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April 24, 2014

Ironic Macro Gentrification: Et Tu, August Wilson?

So, gentrification: the bringing in of gentry, the displacing of others, the increasing of the economic value of a district. Gentrification may be pernicious and unavoidable. It may bring mixed feelings and benefits (Pgh-based!).

By way of introduction, let me mention two mini-stories of gentrification, one rhetorical and the other quite real. Rhetorically: your family is big in your neighborhood; your parents, aunts and uncles, cousins and friends - yinz are all over the place. You're ready to get a place of your own, and you've got your eye on Old Man Rutherford's house down the street. You've talking to Rutherford and his kids and you've got dibs on it. The place goes up for sale, and wow it's listed for $285K, you expected maybe a $115K listing and an $85K price. Rutherford says, Hey my realtor told me they know what they're doing. Two weeks later, A Boston software geek pays $285K and thinks he got a bargain.

True Fact Two weeks ago I went to photograph a mural in Lawrenceville. At the house next door, a couple of people my age are carrying boxes in and I got to talking with them. They grew up in Brookline, found success and moved to Maryland, raised kids. Now their daughter (the doctor) is moving to Pittsburgh, bought this house in L-Ville, and the parents are kind of amused and stumped.

The house listed at $315K went for about $300K. You and I look at that, and we think: crazy. It's a nice house but it's not that nice and there's some real rough houses very close by. But the trick is: that $300K price isn't supposed to be attractive to anybody from here; that $300K price is a bargain to a Baltimore physician that's amazed she can live close to downtown for so little.

It's gentrification and it's arbitrage, playing the difference between what people are used to paying for East Coast or West Coast real estate against the very low prices in Pittsburgh. So this new house owner is the Gentry, a very nice person who's going to contribute to the community, and this transaction is another accretion of Gentrification. Huzzah n'at.

In general, complaints about Gentrification happen at the micro level, and they come from the people who get priced out, the kids who can't buy in their parent's neighborhood; the little people. The power players - the makers and the institutions - say that gentrification is a good thing, it's a positive force, and those complaints are only anecdotes rather than datapoints. Rising tides, future's so bright, etc.. People in Suits usually benefit from gentrification.


And here's why I mention all that. Pittsburgh's power players, all the institutions, thought they had a pretty good strategy for changing the leadership of the August Wilson Center. They allowed the AWC to flounder and fail, and figured they'd resurrect the AWC via bankruptcy. It's not a bad strategy until the AWC real estate went onto the open market.

But an out of town player said - wait a minute, downtown property for $4M or $5M? That's crazy low, I'll pay $9M and still make money on it. This development confounds the Institutions and the Establishment, who have (perhaps for the first time) seen their pet plans thwarted by outside money, different perceptions of real estate value, and the fact that in bankruptcy court it's about the money.

Downtown just got gentrified, and the Pittsburgh players can't afford that house down the street they kind of had plans on. The peon in me loves that all the Suits have had their plan thwarted by the same forces they maintain are no-harm and virtuous when it happens in a poor neighborhood. The Pittsburgher in me sees that once again, the respect and needs of the A-A community are ignored in a power play of white money.

And here's a wrinkle: money guys are smart. Do you think the people who bid $9M knew what they were doing, and are now going to accept $1.5M to just go away? Completely possible. It's the real estate version of patent trolling. Maybe that $9M investor is a rentier, a bungee-speculator.

And so, ACE-Bill are trying to derail and interrupt this bankruptcy process that was (until now) completely acceptable, and the Foundations have taken their money off the table (after they lost the bidding war), and they're all scurrying to either {derail and re-define} or to {condemn and save face}.

To me, the economic story is - the Pittsburgh Players just got gentrified, hoisted on their own petard, and now all of a sudden it's a tragedy when their plans get priced out of the market. In a way, it's August Wilson, meet Adam Smith.

And good people who are caught by surprise say: it's too soon, it's too fast, we need checks and balances; we have a stake in the outcome, this is not just about money, can't we get a veto? - which in a way is a funny echo of the land bank negotiation.

7 comments:

Bram Reichbaum said...

Pittsburgh power players and institutions "allowed" the AWC to flounder and fail? This was all their plan? That's creative. How did they convince the AWC to refuse programming? Who prevailed upon them to keep their delinquencies a secret until it was way too late?

I don't even think prior AWC leadership claims that; in Mr. Udin's op-ed today he accepts on behalf of that group responsibility for mistakes.

New Reader said...

This is a very good piece. Thank you for offering insightful, thought-provoking writing. It's hard to come by these days.

Shawn Carter said...

Bram,

I think Van is suggesting that the "Power Players" could have rescued the AWC at any time.

I believe County Councilman Bill Robinson tried to add a line item to the County's 2014 Capital Budget to aid in precisely that end. I don't think the County's budget was able to accomodate that, but it indicates to me that the AWC's plight isn't a new one.

It is important to keep that in perspective.

BrianTH said...

Generally I liked this post, but I am not sure it is fair to say the AA community is actually being ignored in this case. All the parties contesting for ownership of the building are also pledging to continue the cultural program in the building, and offering financial support (the developer is offering a subsidized lease, and the foundations some sort of ongoing operations subsidy). There are also respective proponents of the competing plans speaking about the interests of the AA community to the media, including Sala Udin for the foundations and Aaron Walton for the developer.

So while I certainly would not claim that good faith understandings of what might benefit the AA community are the only or even the most important consideration, I think at a minimum that issue is being considered as part of the overall public relations battle. And I even think it is likely the various parties more or less believe what they are arguing on that issue, although of course it is likely that motivated reasoning is playing a role.

Bram Reichbaum said...

Shawn: I agree that is what he is suggesting. And I'm saying it is incorrect.

The foundations, as well as government, came to the aid of the AWC several times. Eventually they came to an extremely reasonable judgement that all the money in the world can't save them if they were going to continue to persist in making huge mistakes.

Did they stop supporting it so that it'd have no choice but to change its ways? Sure. Does that mean they stopped supporting it so they could "take over" a building? No way.

Let's not fob off the AWC's faults off onto someone else because it feels good or comports nicely with the rest of our politics. It was in trouble because of itself, and it amply demonstrated that in a convincing multitude of ways.

Shawn Carter said...

Just as with the Pittsburgh Board of Public Education, the region's philanthropic community made a choice to withhold their financial support during a period of turmoil and dysfunction.

No one is suggesting, or at least I am not suggesting, that good money should be thrown after bad.

The Board of Education attained a measure of cohesion, voters voted in new members, terminated the Superintendent, embarked on some cost-cutting measures, and set a new tone.

The philanthropic community returned their suppport.

There are many opinions about that tumultous period, and I make none here, merely making the point that the foundation community is unlikely to support dysfunction, and organizationally, that makes some sense, as these foundations are virtually all endowed by the wealth of captains of successful enterprises.

Personally, I think they should have bid more, but I think Vannevar is right in his analogy about gentrification and hilariously so.

Perhaps the City, County and the foundations should make an offer directly to Dollar Bank that is satisfactory and purchase Dollar Bank's right, title and interest.

I am supremely confident that it can be accomplished.

Bram Reichbaum said...

Vannevar has a strong central observation in that our recently unprecedentedly rising property values across Pittsburgh, which we can consider as "macro gentrification", are making it difficult for even our locally well-heeled to undertake the sorts of things they are accustomed to undertaking. Good show there. I just take pretty serious exception to everything else that gets implied in this essay on thin pretenses.

I'm not sure the City is in a financial position to cut a 7-figure check, let alone a political position to do so. Nor the County, unless maybe it finds something else to drill. I'm hoping Dollar can be persuaded into patience by appealing softly to its better angels.

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