, especially if is offset by proximity to cultural institutions/events and entertainment. There are many upper/middle class people who will pay higher insurance and tax rates if it is offset by lower prices for real estate and/or rental rates.

However, there are very few upper/middle class people who will live in a city where they feel unsafe. As long as the DPD remains unresponsive and useless, there will be no significant influx of upper/middle class people into the city.

The only way Detroit can make a true turnaround is by focusing on the very basic, core city services. Everything else is secondary.

[gdogslim]

you have to live somewhere.
If you work out of your home and have a choice of living in a 15,000.00 house in Detroit or a 200,000. condo somewhere else it could mean a world of difference in lifestyle, quality of life because of extra cash in your pocket.

[citylover]

Erik,

With all do respect, we must do the impossible. Detroit as a whole probably cannot fix everything at once, that is why we need to concentrate on one to three individual neighborhoods, fixing everything on the micro scale, as well as having a strong business and mixed use district, serving as destinations people want to live near right now, today. That neighborhood's success can then be duplicated.

In countless other cities, this has been the way it was done. I'll compare the process to Dr. Frankenstein's Monster. You know, how he made a living being from various odds and ends borrowed from the dead? you have to get vital operations [[safety) and organs [[Downtown) functioning in order to make anything happen at all. After that, you can start dealing with the diseased limbs and discolored skin by injecting a self replicating vacine into the right cell [[neighborhood/set of urban blocks) and it will take over the virus [[blight, crime, etc.). But, all the organs have to be present and functioning on some level. You can't inject the vacine into a dead organism, nothing will happen.

And yet another way of looking at this is through a barrell. No, not a gun barrel, but Liebig's Barrel Minimum to be exact. Liebig's law of the minimum applies here. View Detroit as a stand alone ecosystem. How can she sustain herself?

DetroitDad, are you using the same "caregiver" to get your medical marijuana as Gannon?

[Hermod]

Obviously, you have some insight that was not available to the panel of experts at UofM's Business School.

If they were truly "experts" they would be making money on real estate rather than pontificating about it.

Same thing with "urban planners" in academia. If they were all that good, why aren't they running a city or a county somewhere?

[rjk]

If they were truly "experts" they would be making money on real estate rather than pontificating about it.

Same thing with "urban planners" in academia. If they were all that good, why aren't they running a city or a county somewhere?

Reminds me of the group of urban planners from outstate that visited Detroit and concluded that the city needed to be shrunk down to small concentrated villages that would be bordered by green spaces.

Thanks a lot. My ideas are that the city needs more jobs and less crime.

I imagine they're still working on the way to fund this project and implement their plan.

[mwilbert]

If they were truly "experts" they would be making money on real estate rather than pontificating about it.

I would agree with you if making money on Detroit real estate was just a matter of sending some money in the right direction, but in my opinion, the opportunities in Detroit real estate mostly require a serious time commitment, and someone could easily be an expert in the area and still not have the time or interest to exploit that expertise. I am not an expert, but my inexpert eye sees opportunities that I can not exploit because I lack the time to devote to them.

Same thing with "urban planners" in academia. If they were all that good, why aren't they running a city or a county somewhere?

Because you don't get to run a city or a county on the basis of expertise.

[Hermod]

Because you don't get to run a city or a county on the basis of expertise.

You don't in a kleptocracy such as Detroit. Most cities and counties have a council-manager type of government where the pols actually hire experts to run the day-to-day operations.

[mwilbert]

Most cities and counties have a council-manager type of government where the pols actually hire experts to run the day-to-day operations.

Even with a council-manager government, the managers tend to be chosen for skills other than planning, which only makes sense because most of their job is day-to-day operations, as you say. In any case, they wouldn't have much control over planning, because that almost always ends up being politicized. We just don't live in a country where planning is respected enough to give planners much influence.

[Hermod]

Even with a council-manager government, the managers tend to be chosen for skills other than planning, which only makes sense because most of their job is day-to-day operations, as you say. In any case, they wouldn't have much control over planning, because that almost always ends up being politicized. We just don't live in a country where planning is respected enough to give planners much influence.

The best municipal managers come up through the city engineer ranks and are P.E.

Some come up through the "urban studies" or "urban planner" route and generally mismanage the place because they are long on "ideas" and short on practicality.

.

[citylover]

If they were truly "experts" they would be making money on real estate rather than pontificating about it.

Same thing with "urban planners" in academia. If they were all that good, why aren't they running a city or a county somewhere?

What makes you think they are not making money on real estate? Maybe not in Detroit but somewhere......The things about UM bus school is that it is one of the very tops I can almost guarantee they are making considerable money outside of academia.

[Ocean2026]

[QUOTE=Hermod;217697]If they were truly "experts" they would be making money on real estate rather than pontificating about it.

I guess this was in defense of me daring to post an opinion and not being a U of Michigan Expert. Actually those U Of Michigan experts are making money- they get our tax money to sit on their butts and tell us all this stuff.

And gee I never got to go to U of Michigan, my alma mater is actually a public university that is ranked higher than Michigan [[ and there aren't many so it should be easy to guess).

[mwilbert]

The best municipal managers come up through the city engineer ranks and are P.E.

Maybe, but it would probably be hard to prove. I did a quick survey looking for cities with city managers who are PEs and I didn't find any for large or even medium-large cities. I wouldn't claim that you couldn't have an excellent city manager in a smaller city, but surely the degree of difficulty isn't really comparable. Did you have any particular instances in mind?

[citylover]

[QUOTE=Ocean2026;218102]

If they were truly "experts" they would be making money on real estate rather than pontificating about it.

I guess this was in defense of me daring to post an opinion and not being a U of Michigan Expert. Actually those U Of Michigan experts are making money- they get our tax money to sit on their butts and tell us all this stuff.

And gee I never got to go to U of Michigan, my alma mater is actually a public university that is ranked higher than Michigan [[ and there aren't many so it should be easy to guess).

Who cares about ranking? I am willing to bet that Um is as good a public as any including yours.........and btw I am way too simple minded to have gone to Um in any capacity.

My point is that the higher ups at the u bus school are well connected.They have lots of outside enterprises and things they are involved in.I imagine it is the same at other very high ranking bus schools. They are making money. Good luck with Detroit real estate.