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Real
Estate Development: Managing a Complex Adaptive Reuse Project
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| Rendering of Cannery, 1890 |
THE CHALLENGE The
Webster Station Development Group, a for-profit developer located
in Dayton, Ohio, approached Tetrault & Associates in 1998
with an extremely complicated prospective redevelopment deal:
the conversion of six 19th century warehouses into 156 high-end
live/work lofts and 36,000 square feet of ground-level retail
and commercial space. Adaptive reuse projects are among the most
complex in the business, and they typically require rigorous analysis,
a customized development plan, and unusual financing. Property
appraisals, zoning requirements, market research, tax incentives,
financing, property management, marketing, accounting, and negotiating
with local government—these were just some of the balls
Tetrault & Associates had to keep in the air.
THE SOLUTION Tetrault
& Associates’ first step was to conduct a “first
run” feasibility analysis. We examined the local residential
and commercial real estate markets to confirm that the market
would support the project. Once our team had confirmed the project’s
viability, we worked with the owner to bring the building up to
code using the state’s flexible rehabilitation program.
With this foundation in place, we pulled together an innovative
$21.5-million finance package that included a $14.5 million mortgage
loan guarantee from HUD’s 221(d)(4) program; the sale of
$3.4 million in historic tax credits to three equity partners;
and nearly $2.5 million in acquisition debt, bridge loans, and
mezzanine financing from public and nonprofit sources.
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Rendering of Cannery,
1999 |
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THE
RESULT The Cannery, placed into service in July
2002, has become one of Dayton’s premier properties. It
includes a variety of retail stores, a day spa and salon, art
galleries, a wine bar, and loft-style apartments ranging from
studios to three-bedroom penthouses. “The building development
process is like planning a journey on the Appalachian Trail,”
says Beth Duke, a partner in the Webster Station group. “You
never know what to expect, and you have to adapt. Contracting
with Tetrault & Associates brought tremendous credibility
to our team. We had all of the elements for project success but
we needed Tetrault’s team to help package the project, control
costs, and keep things moving forward.”
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