New owners perceive value or potential in their
newly acquired properties, and usually have the wherewithal
to reposition those properties.
ADAPTATION
Analyzing the time and rate problems concludes with a comparison of
alternative solutions, which include
doing nothing; implementing a new
management, marketing and leasing
program; renovating the property;
repositioning the property within the
existing use; and an adaptive use.
Adaptive use has become an especially popular option of late for
multiple reasons. First, candidates
for adaptive use projects are often in
great locations. Also, when compared
to new construction projects, they
typically involve shorter entitlement
and permitting processes; they cost
less because all or part of the existing
building may be retained, thus reducing or eliminating demolition costs
and lowering construction costs; and
community groups typically object
less to such projects.
The possibilities for adaptive use
projects are many. For example, an
older office building may have floor
plates too small for most tenants to
operate efficiently. However, office
buildings in good to great locations
with small floor plates may be candidates for conversion to apartments
or condominiums. Office buildings
in central business districts have also
been converted to hotels.
For the past few years, tens of thou-
sands of apartments have been con-
verted to condominiums. But today,
many condominiums—both old and
new—are being converted back to
apartments (see sidebar on page 37).
TAKING THE REIGNS
In addition to how a property will
be repositioned, who will reposition
a property needs to be determined.
Three types of candidates have the
opportunity to reposition proper-
ties: current owners, lenders and new
owners.
Current owners might not have
the available funds to reposition their
properties and are also possibly unable to raise enough capital to do so.
Restructuring their properties’ loans
or obtaining new ones might prove
challenging. Current owners might
not want to take the risks involved
with repositioning their properties,
especially if repositioning them as
adaptive uses.
However, even if a current owner
is not willing to reposition his or her
property, he or she may still have an
analysis completed and provide it to
potential buyers to demonstrate the
potential for the property.
Lenders generally are not willing
to take the risk to reposition a property because of all the work that goes
into enhancing its value before a sale.
They often prefer to dispose of the
property as is.
New owners, however, are actually the most likely candidates to reposition properties. They perceive
value or potential in their newly acquired properties, and usually have
the wherewithal to reposition those
properties.
Regardless of who is left with
the task of repositioning a property,
it is a property manager’s responsibility to have a handle on the property’s time and rate problems so he
or she can develop meaningful solutions to take the property in a new
direction. n
Richard Muhlebach, CPM, CRE, SCSM, RPA, ( rmuhlebach@comcast.net), is an author, educator, commercial broker,
expert witness and consultant. He was IREM’s 1998 national president and had served on its faculty since 1981 and
co-authored several of its publications.
