I don't think anyone has yet posted this story from the Post-Dispatch. As it affects several areas of the city, I thought it was better to post it in this section.
If this proceeds as planned, it will cause a lot of uncertainty among current occupants of the affected properties, many of which are apparently located in Soulard or the CWE.
As I've stated previously, the state of disrepair some Soulard buildings are in has made me apprehensive to purchase a home in that neighborhood. Many of the buildings are in heavy need of routine maintenance of buildings that age. I've lived in two Rothschild owned CWE units and both were fairly neglected with shotty repair work and masking over of potentially major issues. If the buildings fall into the hands of an ideal landlord or developer, the potential is there for the change to positively effect the aesthetics of Soulard.
This could be a positive if a well funded, responsible developer buys him out. ... but I worry about the real estate market over here (I live in Soulard now). The market sucks already - flooding it with buildings probably wont help.
I have not heard much positive at all re Rothchild as a landlord. Another terrible example is the building that housing JaBoNi's among many others at the corner of Manchester and Tower Grove
It sounds like he's raising capital for new projects and developments.
Rothschild states in the Post-Dispatch article:
"We had the choice to either add more management staff to manage what we have, or sell some properties and focus on more development. And that's what we are choosing to do."
It goes on to read: "Rothschild plans to continue developing a roughly 300,000-square-foot, 250-unit residential project in St. Louis' Carondelet neighborhood, which includes renovating an existing building and adding a new one. He plans to follow that by developing mixed-use projects at 1818 and 1900 Washington Avenue." (From the P-D)
I've never been a tenant in his buildings, but putting $95,000,000 in the hands of an experienced city oriented developer, who in the past has focused on the CWE and Soulard, with current projects in Carondelet and Wash Ave. should lead to good things for the city.
Wabash wrote:It sounds like he's raising capital for new projects and developments.
Rothschild states in the Post-Dispatch article:
"We had the choice to either add more management staff to manage what we have, or sell some properties and focus on more development. And that's what we are choosing to do."
It goes on to read: "Rothschild plans to continue developing a roughly 300,000-square-foot, 250-unit residential project in St. Louis' Carondelet neighborhood, which includes renovating an existing building and adding a new one. He plans to follow that by developing mixed-use projects at 1818 and 1900 Washington Avenue." (From the P-D)
I've never been a tenant in his buildings, but putting $95,000,000 in the hands of an experienced city oriented developer, who in the past has focused on the CWE and Soulard, with current projects in Carondelet and Wash Ave. should lead to good things for the city.
That he is an experienced something is unquestionable. Whether or not his properties and their condition inspire confidence is easily questionable.
"We had the choice to either add more management staff to manage what we have, or sell some properties and focus on more development. And that's what we are choosing to do"...since we (I) realized that our (my) reputation has gotten around, and nobody wants to work for, or with, us (me).
-So no one what-so-ever wanted to work in real estate management for a $95 million portfolio of rental properties?
-Rothschild realized, "Uh-oh, I have a terrible reputation. I should sell everything ASAP." ???
Where do you get this?
Perhaps he's selling as a reaction to the deteriorating market, or perhaps he sees better investment opportunities, but short-term fear based reputation protection doesn't sound like the MO of a longtime real-estate investor.
No matter his personality or reputation, I just hope he finds a buyer, and uses the money to build density DT and throughout the city.
Wabash wrote:Perhaps he's selling as a reaction to the deteriorating market, or perhaps he sees better investment opportunities, but short-term fear based reputation protection doesn't sound like the MO of a longtime real-estate investor.
I suspect it is because he is bored with management.
The CWE would likely not be what it is today had he not been around.
carrieocity kills wrote:I dont understand selling so much property in a buyer's market.
You only assume we're in a buyer's market. That's what sellers and mortgage brokers want you to believe. Rothschild knows what he's doing.
Also, remember that the market for rental property does not directly correlate to the market for owner-occupied housing. When folks lose their house due to foreclosure, where do they often go? Falling home ownership levels means rising renter levels. So the two markets are probably more negatively correlated, if anything.
^ Good point as it does increase rental demand. But wouldn't the value of rental property still decrease in a poor market? If rents stay strong yet property value goes down, there may still be a negative ROI. Does anyone have information on this?
innov8ion wrote:^ Good point as it does increase rental demand. But wouldn't the value of rental property still decrease in a poor market? If rents stay strong yet property value goes down, there may still be a negative ROI. Does anyone have information on this?
Well, just speaking in macro economic terms, the value of rental property is inextricably linked with its ability to generate income, so it would be difficult to separate the two in order to pose your question about negative ROI. IOW, one begets the other.
That said, it is always subject to the laws of supply and demand. If demand is lowered - either through increased home ownership levels or adding additional supply to the market place - then landlords are forced to lower rents in order to maintain occupancy levels. There don't seem to be many factors at play right now that would push rental property values down, however, it is always a somewhat delicate balance.
As a Soulard property owner, this concerns me but, with a more experienced and reputable manager, this could mean very good news. Owning property and living next to a Red Brick property is not a good thing.
Weren't most of these properties purchased at fire sale prices during a fall out from the real estate crisis in the late 1980s? Recall Mead McClellan.
It appears to be typical systematic disinvestment. In Soulard, the portfolio has been drained of the ability to earn the income it once could. Without substantial reinvestment, it probably can't grow too much in the future.
Looking deeply beyond cosmetics (paint, carpeting, etc...), the building are all more than 125 years old and need substantial structural rehabiliation. Many of the doors and windows, in fact, most exterior wood, is rotted to the core. I looked at several apartments recently and the condition was incredibly bad.
The slum lord business model pockets the monthly revenues without making deposits in long-term repair and replacement funds.
I've noticed certain building that have been rehabilitated in the past few years have already showing signs of significant maintenance neglect.
The investment tranche is certainly less than 20, 30, or 50 years. It seeks the largest rate of return in the first 5 years and then dwindles until another fire sale.
I wonder what the $95 million equates to a price per s.f. and price per unit?
Also, the most recent purchase of a large number of units on Geyer included a promise they would be converted to condos. Never happened.
Certain rental slum lords are the primary force behind Soulard not becoming a conservation district. A district requires frequent occupancy and building code enforcement inspections.
I'm new to this forum, but no one here is really so innocent to buy the line that Rothschild is feeding the press, are they? He's obviously strapped for capital and looking for an out. I also know this, it's virtually impossible to unload something like that, especially in this market. It's a house of cards.
One things for sure, It's going to take a lot of cash to get it sold with the way credit is right now.
I work in multi-family real estate for a living and I can tell you that that really isn't an issue. You always need cash for these big deals. The current lending woes only affect us average joes. When you reach this level of commercial lending, the process doesn't work on credit scores like lower loan amounts and never really has. Credit scores are figured in a ridiculous way and don't reflect the ability or true history of the buyer.
The important thing here is that the buyer will have to bring cash and experience to the table. But that is the case in any market, not unique to today. The big boys are doing fine right now. Better than fine actually. Interest rates are down, rent amounts have skyrocketed and vacancies are down. If you have money its a hell of a time. Thats why I wouldn't be shocked if someone made a jump at this.
As for Rothschild's package, I haven't really sat down and crunched the numbers, but regardless of the price tag it might find a buyer if the return is right. Anyone know what kind of cap rate or cash-on-cash return they are claiming for the package?
