By: Donald V. Watkins
Copyrighted and Published on June 11, 2024
An Editorial Opinion
For 1999 to 2017, I owned the ultra-modern Class A office building in Birmingham, Alabama known as the “Alamerica Bank Building.” At the time, I was also majority owner of Alamerica Bank.
The Alamerica Bank building is located at 2170 Highland Avenue South, which is the most upscale commercial street inside the city limits. My office building was the nicest one on Highland Avenue South. I also owned the adjacent parking lot, as well as the two parking lots that were directly behind the building.
A ten-year first mortgage on the building matured on September 1, 2013. Even though I began refinancing efforts in March 2013, the mortgage products that were offered to me were not acceptable, nor would they have been acceptable to any seasoned business owner.
The office building was fully leased to reputable corporate tenants. It was fully occupied and well-maintained.
In 2003, the building appraised for $5.7 million. In 2013, the mortgage payoffs totaled $3.9 million. The monthly rental income from the two primary tenants, alone, exceeded the monthly mortgage payment by $16,000.
In 2013, I had at least $1.8 million in equity in the property (i.e., $5.7 million fair market value appraisal, minus $3.9 million mortgage payoff), or so I thought.
Despite a diligent six-month effort to refinance the mortgage, no financial institution, in or out of the state, would give me a mortgage that covered the $3.9 million payoff of the existing mortgage, which was held in the portfolio of a New York City real estate investment trust (REIT).
After the mortgage matured, I successfully fought the REIT’s attempted foreclosure on the building from September 2013 to December 2017. I had no choice because I had signed a personal guarantee on the mortgage loan.
As a bank owner at the time, I could not understand why I could not refinance the building on commercially reasonable terms and conditions. How was it possible that I could not get a fully-leased, strong cash flowing, Class A office building in the best commercial district in the city refinanced?
After much prodding on my part, a lender in Miami finally sent me the answer and I was floored. The underwriting report for the requested new mortgage was essentially a demographic report on the city of Birmingham. The report charted and assessed critical data on a multitude of quality-of-life factors in Birmingham going forward from 2013 to 2023.
In summary, the 2013 report predicted:
A dramatic rise in violent crime in the city over time.
A local city government that would become increasingly inept over time.
The inability of the mayor and city council members to recruit new businesses to the city.
Consistently failing Birmingham city public schools.
Deteriorating neighborhoods and communities that would serve as havens for drug activity, property crimes, and increasingly violent violent street gangs.
The exodus of existing Birmingham businesses to the suburbs.
The growth of residential and commercial properties in the suburbs cities.
A deteriorating and grossly neglected infrastructure in the city's residential neighborhoods and communities.
An overall decline in the city of Birmingham’s population.
A diminishing occupational and sales tax base that would undercut the city's ability to provide the seven basic city services.
Every prediction listed in the report happened between 2013 and 2023.
Birmingham was Dying, But I Didn't Know It
Having worked as Mayor Richard Arrington, Jr.’s Special Counsel from 1985 to 1998, I never thought the city of Birmingham would decline to the degree specified in the lender’s demographic report. I was naive in that regard.
Unfortunately, the decline in these quality of life factors has continued to levels that were unimaginable when I invested $6 million of personal money for my ownership shares in Alamerica Bank and $4.4 million in an ultra-modern bank building in 1999.
Initially, I thought I was being denied a suitable mortgage refinancing product because I am black. In hindsight, that was NOT the case. I was denied a suitable mortgage refinancing product because I chose to invest $5.7 million in a commercial building in a city that was dying.
In December 2017, I executed a Settlement Agreement with my REIT lender in which they agreed to release me from the personal guaranty agreement I signed at the time of the mortgage loan in exchange of my release of all liability claims against the REIT. With this release, the lost value in the building was capped at $3.2 million (i.e., the amount equal to its diminished value between 2003 to 2017).
After the REIT lender took possession of the building in 2018, they sold it to a thrid-party for $2.5 million. In the process, I lost $1.8 million in equity ($5.7 million asset value, minus $3.9 million mortgage payoff) and the mortgage lenders lost an additional $1.4 million ($3.9 mortgage payoff, minus $2.5 million foreclosure sale price).
Tren de Aragua is Here
In addition to the bodies piling up in the streets of Birmingham each day, violent drug and gang-related crime in Birmingham is also killing property values in the city and in the surrounding suburbs.
What is worse, Tren de Aragua, a powerful transnational criminal gang that originated in a Venezuela prison, has finally made its way to Mobile, Montgomery, and Birmingham, Alabama. This gang is much more violent than the Bloods, Crips, MS-13, and Disciples who rule the streets of Birmingham today.
Sadly, violent street gang members greatly outnumber Birmingham’s grossly understaffed 430-officer police force. Fullly staffed, the police force is 900 sworn officers.
Having overrun Birmingham's streets with ease, the very gangs that glorify cop-killing are now eying suburban cities and communities as fertile new territory for the expansion of their criminal activities.
These gangs view the city of Birmingham’s law enforcement response to their increasingly violent drug dealing, robberies, carjacking, theft-rings, and shootouts as weak, timid, and reactive rather than proactive. Furthermore, we have received unconfirmed reports that one of the top prosecutors in Birmingham has longtime ties to one of the city's most violent street gangs. He is reportedly pictured (front bottom left) in the photo below.
Reportedly, this top prosecutor and his brother were members of the Nasty Boy Crips during their youth. According to informed sources, this top prosecutor is not in a position to be tough on violent crime perpetrated by the Crips. We are investigating this report.
Lloyd Peeples, the head of the Criminal Division in the Birmingham U.S. Attorney's Office is busy pushing a personal racial agenda that targets black, non-violent, first-time, white-collar offenders rather than Tren de Aragua and the other dangerous street gangs operating within the city. What is more, Prim F. Escalona, the local U.S. Attorney and a 4-year Donald Trump holdover appointee, has zero experience as a criminal prosecutor.
Unless there is a massive and sustained show of force by police officers or National Guard members on the streets of Birmingham, these violent drug dealers and street gangs will continue to roam the streets of Birmingham with impunity and in increasing numbers. Eventually, they will control City Hall much like they control the small island nation of Haiti. Killing innocent people and rival gang members means nothing to them.
With the surge of homicides in Birmingham, together with expanded drug-dealing operations and increasingly violent street gang activities, neighboring suburban cities and communities should expect to see a dramatic increase in their violent crime rates and a corresponding decline in their property values.
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In my opinion, Birmingham has been on a decline since the passing of A.G. Gaston another prominant businessman. The Alamerica Bank building is an attractive commercial property and destined to be sold to some wealthy investors for pennies on a dollar; who have no interest in the economic development of the local community.
Unfortunately, violent drug dealers and street gangs in urban cities like Birmingham perpetuate crimes at an alarming rate most local law enforcement agencies aren't unequiped to take them on.
I might add, street gangs and drug dealing actitives are source of benefit for investors, because it place them in a negotiable position to persuade the bank to sell the property at a rate far below it's market…