Tuesday, August 19, 2008

Socialize the Risks - Privatize the Profits - Part Two

When I took Ray Metcalfe's "Anchorage Real Estate Tour" back on March 29, one of things that went through my mind was "if real estate values, especially office space rental and lease prices, go down locally in the national downturn, how many long-term leases that were made by the MOA in flush times can be renegotiated?"

Kyle Hopkins has written an article for today's Anchorage Daily News that delves into one of the main features of Ray's tour, and his beef with Anchorage Mayor, Mark Begich, against whom Ray is running in the August 26 Democratic Primary.

The parking lot deal Anchorage made with Pfeffer continues to lose money, though the article doesn't quite pin down how much:

The lease has been renegotiated twice to reduce the amount the city pays, and, at $10,000 a month, it's now close to paying for itself. In the process of whittling down the lease payments, Pfeffer and his partners in the proposed Augustine Energy Center office building also cemented the right to buy 570 long-term parking permits for spaces in city owned garages.

And Pfeffer is apparently downscaling the scope of what he's going to put where the parking lot now sits:

The proposed Augustine Energy Center will not necessarily include its own parking. Parking officials say the building will likely be smaller than originally planned.

Part of the reason I haven't gotten deeper into this labyrinth is that I'm not very knowledgeable about how this stuff - municipal leasing agreement practice - is done. But, I have to say, I'd like to hear more from Mr. Pfeffer in any subsequent articles on this.

How many developers with contracts with the MOA for space are locked into sweet, long-term deals, where Anchorage taxpayers are paying more for space than it probably is worth, in an office space market that looks like it is about to go south like it did between 1986 and 1990?

I'm a big fan of Ray Metcalfe, and a fan of Mark Begich. Kyle's article, as good as it is, puts out far less information than the already quickly growing comment string - in the middle of the night, no less - is already producing.

image - the parking lot in question from the top of the parking lot Pfeffer has locked up, if and when he gets the financing to put up Augustine.