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Originally Posted by retro_orange
Yeah that's what I had thought awhile ago when we were discussing how their new tower could be situated. If they did consolidate they could keep all 3 major facades of the cathedral. Kinda surprising they bothered to invest in improvements for a building that's so basic and underbuilt where a prominent building should be.
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Well, think of it from the perspective of Austerville, the owners. They built it in 1974, so it was paid for years ago. It currently rents at $29 to $32 per square foot per year, (Colliers brochure) and it's roughly 100,000 square feet of space. Car parking brings in an extra $250 to $300 per stall per month. So that's an income of at least $3 million, plus the parking revenue. The tenants pay to maintain the place, and the property taxes. It's not tired, or beat-up like some buildings from that era. There's strong demand, and with the new towers nearby that will likely increase.
To redevelop with 250,000 square feet, (a guess at what you might get on the site) would cost at least $125 million (BDC cost calculator says $500 per sq ft to build high quality office Downtown). You've got fees and permits on top of that, three years (at least) of lost revenue, and financing costs. At the end of the exercise you should be able to make $10 million a year in revenue, but you have to repay the financing, probably with a commercial mortgage, so you'll be lucky to actually make more than the $3 million currently coming in until it's paid off. You're also taking a risk that once it's built there won't be immediate demand for all the space. A pension fund can carry that cost for a while; a family business (which Austerville are) might not want to take that sort of risk.
One day it may well make sense, but while rents are as good as they are, and demand is as strong as it is, and the building is basically good enough to retain, redevelopment doesn't seem to make a great deal of sense.
These numbers are all best guesses - not from inside knowledge; anybody on here that knows better is very welcome to step in and correct me.
And now ... back to the Post - definitely past its prime, and owned by a pension fund willing to spend around half a billion dollars or so as an investment!
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