Cocoposts

Development Addict

You gotta read the whole Denver Post story about a man who, in spite being a felon already and  presently indicted awaiting a summer trial, is still engaging in the behavior and profiting from it. 

Drugs?  No.  Land speculator and developer.    

The 60-year-old real estate guru has been twice convicted of felonies over his long career.  But now he faces 67 more counts in the collapse of Mile High Capital, the Denver-based real estate investment firm he founded. Mile High reportedly collected about $44 million from 882 investors across the nation — and then filed bankruptcy.

Out on $250,000 bail, Dryer continues his work as a persuasive real estate guru. He has been working as a consultant to a Charlotte, N.C.-based company called Convergent Acquisitions & Development Inc., which peddles "non-owner occupied" investment properties.

"I can't believe he's still on the street," said Harold Ellerington, a Denver-area resident who claims he lost $250,000 of his retirement savings at Mile High. "I guess the bail was too low. . . . He's like a drug addict. He just can't help himself."

Blaming Smart Growth

In a mighty leap of logic and misdirection, not unusual for the Heritage Foundation, author Wendell Cox blames smart growth for the housing bubble, economic downturn and alopecia.       

These policies, often referred to as "smart growth," create a scarcity of land, artificially raise the price of housing, and, again, have increased the exposure of the market to risky mortgage debt. When more liberal loan policies were implemented, metropolitan areas that had adopted these more restrictive policies lacked the resilient land markets that would have allowed the greater demand to be accommodated without inordinate increases in house prices.

This is simultaneously ridiculous and boring - other typifying traits of  HF material.

There is a glut of housing tied directly to those  liberal loan policies, not a shortage of land caused by excessive land use regulation.  And we should be so lucky.  The sprawl pattern paradigm of the last twenty-five years was constrained by very little and the least of these was "smart growth" regulation.   The term itself was only more recently popularized to describe the largely ineffective and pathetic attempts to rein in the juggernaut - like Albuquerque's Planned Growth Strategy in 1996 - the potential of which was nipped in the bud by sprawlmeisters.   

Albuquerque's most obvious development constraint is land ownership, not regulation.  The edges of our ubiquitous suburbia are defined by federal, Indian or old land grant boundaries, not smart growth boundaries.  The entire idea of effective growth boundaries was kneecapped by the very developer friendly Legislature early in the decade.

Blaming planning or local government regulation seems popular with those who made record breaking profits in the housing boom and on the way down they are grasping at straws. 

Dependent and Obsessed with Real Estate

Dr. Housing Bubble estimates almost $3 trillion in real estate equity is gone and notes Bloomberg on the State of California's $20 billion deficit.   The Dr. says:

Now tell me, what other industries are going to start hiring to boost the so-called phantom housing bottom especially here in California?  Never mind the astounding fact that according to the California Association of Realtors the median price statewide is now off by a stunning 30 percent. It only logically follows that real estate declining will hurt a state that is utterly dependent and obsessed with all things real estate.

SunCal Defaults

California news of troubles for SunCal. 

BAKERSFIELD, Calif. -- The company behind the McAllister Ranch project is in default on its $235 million loan.  That project southwest of Bakersfield was designed to build 6,000 homes, but the project may now be in peril.  The notice of default was filed on Tuesday at the County Recorder's Office.

The three page document said that as of April 15, Suncal McAllister Ranch, LLC, a partner of Irvine-based Suncal Companies owed more than $4.1 million on the $235 million loan Suncal took out in order to develop the site near South Allen Road and Panama Lane southwest of Bakersfield.  The loan company, Lehman Commericial Paper Incorporated filed the default notice and now Chicago Title Company is responsible for collecting the remainder on that loan or the property could be sold.

Photo from KERO 23 News.   Thanks Hunter.

Not Foreclosure Prevention Act

The Senate legislation called the Foreclosure Prevention Act is chock full of tax breaks for builders and automakers (oh, and airlines too because their lobbyist was on the ball).   

From the Dallas Morning News:      

In the Senate bill, the nation's biggest homebuilders, some on the verge of bankruptcy, won a provision that would let them claim millions in tax refunds by charging their current losses against the huge profits they made three or four years ago.  Other struggling industries would also benefit.   

Ford and General Motors were especially dogged in securing a tax break that would let them collect up to $40 million each in alternative minimum tax credits that would otherwise be out of reach because they did not pay enough taxes in recent years to claim a rebate.

Admire for a moment the symmetrical twilight zone-like connection here .  Sprawl developers and their enablers and codependents might be viewed as the ones largely to blame for this whole, you know, recession thing. The last 25 years of growth was financed like a house of cards.   

They overbuilt the land scraping, watershed-raping, automobile dependent, air polluting, public resource sucking (but highly profitable) sprawl we know and love today.  The Senate proposes to reward them again for this.

(modified at 10:13am because, so help me,  I don't have an editor.)

In Developers' Best Interests

Two stories  in the Albuquerque Journal demonstrate how devoted some elected officials are to giving incentives to land developers. 

Pat Lyons, our State Land Commissioner, is told by our Attorney General that the Las Cruces land deal he worked with developer Philip Philippou, isn't authorized by State law.  Details, details.  Too late now.  From the Journal:

Not only would it be unfair to developers to try to change lease provisions "midstream," Stranahan (Land Office lawyer) said, doing so would expose the Land Office to lawsuits by developers.  "The idea is: do you cancel them and break the deals you made in good faith, expose the state to huge levels of liability, or do you keep your word and embrace the idea that these were done in the best interests of the trust," Stranahan said.

So, yeah.  Hugs to developer Philippou.   

We also hear that the Albuquerque City Council may designate vacant leapfrogged mesa land as a Metropolitan Redevelopment Area if Councilor Ken Sanchez and the developer get their way.  This would create an incentive the developer says he needs to build a retail shopping center.  If  he doesn't get it, he says he'll walk.   It 's as if the neighborhood is being held hostage for a grocery store.

One big consequence of our sprawl is leapfrogged land and vacant buildings.   The new stucco box houses on Albuquerque's southwest mesa sit "unserved" awaiting new school and park construction and promised shopping.  Meanwhile, land developers even further-out are given incentives, like tax increment financing, for even more new buildings.  And commercial structures further-in sit empty, unleased and unloved.   

 Incentives for more buildings in an overbuilt market.  Big hugs.          

    

Bank and Builder Bailout

The Senate proposes to reward builders and the twisted sprawl financing  machine with $6 billion in tax credits to fix their over leveraging "mistakes".  They drag down the entire economy and get to keep their paychecks in the name of building more sprawl housing (Because NAR says to.)   

Common Dreams calls it the Bank and Builder Bailout Act, aka Foreclosure Prevention. 

Alan Farago describes this pathetic attempt to rescue housing in Counterpunch:

It's also a form of quintuple taxation: first you bought the dream, then you paid the taxes on the dream. Now you are subsidizing-a third time-the purveyors who were egged on, relentlessly, by Wall Street financiers and lawyers taking down billions in fees and bonuses for structured finance, CDO's, CMO's, and derivatives on derivatives as the whole house of cards built to gargantuan size, spreading suburbs into ten thousand valleys, wetlands, and watersheds, now imposing the quintuple costs of law enforcement to bring in the fraud and courts swamped by the volume of illegal activities.

Water Fee for New Development

The Albuquerque Journal's Sean Olson covers the Albuquerque Bernalillo County Water Utility Authority*

The one-time fee for buildings, called the "water supply charge," will be placed into an account the water authority can only use to buy new water rights or direct toward finding new sources of water.

    Lynne Andersen, National Association of Industrial and Office Properties president, said the fees will most likely be passed on to home buyers and business owners.  But as long as the fees are strictly for new developments, Andersen said her organization doesn't object.

    "It's just part of whether it pencils into the bottom line (for deciding to start a business)," she said.

Wait a minute.  The fee ought to pencil into the bottom line for deciding to build a building, not start a business.  Not the same thing at all.  Unless your business is speculative building.   Or there are no buildings already built anywhere else in town.   

Locating a business, new or not, in a shiny new industrial park outside of the already sprawling water service area just got a little more expensive to pay for the water.   

* ABCWUA - an entity as fathomable as the name.  Just try to use the acronym. It violates a basic  bureaucratic principle that a board moniker must roll off the tongue and fit on a file label.  "Abeckwooah"?  Ugh. Come on.

Googling SunCal

From the OC Register March 4, 2008:

In the past 4 ½ months, eight lawsuits have been filed in Orange County accusing SunCal of failing to pay its debts or complete promised work on projects. Four properties planned for future developments either were foreclosed on or soon will be. ...

Q: What is happening with the cash flow at SunCal?

A: (David Soyka, SunCal senior vice president of public affairs)  SunCal Companies is made up of many companies. It's discreetly financed, which is common for a real estate development firm. It's how non-public companies are financed. No two are identical.

The real estate business is cyclical. We've experienced downturns like this before.  Like every other homebuilding and land development company, we are facing market challenges.  The entire industry is affected, and we're working with our lenders and Wall Street financial partners, both public and privately held companies, to decide how to adjust our business plans.

Commenter Stan is frustrated that no one in Albuquerque caught on earlier to SunCal problems and suggests no one has ever Googled SunCal.  But these stories would be unlikely to make any difference to development proponents here who put a positive twist on the meaning of the adage:  Every calculation based on experience elsewhere fails in New Mexico.

More Residential

From the Albuquerque Journal we hear that approvals for SunCal have been delayed 60 days. 

The city Environmental Planning Commission has a laundry list of concerns it wants SunCal Companies to address before the developer moves forward on a 500-acre West Side residential development.

The commission's staff has, in fact, compiled 15 pages of "conditions for approval" that asks SunCal to provide more information about the development, get into compliance with the Northwest Escarpment Plan and improve design standards....

 Record national foreclosure rates should pose a bigger challenge to selling 500 acres of more housing than 15 pages of questions.  The developer complained the questions were vague.  Maybe one of them was, "Why?"