COMMENT OF THE DAY: DIMENSION DOOM 101 “The floorplate is the set of measurements and parameters that you have to design the floor plan within. If its too large or too small, too narrow or too wide, or if the elevators and stairs are awkwardly situated, it will make the floor plan inefficient in terms of squeezing the most net rentable area from the gross floor area. In addition, what often happens is that there are awkward rooms within apartment units that have little functional utility, which then affects the rent per square foot that can be achieved from those units. To compensate, the developer must purchase the property for a lower price than if the building were ideally configured. But if these adjustments to the financial model drive the value of the property below the value of the land (which is determined by the model for new construction) net of the cost of demolition, then the old building is not the highest and best use. It is doomed. Problems such as these are common in situations where a building gets re-purposed for a completely different use.” [TheNiche, commenting on Finger Going After Finger’s Ben Milam Hotel Downtown]
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Problem, yes. Insurmountable, no. Developers were able to save the Humble Oil building and convert it into the courtyard Marriott downtown. The “loft” apartment has been the long standing and popular solution to converting old office/industrial space to residential. They did it up the street at City View with the old Nabisco building. And in the middle of downtown, the Commerce Towers converted old office space into condos with 57 different floor plans. someone is pretty close to a deal to redevelop the old Texas Company building on the corner of rusk and Fannin, even though a couple stories worth of floor plate came crashing down during a previous renovation attemp. Economics is not science. There are always intangibles like the benefit of having unique historic architecture versus the burden of having your tenants have to see a few thousand downtrodden Astros fans pour out of the stadium 80 nights a year.
Nothing is insurmountable for a developer that has received a generous subsidy from local government.
Financial modeling and project analysis actually does require a fairly scientific approach to things. There’s a vast quantity of empirical data resulting from other ventures’ successes and failures that must be appropriately weighed and adjusted, with the outcomes then articulated to the project’s stakeholders. Most issues that seem subjective, aren’t. You just have to broaden your search, dig deeper, find more data, and isolate the variables of interest.
I’ve made a career of it.
TheNiche, what do you do? (just curious…)
Consulting, in a variety of forms.