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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.
Scott Elliott is an editorial writer and columnist for the Dayton Daily News opinion pages. He writes about education, city and suburban issues, politics, business, workforce and consumer issues.Home > Blogs > A Matter of Opinion > Archives > 2010 > May > 30 > Entry
Ellen Belcher: Foreclosures coming to business property near you
There’s something especially heart-breaking about certain foreclosures downtown.
The Kettering Tower, Dayton’s tallest building and the place from which the late Virginia Kettering watched so protectively over the city, is in receivership. The former Fifth Third Center, a lovely modern building that was built on the belief that downtown would always need classy office space, is, too.
Now the Kuhns building at Fourth and Main, a gorgeously and lovingly renovated architectural gem, is headed toward foreclosure. Oakwood’s Robert Shiffler is struggling to refinance the debt that he ran up to make the building a show place for what can be done with old buildings.
If someone else now gets to come along and buy a stunning piece of history with good tenants at a fire-sale price and Shiffler loses his shirt, that’ll be so unfair. The scenario, however, is not an outlandish possibility.
For the longest time, public attention on the mortgage crisis has been on homeowners whose residences are underwater. (That’s shorthand meaning that the value of a property is less than the amount that’s owed.)
But experts who follow financial matters also are warning that commercial real estate is overvalued, too, and that very many developers who have loans that have to be renegotiated will be out of luck.
Unlike home mortgages, commercial mortgages are written for shorter periods, often five years. Loans that were taken out when real estate prices hadn’t started to tumble are coming due.
One government expert says that half of the commercial real estate loans nationally could be underwater by the start of 2011.
Banks are under pressure by federal regulators to limit their exposure on commercial properties, so they’re not eager to refinance loans or extend the life any that look even marginally risky.
Dayton and indeed the region will not be special. They can’t get through this period without some investors taking hits, even though prices didn’t skyrocket here the way they did in some other places.
Buyers will swoop in and make out because of other people’s losses. But the shake-out won’t be pretty.
Even if the price of office space comes down because new owners are buying investments for a steal, that’ll prompt turnover that leaves someone else hurting.
For instance, if you’re in office space where the rent is X amount, but you know that a building down the street is renting for much less, you’ll want a price break or maybe you’ll even move. If people are just changing spaces but there’s no net increase in tenants, that’s not progress.
It’s hard to even know what’s happening with foreclosures. Montgomery County Clerk of Courts Greg Brush is right that his office needs to start tracking the trends, separating out commercial foreclosures from residential ones.
No one really has a handle on how this is all going to end. Policy makers certainly haven’t gotten far in resolving the home mortgage crisis, and they’ve had plenty of time.
It’s also clear that governments — certainly not state and local governments — will not be rushing in with bailouts or even small handouts to developers. They have their own problems, what with property tax collections down on account of residential and commercial foreclosures, and sales tax collections running tepid because consumers have become more cautious.
The fabled invisible hand of the market is going to be slapping people down and doing so visibly.
Once upon a time, real estate was thought of as a good and safe investment. It was something you could see and touch, and so long as you didn’t speculate wildly, your bet was usually secure.
But like so much about this economy, old truisms just aren’t holding.
Permalink | Comments (6) | Post your comment | Categories: City of Dayton, Columns, Economy, Ellen Belcher, Local Business, Local History
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By Tom
May 30, 2010 8:12 AM | Link to this
Why hasn’t Sheriff Phil Plummer replaced his “politically” appointed appraisers with professional appraisers yet? While he was blubbering and passing the blame to others during his relative hiring foreclosure debacle he said he was going to hire “professional” appraisers. What happened and why are the same unqualified people making huge money still?
By Max
May 30, 2010 8:35 AM | Link to this
FINALLY, a voice of reason! Ellen Belcher provides one major facet, and profound reason, the city planning commission should stop wasting money on ‘redesigning Dayton’ while holding to the status quo in terms of commercial property ownership. The Downtown Dayton Partnership is also denying the realities Belcher cites. Commercial property valuations are quite different than residential outside the actual note being held. Part of this is zoning which city commissions can change. Commissions can, like some cities, impose a zero growth policy which means no new construction can begin until like sized existing structures are removed or at 90% occupancy. Effectively, this creates supply-demand relationship for the city and solves many planning commission concerns. But, as Belcher says, this is going to involve some losses by current property owners which are casualties of the investor/speculator environment. Unfortunately, many of those property owners, as well as the DDP, still have influence over the commission which is part of the problem. Zoning boards do have authority to present changes to the commission but must be part of a comprehensive plan to not only stop the bleeding, but reduce - not add - the amount of vacant buildings. Other tools available include the reduction or freeze of liquor licenses within city limits which automatically increases their value to potential businesses. I think Belcher has a solid view of what constitutes progress and it isn’t just moving the problems around the city. That has never worked and there is no evidence it will in the future. It is the reduction or freeze of commercial property that will make it more valuable and attractive in any economic climate. Then, and only then, can discussions begin about residential areas in and around the downtown area. Even as those discussions begin, a cap to the minimum of subsidized housing units must be imposed with some degree of rent control for the rest. If Dayton really wants to pull out of its economic funk then it is going to have to do it itself and accept there are going to be losses before there can be gains. Essentially, it’s a change in perspective and goals which cost nothing that will turn Dayton around.
By Max
May 30, 2010 8:43 AM | Link to this
Tom, you raise an EXCELLENT point about appraisers. The banks have a ‘lock’ on them and their rates. Until that is fixed at the State level, the appraisers are just instruments of banks to lowball the risks at their whim. Many appraisers have switched to other lines of work such as insurance appraisals because they cannot work independently of the banks.
By fortressdayton
May 30, 2010 1:05 PM | Link to this
The business foreclosures shouldn’t surprise anyone. the amount of developer default is insane…Schwind building, the old storefronts near Main BP and and and…and one developer is always in the mix. I also saw an SUV full of ‘Plummer’ Pals’ (appraisers) having what appeared to be a raucous good time in the air-conditioned vehicle. I am sure that they are billing concurrently when they ‘appraise’…why that is darned good money. Dayton is corrupt, Montgomery County is corrupt and there is NO hope for this city.
By Tom
May 30, 2010 8:49 PM | Link to this
@Fortress Dayton, I too have seen Plummer’s pals driving around together completing their “appraisals”. It is my understanding they are supposed to complete these separately, that means driving in different vehicles and performing this task individually. Apparently this fraud continues. NO wonder these individuals don’t want to give up this position or see the law changed. As I have said before, when the crap hit the fan Plummer said he was going to change these “political” hack appointments made at the recommendation of his former Chief Deputy Mike Nolan to professional certified appraisers. Check the donors to Miami Twp. Trustee Mike Nolan and see how many of the appraisers donated to his campaign. That shouldn’t be too hard to find out; the report should have been filed by now with the Board of Elections. Dayton and Montgomery County are in serious trouble.
By Tom
June 11, 2010 1:53 PM | Link to this
The Plummber comments are interesting but have no facts. Getting on here and bitching about Plummer may be entertaining to some but the facts about him and Nolan are not supported. I looked at Nolan’s records which are online for public viewing. Not a one of the appraisers gave him money. Plummer is a good Sheriff and he is the kind of guy I would want in the fox hole with me when things go bad.