Donjek Project: Designing a Structure for Purchase and Operation of Reused School Buildings

We are very pleased to announce that Donjek is involved in a
process to convert recently-closed school buildings in Minneapolis to active reuse, using a range of
equity and debt sources including equity investments, debt financing and tax
credits. Partnering with the Minneapolis School
, Urban Design Lab and the Local
Initiatives Support Corporation (LISC)
, Donjek will be in the coming months
evaluating the prospects for establishing a real estate investment trust (REIT)
to acquire and operate two large former elementary schools totaling over
200,000 square feet of leasable space. Such a REIT could be a very effective investment instrument with which
to involve a range of potential investors in a new real estate investment model.

The reuse of school buildings is an increasingly relevant
issue for many communities nationwide, both small and large in population.  Minnesota’s school
districts each face a particular circumstance – for example, enrollment trends
are strong in Pequot
in the lakes region, stable in the small town of Rushford,
and falling dramatically in the Lac Qui Parle valley. On the other hand, the small district in Houston,
has nearly tripled in enrollment as a result of its innovative
web-based curriculum, which has secured the presence of its physical school.

The data communicate the story effectively. As shown in the graph included here (click on it to enlarge the image), the overall
public school enrollment trends for Minnesota statewide and for Midwestern states together have been stable in the last
decade. Minneapolis Schools, however,
have seen significant declines in enrollment, due in part to students leaving
to attend neighboring school districts, charter schools and other alternatives. The policy discussion aside, the Minneapolis Public Schools
have twelve buildings they are seeking to sell
in one form or another.  Note also the dramatic red line, which indicates the enrollment drop among Minnesota’s fifty smallest school districts, which had an average total enrollment of 80 students during the 2007-8 school year.

We look forward to keeping you posted as the process
progresses and we engage in mapping out ways to secure active reuse of these
buildings. If you would like to learn
more as an investor, a prospective tenant or a neighbor, feel free to contact me by

Dual, Positive Changes at Donjek

It’s been a brief pause here at the Cents of Place, thanks
primarily to two significant and positive changes at Donjek.

First, Dan Walsh joined the office last week as vice
president, and is (as I type) getting his handsOffice_view dirty in travel demand
management analysis, parking solutions including shared parking
facilities, and redevelopment of a four-acre Minneapolis site. Needless to say, Dan is getting acclimated!

Second, Donjek has moved from our previous location to the
Midway Commercial Building
at 2500 University Avenue West in St. Paul, Minnesota,
where we have more elbow room and ease of access to the two downtowns and the
University. Adjacent is a photo of the
space; Dan is pictured here deep in analysis.

Our new street address is:

2500 University Avenue West, Suite E2
St. Paul, MN 55114
Phone (651) 645-4644

We look forward to hosting you soon!

Shiller on the Housing Bubble

Originally, a familial connection to the Netherlands introduced me to Tulip Mania,
a 17th-century example of a financial bubble that reads like a
parable. Who would invest in a tulip
bulb, wondrous Caseshilleras the blooms themselves can be? As Burton Malkiel
documented well in his book titled “A Random Walk Down Wall Street,” many Dutch joined in the tulip phenomenon, and many lost fortunes large and small. Teaching the theory and practice of investment at the College of St. Catherine in recent years, I have made sure to visit this interesting chapter of Dutch and financial history with students.

There’s nothing Dutch or historic about the bubble now known as the housing and mortgage crisis. Robert Shiller’s assessment
of the flagging housing market concludes not just with pessimism but also recommendations about information in the real estate market. Here’s an excerpt of the article the economist (whose Case-Shiller
housing index
has gained fame in recent years) published in the latest Atlantic magazine:

We also need to get better—and more—information to
more-sophisticated investors and financial professionals. In real estate, one
important way of doing that is by further developing the financial market
rather than focusing only on regulating it or reining it in. For instance,
real-estate futures markets, which have existed since 2006 but are still in
their infancy, have the potential to tame future housing bubbles. Without them,
there is no way for skeptical investors who think they see a rising bubble to express
that opinion in the market, except by selling their own homes. If futures
markets grow, then any skeptic anywhere in the world could profit from a bubble
in, say, Las Vegas, by short-selling real estate there. Substantial short-selling would reduce
bubbles, and provide information to home builders, ratings agencies, and
others. In turn, builders, for instance, might not overbuild if they see that
most of the money in the futures markets is being bet on price declines.

Subsidized financial advice and the encouragement of
real-estate futures markets are just two examples of the sorts of actions that
could limit future bubbles. The larger point is that increasing the amount,
accessibility, and reliability of information about investments should be a high
priority for policy makers. Epidemiology suggests that even very small changes
to the transmission rate of a disease can make the difference between an
epidemic and a low-incidence disease. If better information inoculated even
relatively few people against boom thinking, that could prevent many bubbles
from rising.

Such an article is surely cold comfort to colleagues hit
hard in the architecture field and others, but these ideas belong in the debate
about how to proceed with mortgage industry reforms and housing market
stabilization. If pointing fingers at
anonymous speculators is the extent of the reform, the financial bubble will be
historic, but certainly not extinct.