David Brauer wrote:
Vicky writes:
<>The pension fund paid $141 million for the Fifth Street Towers in 1996 (the
best and brightest money managers no doubt!) The same buildings are aboutAlso, as any property owner knows, the market goes up as well as down. My
to be sold for $110 to $118 million. I wonder if the public employees in
Oregon know about this debacle.
guess is that Fifth Street Towers, now one of the older office buildings in
town, has suffered with new office buildings coming on line.
But those new office buildings are NOT privately subsidized. So this is the
glorious free market working its magic, creating winners and losers.
Seems that the free market is working, to me, also. Class A office space in downtown Minneapolis can easily be had for $12 a square foot (see yesterday's or Sunday's paper for an article to that effect). I know of a large corporation that just leased a whole bunch of space downtown for a measly $10 a square foot. A couple years ago, the going price was closer to $20.
More supply equals lower prices, according to the market dictum, does it not? Real estate speculators built a whole bunch more space downtown thinking they would make money. Some did. Then along came the Bush administration with its ballooning national debt, and the economy soured and stayed that way. Less economic activity means less demand. Less demand means more available supply and voila, lower rent prices.
When the rents get low enough, some owners prefer to sell, even at a loss, rather than continue to hold and sink money into a partly vacant building. So sale prices decline as well.
I suppose the Oregon public employees might want to evaluate the quality of their pension fund management -- but then, no investment management group or tactic ever guarantees profitable returns, especially on one single investment, which is why diversification is so important. Their over-all investment return might be positive, despite a few losers like this office building or any particular stock holding.
So, is there really a problem here? Especially a Minneapolis-specific problem? What different should the city of Minneapolis have done in this situation? Maybe there is a problem, but I just fail to see it.
Chris Johnson, Fulton
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