From the Ground Up
by Phil Hardwick
Published: October 22,2001
The town is small and has a two-block commercial section on Main Street. In its peak of economic activity it was the place where people in an agricultural county shopped, dined and traded goods. Today it is on the brink of a turnaround. Downtown leaders agree that the fulcrum needed to get the town going again is to do something about the two large vacant buildings at each end of Main Street.
If one talks to those in downtown redevelopment in Mississippi one thing that will be heard over and over is the challenge of dealing with owners of old buildings who refuse to sell or renovate their properties. In any type of community development it is critical to control the real estate if for no other reason than the image that vacant property projects about a community.
In this column we will discuss the ownership of old, vacant buildings in downtowns. These type properties are generally owned by one of three types of owners. Let’s call them old family, power brokers and bottom-feeders.
Old family owners have owned the property for a long time, probably even more than one generation. The current owner has memories of the building in its hey-day, and might even harbor the belief that it will be like that again. Old family owners have seen the town undergo several cycles of change and are skeptical that the current redevelopment effort will succeed.
They have a “show me” approach to even beginning to think about selling. They are more attached to their building than they are to the town. They do not have to sell because they are financially secure and own a building that was paid for a long time ago. There is no sense of urgency on their part to sell, nor even a desire to sell. Often they just don’t know what to do, so they do nothing. They sometimes have adult children, and figure that it is up to the children to do something with the buildings after the parents are dead and gone.
In short, they are very patient people.
Power brokers usually control more real estate in town than just the two buildings on Main Street mentioned above. Sure, they are motivated by money because money usually is power, but they want control and influence even more. They want to be seen as the movers and shakers in the community. Power brokers enjoy being contacted by people who are interested in renovating their buildings because the power broker learns what is being planned for the community and see this as a way to gain information to take advantage of other opportunities.
Bottom-feeders buy old buildings and hold on to them in the hope that one day the town will need their buildings so much that they are forced to pay prices that will result in a good profit to the bottom-feeder. Bottom-feeders are risk-takers and engage in a high-risk, high-reward game.
So, how does one deal with such owners? The key is to understand their motivation.
The old family might be persuaded by a lease arrangement instead of an outright sale. That way, the old family owner can judge for himself or herself whether the revitalization efforts are for real. Often, the building’s use is an important factor. If the old family owner sees that the proposed use is similar to the original use or the building’s use in its glory days, then that might be the key.
Power brokers want a seat at the table. If they are invited to be a part of the revitalization effort and can be shown that their contribution will ultimately result in more profit to them, then they may be interested. In some cases, power brokers go into such projects looking for profit, but then get excited by the overall development that they use their influence and become part of the team.
Bottom-feeders are motivated only by money. If they see that they are going to make money or if they see that they are going to lose money, then they will act to reap their profit or cut their losses, as they case might be.
The key to dealing with such owners is to listen to them and understand their motivations. They should not be seen as adversarial or even greedy. Once the motivation is understood, then they can be dealt with. It is a delicate exercise that requires patience and skill.
Phil Hardwick’s column on Mississippi Business appears regularly in the Mississippi Business Journal. His e-mail address is email@example.com.
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