Next month, we are going to a walk-through of 14 Mill Street in Bellows Falls. The Town is looking for someone to redevelop two buildings on the site, which is down a back street downtown. A developer would enter into a partnership with the Town, which would assist with grant funding and redevelopment, then sell the property to the developer for $1. So what does a developer consider in a situation like this? How do you decide to save a building?
First you look at the building itself. Will the building and its spaces work for your proposed use? Does it have enough parking or access for your needs? What are the floor-to-floor heights? How big are the rooms? What condition is the building in? Is it structurally sound?
The 14 Mill Street property has some lovely details, including brick work and large windows. Most of it is likely still sound, structurally, but some has deteriorated and is no longer safe. The building would not likely be suitable for retail purposes, since it has no street presence on the main square of the village, and vehicular access is a little tricky.
Next you think about the financing for the project. What sources of funding are available to you? Does the project qualify for tax credits? What about grants and loans? What can you count on for project “hard” costs (materials and construction expenses)? What about “soft” costs (designers, lawyers, etc.)? What is the market like in the area, and what can you get for rents?
Although you would need a lot more detail on the building to know for sure, from first glance, we can tell that 14 Mill Street is in a New Market Tax Credit zone and is likely eligible for Historic Preservation Tax Credits. It may also be eligible for a Community Block Development Grant for Slums and Blight Development. You can assume somewhere around $200/ft2 for hard costs and another $50 or $60/ft2 for soft costs. We have a rough idea of square footage from previous work on the building, which means that we can guess that you would need to get $25/ft2 in rent to support those redevelopment costs if you didn’t have subsidies and tax credits. To make the project viable, you need to get the rental figure down to what the market will bear, somewhere in the $10-$12/ft2 range.
(Let’s take a minute here to remind ourselves that this is ALL guesswork, and that a full feasibility study would be required to make any of these numbers even close to accurate. We’d also like to note that we will be taking a deeper look at each of these funding sources in the future.)
So what’s the next step? A developer would go back after a walk-through and try to firm up the numbers above and analyze the building and its location. A call to an architect might be in order (that’s why we go to the walk-through) to talk about what’s needed for the building, and a rough budget for the project needs to be developed. Then the developer would submit a proposal, with budgets and maybe even rough design sketches, to the Town. If they are awarded the building, they move on to a more complete look at the feasibility of the project, called a “feasibility study.” And then to design and construction.