Raising a Neglected Office Building to a Higher Standard and 100% Occupancy

Challenge

Plaza 18 is a 33,501 square foot office building located in the Midtown area of Nashville, Tennessee. The property was a Class C office building with severely deferred maintenance and an 85% vacancy. The owner leased 15% of his property in the $12 per square foot gross range, but in 6 months those suites would also become vacant. With these adverse conditions, the owner could either sell the building at a significant loss or devise a creative solution for releasing the property. Stan Snipes, of Snipes Properties, was engaged to analyze the property and suggest renovations that would elevate it to a Class B standard. Such improvements, if the market rental rates could support them, would increase the value of the property and create a higher yield to its investor.

Solution

Immediately, we assembled a team of architects, engineers and contractors to evaluate the level of deferred maintenance to the property. In their evaluations, these experts took into account the code requirements and the necessary finish levels required to elevate the property to a Class B standard. Once specifications for the necessary improvements were determined, we obtained pricing for such improvements, which was anticipated to be approximately $700,000. We then analyzed the competing properties within the submarket to determine the Class B rental rates and what we felt the owner could achieve if the property was re-launched into the market. As a result, we estimated that once the improvements were made, rental rates for the building could be raised from $12 per square foot to $18 per square foot. Improvements to the building began immediately including window, sprinkler and roof installations, HVAC and electrical improvements, parking lot and entryway renovations, common area finishes and a new Eifis stucco skin to the exterior of the building.

Results

• Increased rental rates. The building was renovated and the entire 33,501 square foot property was released at $18.50 per square foot gross full service.
• Created significant return to investor. The building was brought to 100% occupancy within 6 months and the value of the property was increased over $2 million.
• Secured the future of the property. The property has remained fully occupied to this day, and rents have increased over $1.50 per square foot since completing the project, creating an additional value of over $600,000.