Need Some Creative Minds Please
My family owns a 43,000 sq ft building that is dock high. 14,400 is AC which includes 3000 sq ft bathrooms, office, employee breakroom. The 28,600 is clear span. It was designed as a manufacturing facility. Now is only used as warehouse. It has been for sale for almost two years. No serious people even looking. Can't go cheap because too much debt.
Question is - any ideas for what types of businesses that I could market the building to either for sale or lease. It is going to take some very creative thinking for the best use of a building like this.
The building is in New Orleans. Not much manufacturing left here to speak of.
Thanks for any and all input.
Betsy
Hello Betsy,
Does the current warehouse use cover the debt and carrying costs?
In what kind of area is the property located?
Is there a lot of other under-utilized space nearby?
How much is the current debt and the current debt service/square foot?
What are the ceiling heights?
Is there parking? Discuss access to transportation.
Other than price why do you think it hasn't moved?
Have you tried a local commercial realtor?
How about listing on ?
Betsy,
My idea would be to chop it up with internal demising walls and resell it as industrial condos. But (big but), the building has to be amenable to that. That means that it must have a bunch of dock doors, and located in a spread-out way, so that each buyer can have one (or more) loading doors. Then there's the question of what to do with the finished space. If you can subdivide it among the buyers of the open space, that might be best. Otherwise maybe it gets sold to one buyer who uses it for offices.
Of course, probably the first question to ask is how strong the market for this type of product would be in your area. Up here it is red hot, but that is meaningless. Your intended end users are small businesses that are now renting space, (a bay or two), in another building, and want to own their own facility. With today's interest rates, they can own for the same price they are now renting, if they can come up with the down payment. The SBA has two different programs that offer 90% funding for owner-occupied buildings.
Some of these type of users may prefer drive-in doors instead of docks, so you may incur some expense building some ramps up to the docks. But you wouldn't do that until the space is sold, so that's OK.
Of course, if your building layout isn't amenable to this kind of subdivision, forget all the above!
Best of luck in whatever you do.
CT
Hey CT,
Do you have names for those two SBA loan programs you mentioned. Will they permit me to carry back the 10% down?
Mark
Mark,
The two programs are the 504 program, and the 7(a) program. The 504 shares the loan with a bank, the 7(a) is all SBA -guaranteed money.
I really doubt they will let you carry back the 10%, but I don't know that for sure. Might be worth checking on, you never know.
CT
Thanks CT, as you know I am in the midst of one of these and financing alternatives are always welcome.
BTW I always wonder about people who make a post like this, then get questions about their deal from people trying to help and never bother to answer the questions. Makes you wonder if they even came back to look at the advice. Personally I found this an interesting project and was hoping for lots of discussion. Ah well.
Yeah, my feelings exactly. That's too bad, because it could've been an interesting discussion.
CT
Hey guys don't bash me too much please!!!!!
1. I was trying to find the answers to commercial kings questions before I responded.
2. I tried twice to respond to several of the posts and both times something happened with my wireless connection and my responses disappeared. I finally gave up because it was about 2:00am and I had a plane to catch at 8
So I will try again.
First of all the property has been listed with a commerical realtor. Probably one of the most successful in the New Orleans area.
Second, I have never heard of the commercial condo idea. New Orleans is rather backwards with regards to just about everything except the best food in the world. We have very little manufacturing here or warehousing even with the port of New Orleans. New Orleans has the Mississippi River running through the middle of it. The building is not on the side of the river where downtown, Superdome and French Quarter is.
3. If the building was in one particular area it would have been gone almost immediately, but unfortunately it is on the other side of the river. While it is probably one of a handful of buildings available that is dockhigh - the realtor can't get any traffic. It is in as safe an area as you are going to find in New Orleans. It is on 3 acres with a big paved area.
4. The building is shaped like an L with the concrete parking all in the middle. There are three double loading doors along the long side of the L and another double door with a ramp on one side. The smaller part of the L is air conditioned and has the 3000 sq ft of office and bathrooms in it. There is a single loading door there.
5. I am bad with measurements. The smaller part of the building probably has a height of about 16 ft. The 28,000 sq ft part probably has a height of two or three stories. Sorry i don't know.
6. The debt load is out of sight and I would have to write a book to explain that. Another factory is supporting the cost but the drain is terrible. It needs to sell for 1.1 million to just pay off the note.
I think I covered most of the questions. I didn't print the responses out. Sorry!!!
Again I appreciate the feedback and would welcome more.
Thanks,
Betsy
A few more questions answered........
1. The area is in a light industrial area. Most of the building around are related to the oilfield in some form or fashion. The get used when oil in the Gulf is booming and are up for lease when not. The new building across the street is a lighting company. None of the buildings on the street are as large as this. It is not difficult to get to as it is one block off the Westbank Expressway which is the roadway that leads across both bridges.
2. I wish that commercial realtors used a MLS type of service but they don't. Commercial agents tend to only show properties listed within their own company.
3. There has been some comments that our realtor who is the number one guy on our side of the river - also owns alot of buildings himself and that maybe when he has a client he shows them his buildings first. I really don't know because like I said there are only a handful of dockhigh buildings around and i think they are all leased. He also does alot of leasing for strip shopping centers.
4. We were a full fledged manufacturing facility with a sister facility in Texas. They really wanted our factory to close for a long time and did not do what they should have to keep it viable. What the building is being used for now could be done in a building about 3000 to 5000 sq ft. so it is virtually an empty building just sitting.
While the building is easily accessible for anyone to get it, the street does not generate drive by traffic.
I have tried to think of what it could be used for that someone would find it attractive. Any ideas would again be appreciated.
Sorry Betsy, if you felt like we were bashing you. Actually both CT and I were complementing you on bringing us such an interesting project to think about.
So how long was it listed with the commercial guy?
I don't know the New Orleans market at all, of course, except that you guys are down at the other end of the river someplace, but $25 per foot in debt doesn't seem outrageous to me. What is the rate and terms on this mortgage?
Wishing that a building were in another location is a lot like wishing your wife were prettier. Yeah, it would be nice but the only way to make that happen is to get another wife (did that once too).
As to the conflict of interests of the broker, these sorts of things happen all the time, not much to be done about that either. Sounds like he is the right guy (knows the market best) in spite of the conflicts.
So is the current vacancy in the area high?
How far from the river are you?
Actually this is exactly the kind of deal I look for, obsolete building no-body else can figure out what to do with. I would spend a week in the car driving around the area looking for inspiration.
Alternate use Idea:
Storage container center for self storage, moving companies, Document Storage.
Robert
making the doc storage more generic, "media" (computer stuff) storage is appropriate fire system is talled
As a company, at what point do you stop throwing money into a bottomless pit?
there are some commercial mls like systems, ****This URL Not allowed****.com and www.costar.com of note and now here to!
Why not turn it into a nightclub? Or how about a child care center? Indoor golf driving range? Hockey rink? Skating rink? Batting cages? Video arcade? Movie theater? Bowling alley? Laser Tag? Indoor swimming pool for the public? Tanning salon? Restraunt or food court? Coffee house? Gym or health club? Parking garage? Mechanic? Boat storage facility? Cyber cafe? Bookstore? Offsite tape storage facility (for computer backups)? Web hosting facility? Computer superstore? Department store? Sporting goods store? Dry cleaning plant? Indoor mini-mall? Just some thoughts, any or all of these may not be viable, but could help spark an idea of your own. Make sure you do your research before you spend any money.
The problem with office condos is this (not that this is a deal killer-- just be aware). Many professionals, (doctors, lawyers, etc.) would rather rent for the simple reason that it keeps them out of the real estate business and allows them to concentrate on their profession. They seem to feel that buying their office space would, eventually, get them involved in the management of the building/ condo association and that such time is better spent on their core business.
On the other hand I am sure there are such professionals who have made money in other real estate ventures who might feel that the potential appreciation and the debt reduction more than offsets these concerns.
Industrial condos seem to have a slighly different main "objection" which is that the space needs of such users are subject to considerable fluxuation and renting gives them more flexibility to deal with those issues. Again, there are enough people out there who do not share those sentiments to make a valid market but it helps to understand the hurdles you need to overcome.
I have seen some old vacant warehouse space converted into indoor swap meets with great success. Many people have side business that would love to rent booth space. The issue is do you want to run a new business, or can you find a company interested in running it in your building.
The key is marketing to vendors to rent space & creating buzz to generate retail traffic.
If you just want to sell it as is, what about an auction. You want to have a reserve so that you can payoff the debt.
you have to go back to the lender.
Betsy, Have you asked your agent to list the property on ****This URL Not allowed****? www.****This URL Not allowed****.com
It would be the closest to a commercial real estate MLS that lists commercial properties nationwide.
Wow that is some great advice everyone I will take alot of it in for consideration myself! Besty something else you could try is contact your local Goverment there and let them know you have that building avaliable and you would like to know if they would have any use for it! Sometimes organizations such as Red Cross may be able to use property like the one you have mentioned. Places such as Red Cross are Non profit organizations so if they need your building they recieve goverment money to purchase there needs. Betsy I dont think it would be a good ideal to put any more money into the building if you are already losing money on it. You should try to see a profit from it quick as possible. The storage ideal is a great ideal but instead of building walls and adding doors just make it strictly automobile,boat, and bike storage. We have a few places like that here and they do very well all year round. There are tons of things you can do to that building without putting any more money into it. Hire someone whos job is to find a buyer or purpose for the building. Betsy.... CHASE PROFIT!! and GOODLUCK!
The frustrating thing to me is that NNN is not always NNN. There will be carveout like "except roof" or "except building structure"
NNN is not absolute net. In an absolute net lease, the tenant is responsible for structural items, in NNN the landlord is supposed to be responsible for structural/capital type improvements.
This is how I define lease types -
NNN - this is a true triple net lease, the tenant is literally responsible for everything from the structure to the ancillary site improvements, this is the typical Walgreens type lease, the owner will have some administrative expenses and maybe minimal management expenses
NN (double net) - the owner is responsible for the structural components such as the foundation, foundation and exterior walls, roof and roof cover. The owner is also probably responsible for the mechanical (HVAC), electrical and plumbing systems. It is very common for this type of lease to be incorrectly called a "NNN" lease by brokers.
Modified Gross - anything between NN and a true gross lease, the owner might be responsible for real estate taxes and/or insurance as well, this might also be called a NN lease, but I call it modified gross
Gross - the owner is literally responsible for everything, this is common in government leases
NN and modified gross are the most common types of leases. The perceived definitions of these terms usually vary from one market to the next and can vary from one investor to the next, but this is how I define them.
I like to know my tenants too.
When we own as many property as Trump (LOL), then I will deffer to the mgnt company.