Andy Babula, director of the University of St. Thomas real estate program, spoke with the Minnesota Star Tribune and provided commentary on the collapse of Madison Equities and the deep challenges now facing downtown St. Paul. He explained how the firm’s aggressive acquisition strategy, heavy debt load and concentrated control of key properties created conditions that ultimately accelerated the decline of the city’s commercial core.
From the article:
At the height of their run as one of Ramsey County’s largest landlords, the husband-and-wife duo behind Madison Equities, Jim Crockarell and Rosemary Kortgard, owned 1.6 million square feet of downtown St. Paul office space, plus a few apartment buildings and parking ramps.
They valued their assets at more than $200 million, with holdings that included skyline-defining properties like the First National Bank Building, known far and wide by its large, neon-red “1st” sign.
Today, the couple’s real estate empire is in ruins. While COVID-19 emptied the nation’s office buildings, it sent a wrecking ball into Madison’s heavily mortgaged Jenga tower of a portfolio. Some of their properties are going through foreclosures. A few are boarded up and condemned. Others sold for far less than their remaining debt. ...
The couple borrowed from a patchwork of local and regional banks. Crockarell and Kortgard would often guarantee loans personally, meaning if they defaulted and the real estate wasn’t sufficient collateral, they would be on the hook for the debt.
Both practices are not uncommon, said Andrew Babula, director of the University of St. Thomas real estate program. Banks limit the exposure they have to one client or property type. Personal guarantees are an added risk for borrowers, but they can also unlock more financing or better terms, especially for purchases that are more speculative or opportunistic. ...
