Greedy Real Estate Developers

June 9, 2009

* This blog may read like a rant, but I mean what I’m saying in it.

According to an article about real estate in today’s Philadelphia Inquirer, a conversation similar to the following one took place in an office somewhere recently:

Prospective Condo Buyer: “I offer $1,300,000, cash, for the unit”
Greedy Real Estate Mogul: “Sorry, no can do!”

This person’s offer was $50,000 less than what the developer wanted for the unit in the Residences at the Ritz-Carlton, a new luxury high-rise condo building across from the Philadelphia City Hall… a discount of slightly less than 4 percent.  Big deal.  You have to probably be sufficiently snobby and hard-to-deal with to live in a building like this.  The building’s web site notes how a “privileged few” will live there at the city’s “best” residential address.

In my opinion, the developer should have taken it, rather than saying no.

The “Greedy Real Estate Mogul” is Mr. Craig Spencer, who is the Chairman of the Arden Group.  The company’s web site describes in plain language how the company makes money:

” The Arden Group pursues undervalued opportunities where, due to market fundamentals, current mismanagement, lack of sufficient capital or market timing, assets can be purchased at a discount to replacement cost, repositioned and sold at a profit.”

If this company buys assets at a discount, why shouldn’t it offer a small discount to people who want to buy parts of what it owns?  Hmm…

Doesn’t Mr. Spencer have enough money already?  I mean, he is a majority owner of the Philadelphia Soul and can afford to live in Gladwyne, Pennsylvania — one of the richest cities in the U.S. with a median income of almost $160,000 a year per person!!!  If this man wants to do real estate investment in Philadelphia, he should live in Philadelphia too.  He does just enough community service and urban redevelopment (redevelopment of Dilworth Plaza) to generate positive public relations for his company without making any real financial sacrifice due to his massive resources.

I think our city would be better off with less of a difference between the poorest and richest sections.  Some people who live and/or work in Philadelphia will never be able to live in a building like this one unless they win the Powerball lottery, which is just not right.  There wasn’t quite this level of residence quality stratification in the past.  We wonder why Philadelphia has so much crime…. maybe income inequality and housing stratification are some of the reasons.

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One Response to “Greedy Real Estate Developers”

  1. Gary Says:

    i agree with you to a certain extent on the greed of builders. I work in this industry and although they may buy distressed properties, we really don’t know what their true profit is on a property. Although we can determine what they bought the project for through public records, we do not know what they put into the property. We can always speculate, but their are a lot of unforeseen costs associated with permits and building. A builder does not truly make a sell a large majority of the units. So if they discount a home now we do not know what they will recover the project costs at the end of the day, especially in today’s economy. I do however agree with you on the fact that the gap of income is ridiculous, and I feel that this is true with owning real estate in most of the northeast. People who work in Philly are forced to live in the outskirts and commute to work, or cross the bridge into New Jersey.

    Visit my blog at realestateandeconomics.com


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