How do I repurpose a building?

Question

Hi all!

So I am looking to try my hand at doing a full rehab/repurpose of large empty buildings into multifamily apartments.  In my area there are a few very well placed old industrial buildings, gorgeous old, multistory brick and stone buildings around 30,000 sq feet that, based upon their location and what I know of the demand in the area, would do very well as multifamily properties but will require full gut jobs.  Achieving this is way over my head currently so I want to get your advice on how to make it happen.  I would love to hear from some people that have experience in this kind of thing so that I can pick their brains a bit.

The steps I can think of are:

1) Contact county/city zoning planning to ensure zoning is right for multifam and/or what do I need to have it done as well as what are the requirements, e.g. X number of parking spaces, X amount of space for emergency vehicles etc

2) Get multiple bids and walkthroughs by architecture/engineering firms to get a few plans made up

3) Get multiple bids by General Contractors to see how to execute agreed upon plan

4) Use GC and architecture bids to secure financing

5) Execute

I know I am missing a lot of the specifics, but for now I am curious as to how to just do some napkin planning, so say I am looking at that 30,000 sq ft building, how many units would that fit? What is the typical build out cost per sq foot?

So many questions but where to begin?  Anything would help!  Thank you.

Eric Teran · Answer

@Greg H.

As @Anthony Dooley mentioned worry about step 1 first or else you might get scared or waste time. I am going give you a few steps for step 1.

• First      thing first is find out what zone the building is located. This should be      available on the city/county website. If it isn’t then you have to make      the trip and ask in person. If it is in an industrial zone it might be      hard to convert to residential. The planning departments love to keep      these areas separate.
• If      it is industrial find out from the zoning or planning department if there      are other properties located in these zones that have been allowed to      build residential. If yes then gather up information on those properties.      If you can show precedent your life will be much easier.
• Find      out if the zoning/planning department would support this variance. As @Chris Anderson mentioned the zone does not change. The municipality allows you to build      something different through a variance. The city might have a 25 year plan      and they definitely have a general plan on how they want the city to develop.      Find out if your property is located in one of the areas of interest the      city has to redevelop. If you will need a variance then you 99% have to      get the support of the planning and zoning staff when making the      presentation to the city boards. If not you will be fighting an uphill      battle.
• Is      there any residential nearby? If there is that will help. The city does      not like to make isolated pockets of residential areas. They also like new      residential to be somewhat near retail or schools unless it is an enormous      project where they might end up donating land for a new school. For      example, if every residence is less than 10 miles from a school but this      property would make it 25 miles then they might not like it. Just giving      you worse case scenarios and items they might nitpick.
• Any      public transportation nearby? I ask because if you have a parking problem      for the number of units you could say that some units are smaller and      designed for people taking public transportation. In cities this is a      valid agreement. A tenant who rents a 350 SF micro-unit apartment most likely does      not have a car so there is no need for a parking space for them. Parking total may be reduced.
• Find      out if there are any easements. I once designed a Mercedes Car Dealership      in San Jose, CA and when they bought the land they did not realize there      was an easement for some type of bird that flew through that property once      a year to migrate south. The easement took over 1/3 of the property. Luckily we were allowed      to do grass pavers so that all the cars parked in that area. The city      might not be able to tell you this. They might have maps for all utilities      and you might be able to find it there. If the owner of the property doesn’t      have one then you will need to hire a Surveyor to perform an ALTA survey. Make      this part of the conditions to buy the property because it might get expensive. A few thousand.
• I wrote      a blog post with lots of basic zoning and planning questions to ask. Take a      look, “Zoning?      Why Zoning? What Zoning?”

If all this goes well and it looks positive then go onto Step 2. I will give you a very brief explanation on how to start this phase.

• Hire      an Architect to provide preliminary study plans. This will probably be 3      to 4 options on what can be built here. Schedule a      meeting with the zoning/planning staff (preferably directors) and see which option city prefers. They might like all or none of them but at least you can gauge their interest. Of course all of the options will      work for you. These are all studies and very basic. You don’t want to pay      an Architect too much money for detailed designs that will not be needed. That will be at a later phase when preparing plans/presentation to the city boards.
• You      might have to hire a civil engineer at this step. This can cost a lot more      than you think. It depends if the property already has water/gas/electric      for the needs of residential living. Depending on the city they might      require a lot of work from the civil engineer if a variance is required. 
• Find      a General Contractor that has experience in these types of projects. Pay      them an hourly fee to review the basic options to give you a very rough      estimate on price. I’m taking an estimate like option 1 - $500k to $1      million, option 2 - $3 million to $4 million and so on. It will be a big      range but you want something so you are not flying blind. It will also      help you decide which option to choose or push to the city.

There is a lot lot lot more but this is a good start. Just worry about Step 1 for now. There is a lot there. Remember just because they say no it doesn’t mean no. It just means you have to be creative. For example, they say no but you ask "what if I build a bus stop (bench, sign, some shade) in front of my building." Cities love to get free stuff for public use from developers.

Most of this is if you require a variance or it is something other than residential or mixed-use. If you get one of those two your life just got a whole lot easier. Also if the city wants to redevelop this area in the future and you are the first they will love you for it.

Let me know if you have any questions on the forum or a PM. I know this is a lot and I wrote waaaaaaaaaaaay to much. Sorry. It helps that I’ve been an Architect for 15 years so this is all just standard stuff. A lot of it might not even apply but I always ask everything just in case.

Good luck.

Eric Teran · Answer

@Greg M.

Good to hear that there is residential everywhere. Were you able to find out what zone it is in? It might already be zoned for residential. If that is the case then you might just have to see if you can get the desired density. Once you go down this route require that your Architect schedule a neighborhood meeting in the early stages of design. You want to be open with all your neighbors about the goals you have for this project. Definitely do this meeting before any type of review board hearings. That way you can always tell the review board that you have heard your neighbors concerns and made certain design decisions with them in mind. You might also be able to get a few neighbors to speak on your behalf. When I do these I usually bring some type of snack so they stick around long enough to hear my presentation. Of course this is all done once you already have the property in contract. Even though it looks like it will work be sure you get the city staff behind you and work with them. When you present in front of the board you want the city staff and as many neighbors as possible to voice their approval on your behalf.

Another way of protecting yourself is ask the seller that the contract be contingent on you obtaining approval from the city to build what you want.

In regards to pricing that is a tough one. I don't know the going rate in your area and I would have to research more to see what is exactly required for the city submittal process. Preliminary designs might be a few thousand. Remember this is very rough and more like bubble diagrams and maybe a rendering or two that are low resolution. None of that would be enough to submit plans if a variance is needed. Basically it is a feasibility study.

In order to get a GC bid at this early stage you need to give him a detailed program of what you want to do. List everything. A good GC will be able to give you a ballpark figure (a big ballpark) but know that this can drastically change.

Be careful with design build firms for bigger projects. You might not get the best design or craftsmanship. You will probably be within budget though. You also won't have anyone looking out for you during construction (Architect) unless you hire a construction manager. I can go more into detail on the process during construction and how it should probably be handled to protect all parties. However, it will be much to long to get into here.

Have you verified the zone yet? If you want send it to me and I can tell you. Assuming that the city has an adequate website. Or just tell me the city and I'll try to find the map for you and you can figure out the exact location. It is usually under zoning. Sometimes under planning.

Good Luck.

Joshua Tobin · Answer

@Greg M. Would love it if you keep the progress you make updated on this thread. Super interested in this as well. Best of luck to you!

Greg M. · Answer

@Eric Teran

Thank you for that great info!

So the property in question is well suited for residential, it on the corner of the block entirely surrounded by single family/low density residential properties.  Literally across the street is the town high school, the only reason this property is here I am pretty sure is because it pre-dated all the homes and school. There are no other industrial anywhere within 4 blocks, and no commercial within two.  So getting a variance to make it multi-family would probably be easier then actually trying to use it as it is currently zoned as I am sure the locals would complain if this actually started running factory/warehouse operations.

I have contacted some of the firms in my area to feel them out, and I have found one that is an all in one design and GC firm.  How much should I be paying just to have them work out basic feasibility plans as well as get a simple bid to GC it all?

Chris Anderson · Answer

Zoning doesn't change.  A zoning variance authorizes use outside of the parameters set by city ordinance.  That being said.  This may not be outside zoning ordinance at all.  As long as there is sufficient parking, and lot size to house the structure and conform to impervious ground and FAR calculations.  This property may already be allowed to be converted.  I am looking at a similar project now.  However, the lot size is insufficient and will not allow for parking, I am pretty sure the deal will go down over this.  However given that it was an industrial building there is probably parking already there.   Get the property under contract subject to.  If they have a survey get it, if they don't have a survey done.  Formulate a basic concept.  Just you and the survey.  Then Speak to the city planning officer or zoning official, and ask about the property, schedule a time, go over the survey and talk about the parking spots.  If it conforms then go to the next step.  You may not need a variance.  If you do but the zoning official thinks it looks good, then you will likely have to retain an attorney.

Will G. · Answer

just had this conversation with my city manager, and discovered they WANT projects like you are describing. This is a giant hurdle regardless of what is legally possible, as you will be in a much better position if your city council "like" the idea. I am not sure how you go about tying up the property long enough to try zoning change(several months?) except if it has been sitting so long the owner wont care? And then what if owner does not want the zoning changed/ can you withdraw from change application at any time? I would be very interested in how that might work. What about reaching out to people you would like to have on your "team" and pitch it as a jv, and add credibility to your proposal?

I am sure you know this but we are in a super bull market for multi, with the lowest cap rates ever, so make sure there arent any large developments coming that could hurt yours.

Anthony Dooley · Answer

@Greg M. I wouldn't get wrapped around the axle about anything until you clear up step one. Planning ahead is great, but I wouldn't put anything in motion until the zoning people give you the go ahead. This may take a while. You could probably tie up the property with a contract to purchase contingent on favorable zoning, physical inspection of repairs needed, and of course financing. Once the zoning is changed, the value should actually increase.

How do I repurpose a building?

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