The Wizard recently has been in a rather expansive mood, exploring other aspects and possibilities that life has to offer. About two and a half years ago, a friend of mine made an offer to me to buy in on a wine bar located on Washington Avenue. He was up front and fair with me, offering me a detailed prospectus from the business owners, as well as what to expect from him. I mulled over the offer for about two weeks before turning it down. I had some confidence that the bar would make it. What stopped me was the thought that I simply did not know how much time and effort overseeing my investment would take out of me. My employer frowns on moonlighting and I dreaded the thought of having to get up at 7am in the morning and coming home after midnight five nights out of the week.
And so it was. Yet, it is a good thing to look over offers with an open mind. I ran into this same fellow about two weeks ago, and sure enough we started going over the idea of me buying into something along Washington Avenue. The street is brimming now, of course, with new development, the area being ripe for redevelopment.
So this past Saturday, the Wizard found himself taking a tour of Washington Avenue. There was a carnival atmosphere at the Salvation Army Thrift Store, as well as plenty of people enjoying themselves at various bars and clubs. It was a beautiful day out.
My landlord friend showed me his properties, and described the overall situation he was in. I had to admit it was a bit of gordian knot. To wit, the wine bar which I would have invested in ran into a bit of trouble with an ornery City inspector and had their outside porch ripped out. There went some of their business and the bar had to let go of several employees, and that wasn't the last of what I heard from my landlord friend, or his associates I met with that day, with regards to complaints about being a businessman dealing with the City.
But we moved onwards. We went to another of my landlord friend's properties, another of which is host to a bar. Now here is where I was really leading to with this blog entry. The bar has parking, but there is a lot along the street behind Washington Avenue that recently came up for sale. The lot is undeveloped and needs only to be cleared by its future owner. Now here's the kicker. The lot will probably go around $350,000. Adding the lot would be a bit asset to my landlord friend's property, but he's a bit tied up financially. Hence the possibility of my involvement.
But here's the catch. Ideally, we would be using the property for about 25 parking spaces, and one guy came up with the idea of putting some sand on the lot and allowing bar patrons to play some off street volleyball (this was their idea, not mine!). Now the Wizard has a degree in Economics and you can imagine what is going through my mind. How am I going recoup or otherwise justify investing over a third of a million dollars on a lot that is to be used for 25 parking spaces? That works out to some $14,000 per parking space. I'm not sure a commercial lender will look at me and say that - yes - I can carry another note like that in my current financial condition. Can I amortize something like that over 30 or more years?
Several ideas went through my mind. My landlord friend and I could charge for parking space. My partner has made it clear (as has the City) that parking - not sidewalks or walkability - is the biggest problem along Washington Avenue. Maybe parking is indeed the highest and best use for this lot and that I could generate sufficient monthly fees to justify utilizing that lot as a parking lot. Maybe it would enhance the value of my friend's property and business, thereby we could figure out a way to capture that value and get it back to me.
But ultimately, all of that is not what I'm getting at here. What I am getting at is is that it's an article of faith amongst those who are angry about automobiles or suburbanization that automobile use is subsidized and that automobile use does not pay for itself. I've often wondered how many of those gripers have actually run a business, have been faced with a real world decision on how much parking to provide potential customers, or tried figuring out how to best use a plot of land in a spot market that is both in a recession, yet is dynamic and rapidly changing.
Tom DeGregory was right. In a competitive market economy, the competition in capital markets, in the form of land, labor, and investment, is much more fierce than it is for product markets. It's not an easy thing to figure out, and as George P. Bush said the other night at an event I attended, there are no guarantees in a free market economy. Others will no doubt covet that lot of land, but such a decision on the use of that land certainly isn't something that I would trust to some starry eyed urban planner, or some moron employed in a City bureaucracy, even if the neighbors get noisy and start complaining.
Yes, I know what the answers are going to be. The planners are going to gripe about how City codes dictate how much parking there is supposed to be. They're going to gripe about strip centers and shopping malls full of acres of concrete. They're going to gripe about off street parking, a lack of sidewalks, and all the rest of it. But it still doesn't erase the dilemma I find myself in - whether to pull the trigger and buy?
Multiply this conundrum hundreds of thousands of times over and maybe, just maybe, you can begin to understand why I'm not all that thrilled with zoning or other far distant planning.
The world rolls onwards...
Wizard
Posted by The Mighty Wizard at October 22, 2009 11:54 PM