Office to Resi Conversions

[KJHburg]

this is an office to warehouse conversion in Fort Mill but it is demolition which is usually the way it is done in the suburbs with smaller buildings.  

""Foundry Commercial is nearing final approval for its plan to replace two office buildings in Fort Mill with an industrial park.

The York County Council has approved the first reading of the Florida-based developer's rezoning request for a 32-acre site on Stateview Boulevard, near the state line. The site is home to existing office buildings, totaling around 120,000 square feet, that used to house major operations for Wells Fargo Home Mortgage.

Foundry is proposing the demolition of those offices to allow for a three-building industrial development.""

Foundry Commercial's Wells Fargo office demo plan advances - Charlotte Business Journal (bizjournals.com)

so here is 120,000 sq ft of office space being removed.  I might have to start a list since 2 buildings have been demo'ed in Carmel 51 area one for a Publix and another for apartment complex.  

[AltNative]

41 minutes ago, KJHburg said:

"A planned conversion of the former Duke Energy Corp. (NYSE: DUK) headquarters building uptown into a mix of apartments and commercial uses could need as much as $20 million in public funding.

would be curious to know how my fellow UPers feel about this. Can we do an emoji reaction poll?

Thanks emoji = support public funding

sad emoji = against public funding

[JHart]

LMAO! I'm sure everyone loves the idea of our private monopolized utility selling a building at a discount well below market value and then using public funding (the source of which isn't even clear because tax incentive grants use tax increases not decreases) to help an out of state developer convert what is arguably the most desired development location in the city into apartments at a time with decreasing rents after the largest apartment boom this city has ever seen. It's really nice because we get to funnel money from the Charlotte taxpayers out to private investors in multiple different ways throughout the entire process!

[kermit]

Meh, my impression of uptown is that it is hurting. The city certainly can’t afford for it to decay, and changes in uptown land use seem vital to future health of the entire metro. I am fine for some taxpayer subsidies for a proof of concept (office to residential conversion) and kick-starting some post-pandemic residential development uptown.  Honestly the only thing that makes Charlotte different than most other Sunbelt metros is its (once) healthy and dense downtown. I view this as a way to protect against the ‘Levineisation’ of the 3rd Ward that might happen if this site were left without an immediate conversion. How much money has Levine's inaction cost us over the years in 1st Ward? I am sure its way over $20 million.

Far better ROI on this than  any sport of ‘roads first transit plan’, and certainly far better ROI than any stadium investment (yes, hotel tax funds, walled off, yada yada).

Edited March 8 by kermit

[JHart]

18 minutes ago, kermit said:

Meh, my impression of uptown is that it is hurting. The city certainly can’t afford for it to decay, and changes in uptown land use seem vital to future health of the entire metro. I am fine for some taxpayer subsidies for a proof of concept (office to residential conversion) and kick-starting some post-pandemic residential development uptown.  I view this as a way to avoid the ‘Levineisation’ of the 3rd Ward. How much money has his inaction cost us over the years in 1st Ward? I am sure its way over $20 million.

Far better ROI on this than  any sport of ‘roads first transit plan’, and certainly far better ROI than any stadium investment (yes, hotel tax funds, walled off, yada yada).

It's not a proof of concept of anything. The concept of developing (even converting) a residential building is already very established, it isn't happening in this case because it doesn't make financial sense to do so. Do you think the city should be paying Daniel Levine to start building on his land because he has sat on it for so long? If your answer is no, then it isn't any better to pick a different developer for public investment. MRP could take their same $250M and build a residential tower on any of our vacant lots across the city.

[kermit]

16 minutes ago, JHart said:

It's not a proof of concept of anything. The concept of developing (even converting) a residential building is already very established, it isn't happening in this case because it doesn't make financial sense to do so. Do you think the city should be paying Daniel Levine to start building on his land because he has sat on it for so long? If your answer is no, then it isn't any better to pick a different developer for public investment. MRP could take their same $250M and build a residential tower on any of our vacant lots across the city.

I dunno, we have a couple of conversions uptown, but (IIRC) they are either from a long time ago or not really comparable (e.g. super luxury the Trust). Wouldn't this be a larger floorplate conversion than we have seen in the past? Have we seen any conversions in the past 5-10 years?

No, I would not give Levine a dime, but we already kida did IIRC (I think the city paid for infrastructure and park / UNCC paid for parking spaces which were never delivered).

$250 million? I thought the Duke building subsidy was $20 million. Assuming the subsidy is geared towards getting the conversion done quickly then it does not seem totally out of line to me. I'll admit to being a bit far from my area of expertise here, I was just responding from my gut.

Edited March 7 by kermit

[JHart]

10 minutes ago, kermit said:

I dunno, we have a couple of conversions uptown, but (IIRC) they are either from a long time ago or not really comparable (e.g. super luxury the Trust). Have we seen any conversions in the past 5 (10?) years?

No, I would not give Levine a dime, but we already kida did IIRC (I think the city paid for infrastructure and park / UNCC paid for parking spaces which were never delivered).

$250 million? I thought the Duke building subsidy was $20 million. Assuming the subsidy is geared towards getting the conversion done quickly then it does not seem totally out of line to me.

They paid $35M for the building and they estimated the renovation at ~$210M from that article. My point is if the goal is to get residents in Uptown, they could take the same $250M and build more apartments for cheaper on a vacant lot. All residential conversions are super luxury because that is the only way to get the numbers to work, it is so much more expensive than building from scratch even under the most ideal conditions. It's just another grift like Levine.

Why can't I get 50% of my higher tax revenues back if I renovate my house? If it improves the tax base the city still comes out ahead! (Not trying to be snarky, I just thought it would help illustrate the idea). 

[kermit]

37 minutes ago, JHart said:

They paid $35M for the building and they estimated the renovation at ~$210M from that article. My point is if the goal is to get residents in Uptown, they could take the same $250M and build more apartments for cheaper on a vacant lot. All residential conversions are super luxury because that is the only way to get the numbers to work, it is so much more expensive than building from scratch even under the most ideal conditions. It's just another grift like Levine.

Why can't I get 50% of my higher tax revenues back if I renovate my house? If it improves the tax base the city still comes out ahead! (Not trying to be snarky, I just thought it would help illustrate the idea). 

Yea that is fair. When conversion just don't pencil, it sounds like any potential public subsidy might be better spent on demo in order to speed a couple of first movers along.

Not to be the 'well actually' guy but there are subsidies for some home renovations (if in a federal historic district and your plans have their approval)

Edited March 7 by kermit

[JHart]

2 minutes ago, kermit said:

Yea that is fair. When conversion just don't pencil, it sounds like any potential public subsidy might be spend on demo in order to speed residential redevelopment.

Not to be the 'well actually' guy but there are subsidies for some home renovations (if in a federal historic district and your plans have their approval)

I think it needs to be income producing, we want to incentivize companies from tearing down historic properties, homeowners we just mandate they follow historic restoration guidelines through zoning  There is additional value in historic facades, that's why if you look at a list of large office/residential conversion projects they are all in NY/DC/SF where land and construction costs are so high or they have a historic facade that provides additional value besides just square footage being used as office space. 

[kermit]

35 minutes ago, JHart said:

I think it needs to be income producing, we want to incentivize companies from tearing down historic properties, homeowners we just mandate they follow historic restoration guidelines through zoning  There is additional value in historic facades, that's why if you look at a list of large office/residential conversion projects they are all in NY/DC/SF where land and construction costs are so high or they have a historic facade that provides additional value besides just square footage being used as office space. 

Getting off topic here but... The commercial historic renno program needs to be income producing (they used this program at the Alpha Mill apartments). The federal residential program (which was a tax credit IIRC) does (did?) not. I went through the process about 15 years ago, but they would never agree to my plans to add a stairway in an existing portion of the house so I had to walk away from the subsidy.

There are also smaller federal subsidies for energy efficient renovations to homes and also big subsidies for affordable housing. I don't have a problem uptown redevelopment subsidies during a time where the biggest single property tax generator neighborhood is struggling, but I do agree that any subsidies should be as efficient (yield the greatest transformative change for the least money) as possible. I'll also readily admit that I don't know enough about the Duke building case to have a strong opinion about it specifically. My response was more along the lines of 'doing something is better than doing nothing'.

Edited March 7 by kermit

[JHart]

2 hours ago, kermit said:

I don't have a problem uptown redevelopment subsidies during a time where the biggest single property tax generator neighborhood is struggling, but I do agree that any subsidies should be as efficient (yield the greatest transformative change for the least money) as possible.

I personally think that if we've overbuilt Uptown office buildings to the point that valuations and loans against these properties are so far off from reality that all of these buildings are no longer viable as office space at any price point, then there is no way the city government has enough money to fix the actual problem. I would probably have less objections for incentives to just build cheap housing on vacant lots in Uptown. 

[kermit]

26 minutes ago, JHart said:

I personally think that if we've overbuilt Uptown office buildings to the point that valuations and loans against these properties are so far off from reality that all of these buildings are no longer viable as office space at any price point, then there is no way the city government has enough money to fix the actual problem. I would probably have less objections for incentives to just build cheap housing on vacant lots in Uptown. 

I don't really feel like we are at the end of the office age, I think demand for office just dropped by 18% or so. (Pre-pandemic firms rented office space 7 days per week and used it for 4.5 days. After the pandemic firms rent office space for 7 days a week and use it for 3.5 days.). So I can't see office demand falling of the map, but it does seem clear that office districts that have a healthy mix  of residential are the top performers, and all of Charlotte would be better off if Uptown was more like Southend (or the Beltline, or the Warehouse District, or downtown Durham, or West End Nashville).

Charlotte has too much invested in Uptown to not help it return.

Edited March 7 by kermit

[rancenc]

From the recent edition of Business NC magazine on office to residential conversion of empty high rise buildings.

https://businessnc.com/nc-trend-uptown-charlotte-ponders-public-support-for-developers-of-vacant-uptown-buildings/

[KJHburg]

Taxpayer subsidy for new uptown apartments? Mecklenburg County Commissioners blast proposal | WFAE 90.7 - Charlotte's NPR News Source

My thoughts when this property was purchased why did they not factor this into their original offer?  It is kind of weird to go back after they purchased the property with the announced decision to convert to residential and then only say they need tax abatements.  I still urge Wells Fargo to sell their 2 Wells Fargo South Tryon tower for such a price to make the numbers work for a conversion of the 32 story tower.  They picked up that entire block for pennies when they bought out Wachovia.  Plus they could get some good press and attention from Federal banking regulators.  

My thoughts would be to do what San Antonio and Houston have done to spur housing in their downtowns. Uptown is seriously lacking residential development now with only 1 non subsidized housing project going up that being the Daniel Corp in 4th Ward.  Of course, Inlivian's is subsidized for their mixed income project.  But doing nothing uptown is serious problem as well.