The View from the Trolley - Recapitalizing Albany


By DIA, Section News
Posted on Tue Jun 12, 2007 at 03:49:41 AM EST

When Mayor Jennings first put together his Recapitalize Albany plan there were some of us who were quite critical because the group was mostly all white male bankers and developers who didn't actually live in Albany. We pointed out they might miss some of the nuances of our city since they didn't actually live here. And now when you see that the whole report basically comes down to a strategy that might best be called "Borrow and Build Big" it becomes more clear why this might be a problem. They aren't looking to make subtle changes or work with existing homeowners, small business owners and communities to improve the city. They are only looking for large projects that involve large loans to keep the banks happy that can be used for large contracts to keep the builders happy. They look at the city and see it as a potential construction site requiring new bonds galore. They don't do nuance. And they don't even really care about the realities of the city of Albany. Take for instance the statement made by the Neighborhood Subcommittee who has recommended that the best thing to do is to let the bankers decide which neighborhoods to buy up in chunks to then be handed over to the developers. This is their take on the Albany Real Estate Market in a report that came out in May of 2007. They list one of Albany's main challenges as:
A weak real estate market.
Now remember that Mayor Jennings headed up this front for the bankers and developers. What has Mr. Jennings had to say to the people of Albany recently about the real estate market? Remember this one?
"People should be happy that their properties are appreciating, not depreciating."
And remember this article that came out the same month as the Recapitalization report?
ALBANY -- In four years, the value of homes in the city shot up dramatically in every neighborhood.

A Times Union analysis of the tentative reassessment numbers shows sharp increases in every corner of the city, from an average 65 percent rise in Arbor Hill to an average 92 percent leap in Center Square.

"We're valuing them based on sales, and that's what the sales are showing," said Keith McDonald, the city assessor. "The sales increased in every neighborhood in the city."
So, the suburban bankers and developers spend a year studying the Albany market and their conclusion is that we have a weak real estate market. Meanwhile the mayor is telling you to shut up and take your reassessment like a man. And the city assessor is saying that sales increase in every neighborhood in the city from a lowly 65% in Arbor Hill to 92% in Center Square. See any disconnect here? So how could the bankers, developers, Mayor Jennings, Councilman Conti and Councilwoman McLaughlin get it so wrong? Because if they say the real estate market is improving in Albany and people are investing in their buildings its much harder to make a case for them to be able to go in and buy up large chunks of neighborhoods with loans from the banks and then sell them to the developers who will sell them for profits. And because they know most people aren't paying attention and won't notice their brazen lies.

So perhaps you are saying that the Recap committee just missed one of the most important economic trends in our area but got everything else right. No big deal. Well the report mentions another big trend right in the intro when they think it is in their best interest.
A unique opportunity that must be maximized in Albany is the growth and investment occurring at Albany NanoTech. This research operation is attracting global corporate partners and is creating significant job opportunities both in the City and around the region. Albany can leverage this activity to spur additional business development and bring new residents to the City.
I'm sure you are all well aware of the excitement in the area about the expected growth relating to the AMD/Nanotech/Sematech investment. In the same month that this report came out we were reminded of it once again in a Times Union article.
The Capital Region hasn't had to handle Austin's pace of growth. Between 1990 and 2000, the net total populations of Albany, Rensselaer, Schenectady and Saratoga counties grew by just 2.1 percent, or 16,000 people, to reach 794,293 residents, according to the Capital District Regional Planning Commission.

With the Capital District Transportation Committee, the commission has sketched out different growth scenarios -- including a hyper-growth one that envisions 1 percent annual population growth that would put extreme pressure on the region's resources with 230,000 new residents by 2030.

The commission is also compiling recommendations on how to deal with a variety of growth patterns, including a more moderate scenario that projects 73,000 new residents by 2030.
Wow. Hyper-growth. Moderate growth. Seems like there is going to be some population growth in the city and the region in the next 20 years. So, why is the Recapitalization report saying this about the expect population growth in Albany (page 20)
population will stabilize near 95,000 between now and 2040.
That is right. According to their current report we are expecting no meaningful population growth in the city in the next 30 years. Beginning to see a trend? Beginning to notice that the report seems to get all the most important economic realities of Albany completely wrong? Beginning to feel like you need to be saved by bankers and developers? Good. That is what they want you to feel.

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The View from the Trolley - Recapitalizing Albany | 11 comments (11 topical, 0 hidden)
Growth (none / 0) (#1)
by alfrednewman on Tue Jun 12, 2007 at 05:36:34 AM EST
I think the difference in the numbers is that the transportation committee was looking at the over all area while the Trolley riders were looking at only within Albany's boarders.
"What? Me worry? " "whatmeworry.alfred@gmail.com"
nope (none / 0) (#2)
by DIA on Tue Jun 12, 2007 at 06:57:16 AM EST
the difference is that they were using the same numbers used in the vacany report done by enterprise three years ago.  

tell me if you were an investor who read this you would say, "spot on team, this really reflects the current economic outlook".  

[ Parent ]

If I was an investor (none / 0) (#3)
by alfrednewman on Tue Jun 12, 2007 at 08:16:03 AM EST
I would be more interested in the current vacancy rates, unemplyment data, business trends and over all tax burden.

Some of what they propose makes some sence, some of it looks like a blatent attempt to give DeThomas and BBL more of our money.
"What? Me worry? " "whatmeworry.alfred@gmail.com"
[ Parent ]

It's all local (none / 0) (#4)
by miriamaxellute on Tue Jun 12, 2007 at 08:19:08 AM EST

You're right that the report is quite schizophrenic when it comes to its predictions and seems to be using the numbers that fit a given recommendation. It can't quite see the city, let alone the region, as a whole, when it comes to connecting things like the effects of new industry and how to deal with abandoned properties.

Some of it is different sets of data, and some of it is that real estate markets are very local. The real estate market on Colonie Street or 4th Avenue is not the same as it is in Center Square or even Delaware Ave. The report does not do a good job of clarifying either of these things.

Also, we do need to remember that rising prices don't actually make a strong real estate market. If it costs more to buy and renovate a building than it will be worth when you're done, then the market is weak. Wherever you see widespread abandonment, you can be assured that the market is weak.

What you decide should be done with that information, of course, depends on whether you are a banker or a neighborhood resident.

Albany is in a weird spot, I think. By the 2000 census and all sorts of aging data, we fall into a group of "weak market" cities that Brookings studied. In many ways these descriptions are accurate. But in many ways they are already becoming less so. We need to be able to recognize the facts on the ground without turning away from practices that would still be useful to us.

I respectfully disagree (none / 0) (#5)
by DIA on Tue Jun 12, 2007 at 08:35:40 AM EST

Also, we do need to remember that rising prices don't actually make a strong real estate market. If it costs more to buy and renovate a building than it will be worth when you're done, then the market is weak. Wherever you see widespread abandonment, you can be assured that the market is weak.

You are going to have a very hard time finding anyone with real estate development experience that will agree with this statement.  And take a look at all the big developers right now.  They all have projects going in downtown albany.  Big ones.  That is what constitutes a strong real estate market.  

I will be commenting quite a bit more on this report over the next week or so.  so much to cover.  But to say that the city of Albany currently is experiencing a weak real estate market is not accurate.   Is it hard to sell your 2 family in West Hill?  Sure thing.   As you mention they don't do a good job of addressing the different areas of the city.  But that is because they don't care about the neighborhoods that can't be part of their Borrow and Build Big strategy.  And all of the ones currently experiencing a strong real estate market can't be targeted that way.  

And it costs more to buy and renovate a building in center square than you can turn around and flip that building for.   I don't see too much abandonment.  I don't think anyone could say that center square has a weak real estate market.

There are certainly individual investors who would be happy to start buying up the abandoned buildings in the downtown neighborhoods and investing them.  However, the city has no way to force those landlords to sell.  Their new plan is to find a way to force the landlords to sell but it cuts out the individual investor for the institutional ones.  

More later in the week.

DIA (none / 0) (#6)
by alfrednewman on Tue Jun 12, 2007 at 09:40:49 AM EST
DIA:

I think that she is actually right, to a point. . You are talking about buying and flipping and she is talking about a non-investment owner occupied.

Center Square is a bad example and we all know it.  People pay a premium to live in the this little slice of heaven.  People think nothing of spending a few hundred thousand on a house and then spend a few hundred more renovating it.

However, cross Madison and the economics change.  You have a house on the other end of Dove and it is worth 1/3 of a house on this end.  Its not worth spending $70,000  to buy and fix a house that will market for 65,000.

The institutional investor thing bothers me, although I can see where it is better than NYC speculators buying and  sitting on land.
"What? Me worry? " "whatmeworry.alfred@gmail.com"
[ Parent ]

Not so far apart (none / 0) (#11)
by miriamaxellute on Thu Jun 28, 2007 at 09:57:22 AM EST
That's what I meant by local. I agree with you that downtown, and much of the city isn't weak market, at least by my standards. But parts of it are, and it's those parts that are still struggling with abandonment.

[ Parent ]
sure (none / 0) (#7)
by DIA on Tue Jun 12, 2007 at 10:28:01 AM EST
there are places where you can buy a house and if you want to completely renovate it and live it in you will be worth less than you have into it.   big deal.  That doesn't mean there is a weak market.  It can quite possibly mean that the market has been so strong that even crappy houses are going for a lot of money.  Which is certainly the case in many areas of albany.  

If you want to go to the areas where people are getting shot on a regular basis you also could buy a house there and it would be worth less than what you paid for it.  That just means people don't like getting shot.  

I'm sure there is a very short list of building in west hill or the south end that people would want to buy and renovate.  But I know quite a few vacant buildings in neighborhoods that would be perfectly fine buildings to buy and renovate and not have something you couldn't sell and recoup.  But the mayor will do nothing to help people in those neighborhoods who want to buy and renovate actually be able to do so.  

We can always find examples in such a diverse city to fit our little arguments.  Anyone who wants to say that the Albany real estate market in general is "weak", which is what the Recap report does, is not accurate.  

Al, weren't you just telling us that the commerical properties were selling for more than you thought they were worth in Albany?   Is that a sign of a weak market?   So little demand that people are overpaying?

So little stock (none / 0) (#8)
by alfrednewman on Tue Jun 12, 2007 at 11:46:25 AM EST
As I told you, the commercial over valuation has more to do with the tax code then with supply and demand.

A good indication of how weak the commercial market is is how many commercial spaces are empty and how many of the factory buildings are empty and deteriorating or converted to self storage facilities.

There is one point that I also have to make.  The definition of "weak" has changed. It used to be that it houses would be on the market for months before getting offers.  Now it considered weak if a house sits for days...
"What? Me worry? " "whatmeworry.alfred@gmail.com"
[ Parent ]

Jennings (none / 0) (#9)
by Corruptany on Tue Jun 12, 2007 at 04:08:41 PM EST
I am going to play the Devils advocate here, but I am pretty sure Albany will see a huge spike in population the coming years. One of the reasons has to do with the anount of people looking to escape the high cost of living in NYC. My parents like in Colonbie and already two of our new neighbors are New York City fireman. They work in NYC 4 days a week and have a house in Albany due to the high quality of life and cost of living. Another factor you can add in is the proposed extension of Metro-north to Albany by 2012 and the potential for bullet trains. I doubt we will see bullet trains, but I am sure Metro North will be extended. Doing so will bring more people upstate to take advantage of the lower cost of living. I worked in real estate development in Albany and everyday my organization recieved phone calls from  business and homebuyers from NYC and NJ looking to come to Albany. Albany will grow, lets look at NH as an example. 10 years ago people would have laughed at you if you said that it would be growing like it is. twn years ago Nashua was farms and today it looks like Colonie. I don't agree with Jennings plan and his methods but I we need to make the city more attractive to people looking to own homes and businesses looking to relocate. Think of the benefit, in cities like Somerville and Cambridge ma the new residents essentially outsed out the old time corrupt politicians. Younger better educated people tend to vote more proggressive. I say people should try to get involved in the planning process because Albanys future will never be the reality it should be if Jennings and his cronys run it. These people have never left Albany so I doubt they have any clue what other cities are like.

[ Parent ]
definition of weak (none / 0) (#10)
by DIA on Wed Jun 13, 2007 at 05:37:13 AM EST

There is one point that I also have to make.  The definition of "weak" has changed. It used to be that it houses would be on the market for months before getting offers.  Now it considered weak if a house sits for days...

So does that mean i can't call your argument weak?  Because it is.

The View from the Trolley - Recapitalizing Albany | 11 comments (11 topical, 0 hidden)
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