Vail Daily letter: Subsidy doesn’t make sense
I read the article on Sun and Ski Sports with great distress. As the managing partner in a three-generation commercial real estate business in Michigan, I am shocked by the town of Avon’s proposed sales tax rebate to Sun and Ski Sports for the vacated Sports Authority space. I believe emphatically that it is not the town’s responsibility nor it is in the town’s purview to subsidize the leasing of a privately owned parcel of commercial real estate. By doing so, the town is taking money from its own pocket and effectively transferring it into the pocket of a private investor — in this case the Traer Creek Partnership.
As I understand it, the Sun & Ski Sports’ landlord is Traer Creek Partnership, which in turn leases the space from Hoffmann Commercial Real Estate. Traer Creek Partnership therefore collects the difference between what it pays Hoffmann in rent and what Traer Creek Partnership in turn collects from Sun & Ski Sports in rent. Further, the rent that Traer Creek Partnership pays to Hoffmann is a relatively low amount. This “problem” of attracting Sun & Ski Sports therefore rests with Traer Creek Partnership. All Traer Creek Partnership has to do to attract Sun & Ski Sports is to offer a rent that is reduced by $100,000 per year to Sun & Ski Sports and the problem is solved. By rebating Sun & Ski Sports $100,000 per year, the town is therefore enriching Traer Creek Partnership by the same amount.
I do not understand how the town believes that making Traer Creek Partnership $500,000 richer is the correct use of funds. The town is putting money into a private developer’s pocket, when this developer clearly had the means and the wherewithal to solve a private lease problem. Think about what $500,000 could do for other retail businesses, or for affordable housing, or other town improvement projects. I again state that the town of Avon should not be subsidizing real estate owners, because once it starts down this path, the question becomes why not subsidize all of them? How do you think Christy Sports feels about the town subsidizing a competitor to itself?
I do understand that Pier Imports is hurt by the vacancy next to it. Believe me, I understand this. We had a tenant in one of our properties (Kroger) go dark and pay us rent for seven years. This hurt other tenants. But Kroger refused to give up its space. Now that we have the space back again, it will probably cost our partnership $2 million to refurbish the space. We did not ask the town in which our property is located to subsidize us. That is our job as owners/landlords. That’s why we maintain reserves and run our properties prudently. Because it is our responsibility to attract tenants and pay for them. Similarly, we thought it beneficial to attract Trader Joe’s to our property. So we took over its lease obligations at another property for four years at a great cost to us. We therefore lowered our return to attract the right tenant. This is the job of real estate owners, and in this case, the job of Traer Creek Partnership.
This entire discussion reminds me of the initial discussions we had about the Skier Building. The town decided it wanted to purchase the building, and therefore went headlong into it without realizing the economic impact of it. When it stepped back, after residents’ objections, it was able to purchase the property for less than half of the original price. Here we see a situation where the town is jumping the gun on attracting Sun & Ski Sports. It is being played and taken advantage of by Traer Creek Partnership and the Hoffmanns, both of whom are seeking concessions at the town’s expense so that these private developers can profit.
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The town of Avon is doing a great job of beautifying itself. However, when it comes to real estate transactions, the town is woefully lacking in its business acumen, financial stewardship and responsibility to its citizens.
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