The original version of the agenda for the January 28, 2008 meeting of the St. Louis Preservation Board included an appeal of staff denial of demolition of the commercial building at 5100 Page Boulevard. This building stands just east of another building whose fate on the same agenda, 5286-98 Page. The final agenda did not include the appeal. Whether or not it returns is up to the owner of the building, Rosie Love.
Curiosity sent me to look at the building. I was pleasantly surprised to find a sturdy three-story building with a mansard-style roof and lovely masonry details. The stepped-down parapet alongside the mansard gives the corner some pizazz, while a terra cotta cornice below the mansard has an eye-catching swag garland motif. The brick cornice on the secondary east elevation adds a less formal vertical line.
What is perhaps most intriguing is the bricked-in storefront configuration on the east wall. Under a continuous cornice with an egg-and-dart pattern are some strange capitals; these top brick false pilasters that run vertically between the storefront opening. Looking at the painted wall closely, one can see the distinct vertical lines between the pilasters and the infill. How wonderful it must have been to have the storefront opened up to both the main and side streets!
The building is, of course, vacant and deteriorating. It's been empty for some time. Geo St. Louis shows records of an occupancy permit for a convenience store in 1995 and a permit for a "grandfathered pay phone" in 1998.
The front wall has some damage at the cornice line, while missing downspouts on the rear elevation has caused severe mortar erosion. Still, there are no collapsed wall sections yet. Numerous buildings in worse condition have been spared demolition by the Cultural Resources Office and the Preservation Board.
The Academy neighborhood (and the Mount Cabanne-Raymond Place National Historic District that encompasses much of the neighborhood) needs its commercial edges to remain strong. Delmar on the south has become a lost cause, but Page retains many corner commercial buildings like this one and the one at 5286-98 Page, which bookend rows of historic residences. With its proximity to the Central West End and its largely intact building stock, this area is bound to be an emergent rehabbing neighborhood. We need to keep the neighborhood's buildings around for the new day ahead.
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How much would it cost to rehab a building like this, how much would it generate in rent on today's market, and are there any incentives for a rehabber? Who would take such a risk?
They tore down another storefront across the street a year or two ago. Another sound building. I wonder what are the motives for tearing it down? Are wreckers offering money to the owner? It makes no sense, since like across the street the lot will sit vacant, what is in it for the owner?
The rehab costs would be on the order of $400,000 to $500,000(assuming around 4000 sq ft.excluding attic space. The rents, maybe $2000 for the building, figuring storefront downstairs and two apartments upstairs. That's a real rough estimate, there is so many different possible approaches, costs, union vs nonunion etc.
If in fact it is in a national historic district rental units can receive a 25% credit, and there other possible programs,(Michael should know some others) but any rehab, north or south takes a great deal of effort to make the numbers work. In the early days of Soulard there were no programs at all, simply people homesteading in properties and improving them over time. It still happens, but less because real estate prices have risen so much.
If it was an up and coming neighborhood there would be people willing to take risk, that is the crux of the problem, turn neighborhoods around to make them desirable for rehab, but then it doesn't happen without rehab, sort of a chicken and egg scenario.
Using the high figure (rehab ALWAYS ends up costing more...), gives us an upfront investment requirement of 1/2 million dollars.
$2,000 per year rent gives us $24,000 per year in income. Annual operating expenses would likely run at least a quarter of that amount, say $6,000 (that's only $500 per month for all maintentance, taxes, property management, insurance, etc), leaving $18,000.
Given that the property, like most city buldings, isn't in a historic district, let's not discount the investment by any historic tax credits.
So we're looking at an $18,000 per year return (high estimate), on a $500,000 initial investment (low estimate). The rate of return would be 3.6 percent (not counting the writeoff value of depreciation and other business expenses of ownership).
Why not just put the investment into a money market account and save all the headaches?
If we're going to push for rehab and preserving old buildings, we have to be able to justify the cost/risk/headaches involved.
This deal looks pretty weak. Perhaps that explains why the building is in the shape it's in? Maybe the former owner simply ran out of money and threw in the towel? Or decided enough "good money after bad"?
Ummm, have you two ever rehabbed a brick building in a historic district on the northside? I'm guessing no. Looks like you figured the building was 5000 sq ft and multiplied by $100 per sqft. That isn't how it works up here.
I'm working on a 5200 sq ft project in ONSL. I also help people who want to buy a $1000 vacant building work out their budgets and find financing (not my "real" job, but a very fun pro-bono hobby). So I have some directly relevant experience here.
The most important factor is the cost of acquisition and whether you are a landlord or owner-occupier. That's because you can get about 25% tax credit as an owner-occupier and 45% as a landlord (both minus various fees). Both percentages are "above the cost of acquisition". So if you buy a rental building for a dollar and invest 200K, you can get a max of about 85K back... bringing your cost to $115K. If you buy for 100K and invest 100K, you only get about 42,500 back, bringing your cost to 157,500. So, the more depressed the price, the more tax credits you are eligible for.
The next most important factors are the state of the infrastructure -- is the sewer still there, etc. Usually, the buildings right at the street have services in pretty good shape.
Then the third factor... what you can rent it for. You guys are WAY low. I suspect you live in south city or the county and are thinking, "who would live there?" and answering your question with "poor people, so rent must be really cheap".
Ummm, wrong! Who lives up here? People who WANT TO LIVE HERE. You have to think supply and demand. If you have a lead-free, newly rehabbed property, you have a desirable commodity in short supply. And the demand is there. Many people WANT to live in northside neighborhoods. If you haven't run into these people as your south-side and west-side neighbors, have a thought... St Louis is the 4th most segregated city in the nation and Delmar is the dividing line, but money is just as green north of Delmar. Did you know there are ZERO available apartments for rent in ONSL at any given time? People *waitlist* to get newly rehabbed apartments.
So, crunching the numbers, I'd say, if the asking price is around 30K, figure a Phase I rehab (do the 4 residential units, stablize the structure and meet historic standards for the exterior) with costs around 200K, get a HUD loan at %5.75 (or less! act now!) for the whole amount, payment of $1675 a month, rent 4 units at $600 (at least, probably more if they are bigger) each = $2400, or an income of $725 a month ... BEFORE tax credits, and before you find a commercial renter. When you get your 85K credits back, they are not tied to your project, meaning you don't need to pay down your loan with them. You could run out and buy a BMW. However, the prudent investor would use the 85K tax credits to tuck/relay the exterior for a 40-yr maintenance-free investment and also build out the commercial space to suit the tenant. Note, you can make this Phase II of your tax credit project, and then get 45% of the 85K back, still enough for a Prius ;-). You can also get facade grant money promised from your alderman, particularly for a corner building, and use that to lure a good business tenant. Once you get that tenant in, you could see NET income of $1500+, even if you offer some low-price incentives to get the right tenant.
This building is a great project just waiting to happen. (I too want to see what is under that bricked-in facade!) And yes, development on the northside could be faster. BUT, there's a lot more of it going on up here than there was 10, 5, 3 even 1 year ago. Despite the impending recession, I am working with 2 new buyers interested in LRA properties... IN THE WINTER. Both are construction professionals -- an architect and a contractor.
Got any more questions? I'd be happy to meet you at Crown Candy, buy you an ice cream cone, and show you bona fide LRA and HUD paperwork from in-progress projects.
Also, snarking negatively as "Anonymous" doesn't really add to your credibility. This does:
Barbara Manzara
3202 North 19th St
314-238-4032
manzarbe@hotmail.com
It sounded from the writeup that this building is not in a historic district.
If so, what tax credits are available, and what specific program for facade improvements is available?
What neighborhood is this? It sounds like Barbara is experienced in Old North. Is this building nearby? North city is a big, diverse place.
Actually I'm on the board of Union West Community Corp near Hamilton and Ridge, the subject of Michaels craftsman blog above. We have rental units that we rehabbed and recently built new buildings. I am just going off of rents we charge and construction costs in the area. I said it is difficult to make the numbers work, it requires a hell of a lot of involvement with government programs, political types and the like. It certainly isn't a market rate adventure.
That's also why I say the best way to enter the market is homesteading. Brave artists we are all.
And anony is correct, there are easier ways to make money, no doubt. I have been involved in rehabbing and building new literally hundreds of buildings, brick and frame, it is a difficult procedure at best. As a friend of mine said, "it is not for the faint hearted". But you can take your money and sleep with it, I would rather tackle life and its' difficulties and make a difference. Screw money, it's making America a sick nation, a nation that can't do anything and accepts that derelict building and neighborhoods are okay.
There is unemployment not because there is not work to do, a walk down practically any city street reveals much needed work. Instead of people, lives and cities the lust for money is in the headlines in America everyday.
If some of the billions for Iraq destruction were dedicated to North St. Louis and jobs, education and rebuilding the affect would be immediate. The priorities of this nation are wrong.
Thanks GMichaud, I always appreciate your support for the N side. The numbers I put out there assume the rehabber has (his or her own) actual skin in the game.
I shouldn't get so riled up by anonymous anyway, just an anti-preservation concern troll without any vision, sense of history or ecological sensiblities.
Barbara,
When you say, "skin in the game", are you referring to sweat equity?
Obviously cash/debt is "skin in the game", but sometimes, the only way for tight deals to work is for the owner to invest all three: cash, debt, and sweat.
For most investors, the sweat option isn't viable because they already have another 8-5 job, and they want a life outside of rehab.
And with only two of the other ingredients, cash and debt, the cost may get too high to make the project feasible.
Hence the owner/rehabber model. With lots of donated labor, or sweat equity, its possible for some family-run businesses to succeed.
This approach however seldom works under a more corporate business model.
Also, most banks, and HUD, generally won't allow sweat equity to count towards underwritten project costs. They want to see bona fide contractor estimates for all lines in the construction budget.
Nice to know that anonymous is a member of the leisure class! Out here in reality, we work for a living and then we come home and work on our investments.
All the rehabbers I know work at least 9-5, then work on their properties on nights and weekends, and yes, I do have a nice social life and have time to volunteer for my community.
Of course HUD doesn't pay the owner for their efforts, unless the owner incorporates and pays him/herself actual cash. There are times when this makes sense, such as if you are going for Fed credits. Then you can get paid for your efforts, and claim a tax credit on what you paid yourself.
To clarify: The building is a contributing resource to the Mount Cabanne-Raymond Place Historic District.
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