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txcat84

Sand Dollar/Label Warehouse

10 posts in this topic

First of all, I'm not being "let's demolish everything that helps po folk" guy. This is a genuine inquiry.

 

How do Label Warehouse and Sand Dollar stay in business? I imagine the tax rate on those places is insane, and while I do see people shop there, I can't imagine it's enough revenue to cover (letter alone profit). Is there some sort of subsidy or tax shelter for businesses like these? Has no one thought this would be a good indie movie theatre or retail spot?

 

Just curious.

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Being pedantic, the tax rate for those buildings is the same as for any other building with the same taxing entities. Total taxes vary on property value and any exemptions. The taxes on the Sand Dollar property were $41k last year, the label warehouse owners paid $29k. Neither of those amounts is that high, and the business model for those types of stores are to buy stock for almost nothing, and get it out the door for a 300% markup, with prices that are much less than a regular retail establishment.

 

The label warehouse owners have several other stores in Houston, all of them owned for some time, so their carry costs are probably minimal, as they acquired them when property was much cheaper.

 

There are three Sand Dollar stores with similar ownership histories. I doubt either company is interested in selling their properties, or they likely would have by now.

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22 minutes ago, txcat84 said:

You think Sand Dollar clears that plus overhead?

Absolutely. $41k per year is only $800 per week. As long as they've been in business, they know  what they are doing. 

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16 hours ago, Ross said:

The label warehouse owners have several other stores in Houston, all of them owned for some time, so their carry costs are probably minimal, as they acquired them when property was much cheaper.

 

There are three Sand Dollar stores with similar ownership histories. I doubt either company is interested in selling their properties, or they likely would have by now.

 

Carrying costs are one part of the equation; opportunity cost is the other. It's not inconceivable that they could sell a location on 19th and buy 3 others in less expensive parts of the city.

 

However, in close proximity to these two, there's a relatively new Goodwill on 20th, the Value Village on 23rd, and any number of "antique" shops that aren't too far removed from the same business model. I suspect there's value to both customer and proprietor in this kind of clustering, and wouldn't expect these stores to go away anytime soon.

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As best I can tell, both Sand Dollar and Label Warehouse own the dirt they are on through related entities.  The appraised value for 1903 Yale St. went from 827k to 1.619 mil in four years.  222 W 19 went from 712k to 1.152 mil over the same period.  You may be able to keep the lights on with those taxes, but having your tax bill go up while your main clientele gets gentrified out of the area is something that is not sustainable in the long term.

 

But you never know what the motivations are behind the people who hold on to properties in the Heights.  Why does Solar Supply still maintain a warehouse on Waverly in the middle of a residential area where the property tax appraisal has gone from 1.1 mil to 2.3 mil in four years?   Why has the owner of the old National Flame and Forge site just let it sit for years?  Why does Weingarten sit on a cruddy strip mall with a beat up old Kroger while HEB is racing into the market with a shiny new store down the street?  Is the Happy All Cafe a front?

 

I suspect it largely depends on everyone's sense of how to time the market and whether they are satisfied with the cash flow they get from the existing use.  I am always surprised by the number of people who are just happy to sit on an asset with half decent cash flow and have no interest in selling or redeveloping.  Just because a property owner can do something to make a good return does not mean that they are going to do it.

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21 hours ago, s3mh said:

I suspect it largely depends on everyone's sense of how to time the market 

 

I think that's where you're right.  I give the owners credit that they know how much money they could make by selling.  But then where are you going to invest the money next?

 

With the uncertainties of Trump, Brexit, sub-$50 oil, etc. I bet that these people and many others figure that land in the Heights, even with increasing taxes, is still a wise investment with more potential upside. 

 

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There's also a strong bias in favor of doing nothing, especially in the case of family-owned properties.

 

As long as the status quo is financially tenable, there's a fair amount of emotional inertia to overcome before these properties move.

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i wish they would at least maintain the building a bit better.  the rust stains on the building facade by the gutters and the worn out parking lot make it look as lackluster as the items they sell.  i also wish the solar supply would sell.  i'm tried of the 18 wheelers coming down my street.  waverly is only about 20' wide.

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