Assignment 4:
Building Rehabilitation and ProForma Financial Analysis
For this project you are to consider the various factors involved in rehabbing a building from Uniontown, Pennsylvania. It is a project for which I was architect many years ago, and is small enough to serve as a good case study. Below are listed the parameters of this analysis, including a description of the building, a sketch of its exterior, and a floor plan.
Your analysis will include the following:
- Considerations concerning its reuse.
- Analysis of its financial costs.
- Other factors you consider relevant to the analysis of such a rehab.
You are to prepare a report on this project, to be submitted to me electronically. The report will be based on questions given to you below which are meant to form a framework for your information. You are encouraged to see this format as a minimum, not as a maximum, and are expected to expand on the information as appropriate.
To familiarize ourselves better with communication technology, I will not be accepting these reports on hard copy, but require them to be submitted either by Email, or on a disk (Macintosh format, please), or other method approved by me beforehand.
The project:
The building is the Jones Building. You are an investor and are considering buying it from Alf Jones, the current owner. You want to determine what is involved in the rehab of this building, and whether it is a good financial investment. The sketch of the exterior shows the brick structure as you wish to restore it (after the proposed work). It sits on a corner in downtown Uniontown, and is part of the downtown historic district, which is listed on the National Register.
The floor plan shows the layout and dimensions for the upper floor, which you intend to convert to an apartment, with overall dimensions shown. The lower floor is completely open, with no walls other than the stairwell, and is to be available for use as office or commercial space (e.g., an insurance office or a small store).
Below are outlined questions you need to answer prepare a feasibility study. Your study report should include a narrative description and a financial synopsis. To develop the information needed for this analysis carefully read Chapter VIII, especially the section on ProForma Analysis, and the section in Chapter VI on "Construction Codes and Regulatory Concerns." You should consider your other resource to be me. Probably not all of the information you need will be clearly available. If you are unclear about how to understand information, or need additional input, etc., contact me either by Email or WebCaucus. I will try to respond quickly to each of your requests. This is a new format for all of us for this type of assignment, but with your cooperation I think it will work just fine.
Framework for the report:
Code/regulatory parameters:
- An elevator is not required to a 2nd floor space if it is less than 1,500 sq. ft.
- A second means of egress is required for three or more residential units above ground level.
- A handicapped restroom is required for all commercial and office uses open to the public.
- Access at grade level shall be available to at least one entrance to all commercial and office uses open to the public.
Financial data:
ProForma Analysis assumptions
- Assumed selling price as is: $70,000
- Soft costs total is 20% of hard costs total
- There are no demolition costs
- Rent-up costs are $4,000
- Cost of stairs are included in lower floor only
opening for stairs on 2nd floor is 4 ft. x 12 ft.)
- Loan-to-value ratio is 80%
- Assume no vacancy (0% vacancy rate)
- Assume annual Operating Expenses are 20% of Gross Annual Rent
- Monthly payments on your mortgage (debt service) are $1,300
- Value of land without a building is $20,000
- Tax depreciation can be taken for 39 years
- Your tax bracket is 28%
- Annual appreciation of property in Uniontown is 3%
As part of your report, you are to include all of the information shown in the left column (of 3 columns) of the ProForma analysis sheet shown in Chapter VIII, beginning with "Assumed final price" down to "TOTAL ROI with Credit." This may at first seem daunting, but each step is explained in the chapter, and it is relatively straightforward math (addition, subtraction and multiplication) used throughout. If you have questions, and I expect you will have, Email me right away for clarification.
Your report should include the ProForma analysis numbers. If your TOTAL ROI adds up to greater than 25% (not counting the Tax Credit), then you've probably got a good project financially.
The narrative portion of your report should generally describe the structure and the proposed work. It should include reference to the following:
- Will the proposed work qualify for a Rehab Investment Tax Credit.
- What provisions need to be made for Fire Codes.
- What provisions need to be made for barrier-free access.
A summary paragraph should be included, which reviews the primary findings of your Feasibility Analysis.
