books that were at least 11 years old. “The lease value of some of
those assets drops 77 cents per square foot per year,” stated Kevin
McGowan of McGowan Corporate Real Estate Advisors, one of
the SIOR project team members.
Not surprisingly, the cost to repurpose is much less than the
price tag of a new build. But the refurbish costs can creep up,
Also no surprise was the report that ware-
house spaces—essentially big open boxes—were
the most common repurpose targets. Obviously,
as the complexity of the project grows, the vol-
ume of adaptations drops.
But straight across the board, the ROI is
impressive, and Ron Grossman of Novartis
Pharmaceuticals, one of the study’s co-chairs,
told the attendees that “for 46% of the respondents, the ROI was one to three years.” Another
30% reported returns within three to five.
The other incentive to tackling an adaptive
re-use was, well, incentives. Mark Beattie of con-sultancy Hickey & Associates explained that
such projects are open to federal, state, regional
and local grants and tax breaks. “But,” he
warned, “it’s important to obtain the buy-in of all
involved partners,” and in that list he included
not only the obvious investors and owners but the
local community and special interest groups, as well.—John Salustri
BY THE NUMBERS
MF Occupancy Ebbs in Urban Cores
DALLAS—The steady pace of apartment deliveries in urban submarkets during 2013 has made inroads on occupancy in those submarkets as of this year’s first quarter, Axiometrics Inc. said
recently. Although the multifamily data firm noted an uptick in
the occupancy rate nationally over the past two months, it’s
expecting the erosion of occupancy in urban core submarkets to
continue throughout the year.
“The occupancy decrease within these urban cores isn’t sur-
prising, especially given the amount of new supply coming to the
market,” says Jay Denton, VP of
research with Dallas-based
Axiometrics. “These sub-
markets will likely
continue to see
drop throughout 2014 in the face of increasing supply.”
Axiometrics says 155,124 multifamily units were delivered last
year. For this year, 258,011 units are expected to come on line.
Among urban core submarkets analyzed by Axiometrics,
Chicago’s Gold Coast/River North submarket suffered the largest
year-over-year drop in occupancy at 320 basis points. Builders
added 1,905 units to the submarket last year.
Not far behind were the Capitol Hill/
Southwest submarket in Washington, DC, with a
2.4% Y-O-Y decline in occupancy; and Chicago’s
Loop at - 1.4%. There will be more new supply in
both submarkets, according to Axiometrics.—
SBA 504 Financing Ticks Up
IRVINE, CA—The interest level among owner-users for financing acquisitions via SBA 504 is
on the rise, says Jennifer Davis, SVP business
development for locally based TMC Financing.
Potential owners are seeing the upside to buying their own properties through this financing program, particularly while interest rates
TMC recently provided an SBA 504 loan
through Union Bank for hospitality-management
firm Casa Resorts to acquire a corporate headquarters building
here for $1.2 million. The broker on the project was Lee &
Associates; both the bank and the broker are based in Irvine.
The project, located at 84 Discovery Dr., features a 3,968-square-
foot office condominium. The financing enables Casa Resorts to
purchase an additional office location, make interior upgrades to
the building and retain working capital.
According to Davis, “Casa Resorts was looking for office space
that would meet their expanding operations. With the help of an
SBA 504 loan, they will be able to accommodate the growing staff
successfully, with additional space to add more jobs in the near
Davis tells GlobeSt.com that the biggest issue with owner-users
using SBA 504 financing is finding available inventory. “The chal-
lenge is finding something that’s for sale that isn’t being gobbled
up by investors.”
Once that issue is resolved, however, SBA 504 provides owner-
users with a great opportunity for fixing occupancy costs and
locking in low interest rates, all for 10% down on the property.
“Many users can’t get over the fact that they can do 10% down
and they didn’t know about it,” says Davis.
There are few restrictions for borrowers, she adds. “The prop-
erty does have to be 51% owner occupied, and they need to do
that within 12 months. They can get a short-term lease on the
property for a portion of it if they’re eligible.”
Despite imminent rising interest rates, rising prices make the
opportunity of closing a deal with 10% down more attractive to
potential owners. “Inventory is low, and you can use 10% down
payment as opposed to having to come up with 25%,” says Davis.
“And if interest rates bump up a little bit, there’s still a borrower
for whom it makes sense to retain their capital and reduce their
down payment.”—Carrie Rossenfeld
form, which will consist of Cetera and First
Allied Securities along with other brands still
to join the fold. The appointment followed the
closing of RCAP’s all-cash, $1.15-billion
acquisition of Cetera from affiliates of
in April, after
—Institute for Supply