Uh, you think this might be a problem?
Pontiac -- Nearly 35 years after taxpayers spent $55.7 million building the Pontiac Silverdome and a year after a $20 million sale fell through, city officials have sold the arena once called the most desirable property in Oakland County.
The price: $583,000.
Niiiice.
99% depreciation over 35 years, plus of course all the money poured into property taxes and maintenance.
"The citizens of Pontiac deserve better," Seay said. "This is pennies on the dollar (of what it cost). It goes to show how bad times are ... Worse, we don't even know who bought it."
Sounds like a Realtor. Oh wait - that's a Pontiac City Councilman. Same difference.
Hint to the peanut gallery in Pontiac MI:
What something is worth is entirely dependent on what someone will pay you for it - nothing more or less. Ever.
This sale is emblematic of the general state of Commercial Real Estate. Bluntly, too many people built too much crap on wishes and dreams - dreams they financed with other people's money, either the taxpayer's (in this case) or with some poor jackass who believed the prospectus on some CMBS deal that screamed "PRIME Commercial Space!"
Well, perhaps. But there are only so many business interests that can inhabit a given area and turn a profit, especially when you send all the good jobs overseas to CHINA and INDIA, rendering unemployed the middle-class call-center employee who used to make $30,000 a year but now makes zero while the Indian or Chinese employee makes $2/day.
Worse, all real estate (that has buildings on it anyway) has a carrying cost, meaning that if you don't have a revenue-producing use for it the value is actually negative. In the case of the Silverdome basic maintenance on the building and grounds is about $1.5 million a year. If you can't make enough to cover that nut "ownership" just bleeds you out.
Welcome to the "new normal."
If this doesn't send a shiver up your spine on the "quality" of regional banks that are stuffed to the gills with commercial real estate loans made in the last few years, you're not paying attention.
Don't worry, you soon will be, as nearly all of these deals are interest-only and have to roll over between now and 2013.
They can't and won't.
