Considering conversion of Industrial Building to Industrial Condo's

Buying & Selling Real Estate
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Considering conversion of Industrial Building to Industrial Condo's

Bob Baldwin
Investor · Shelbyville, KY · Member since 2011 · 93 posts · 20 votes

Got a call from a lady whose husband owned an Industrial Bldg on 9 acres . It had been used by her husband who operated several businesses . The actual building is 65,000 SQ feet . It has been vacant for 4 years other than occasionally for some short term warehousing rental . Owner has no mortgage wife and kids want it gone . It had been listed with a commercial Agent and now that listing is expired .

I am further stating that in the past 4 years the commercial broker was neither able to sell the place nor get offers to lease out the whole place . From speaking to others in town I do see an interest in / need  for 10,,000 - 12,000  sq ft units for industrial / warehouse sites for sale and for lease . almost like Industrial Mini Storeage space .

The Bldg has 6 shipping / receiving Dock Doors along with a 14 ft wide drive up ramp that door is also 14 ft tall so you could literally drive a tractor trailer inside if need be 

My thinking ! Not confirmed yet would be to leave the shipping area intact leaving it as common area then further sub-dividing the rest of the space into industrial Condo's 10-12,000 sq ft each .

Have not talked Price yet with the seller but I get the impression they Really Really want out 

I would like your thoughts both Pro and Con to proceed with my due diligence ?

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  • Justin Smith
    Commercial Real Estate Broker · Irvine, CA · Member since 2011 · 11 posts · 2 votes
    11y

    I love the idea. You could split it up and lease them out or one day you could even sell them individually. my guess is you could build another building that size on the lot too. Maybe you buy it, split the lot into two and sell one to pay for the other. Obviously a big consideration for the building is the layout and functionality of it for smaller users. Can you give everyone their own loading door or dock door. How would shared access work? Is the ceiling height high enough to compete with other buildings that size?

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  • Scott Meyers
    Investor · Fishers, IN · Member since 2012 · 520 posts · 499 votes
    11y

    Hi Bob,

    We own a 200,000 Sf Industrial Building in Indianapolis, and yes - the most highly sought after size that is requested is right around 10,0000 sf - and occasionally +- 5,000 sf. 

    Personally, I'm a Self-Storage Guy, so I'd perform a basic feasibility study to see if Self Storage Would work in this market, and if not, then pursue a conversion to the larger units.  Remember - Profits rise, the smaller the size.....   Buy it by the gallon, rent it by the Shot.... etc. 

    However, If your plan was to sell them, then you're done - you only get paid once.  and if you choose this path, you would probably need to sell them all - mixing the 2 (rental, and ownership) within the same building can leave you with fewer options as an exit strategy. Just my $.02 

    Depending upon the market, I would be interested in chatting with you about the property for our own purposes of converting it to Self-Storage as we are actively seeking projects like this in several markets throughout the country.   We pay referral fees, and in some instances, we partner with developers/investors/equity partners if it makes sense to do so. 

    Give me a ring if you are interested in pursuing either of those options. 

    Cheers, 

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  • Mark M.
    Zionsville, IN · Member since 2015 · 52 posts · 13 votes
    11y

    do you know the previous uses of the facility? Make sure there's no environmental issues. 

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  • Bob Baldwin
    OP
    Investor · Shelbyville, KY · Member since 2011 · 93 posts · 20 votes
    11y

    Scott : That is what I am currently doing My due deligence / Fesability study . Remember I have not yet bought the place YET ! I can tell you though that the town has 6 various " Mini - Storage Facilities  Talking to their owners generally at 75% capacity . In these units generally the largest are about 10 X 25 ft . My thinking is for Household storeage . two of the places do offer a small outdoor storeage for Boats , RV's etc .not sure what those rates are I guess it depends on the size . 

    Not really sure how this translates to the potential of Industrial Storage / Industrial Useage though .

    On the bldg under consideration of the 65,000 sq ft I am thinking the positive features are the 6 Shipping doors and the ability to drive a tractor trailer inside the bldg if need be . that I would not want to change and I am further thinking that I would save about 5,000 sq ft for that purpose . this is all to the rear of the bldg . 

    The other consideration is the front of the bldg has about 5,000 sq ft of empty office space / lunch room / bathroom facilities / Meeting room etc; How to best make use of that space .?

    On tuesday I am actually having a few OFF the RECORD meetings with town officials just to discuss what I am Considering doing and make sure no unforseen problems may arise if this project should move forward . 

    Scott or Others : Do you or anyone else have any experience in the " Record Storage " business ? I do see that as a Need for the area as the nearest type of facility like that is 45 minutes away . Though I would think you would need a controlled enviorment Temp , Humidity , etc; Just curious 

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  • Bob Baldwin
    OP
    Investor · Shelbyville, KY · Member since 2011 · 93 posts · 20 votes
    11y

    Mark : It was used as Mfg for a couple of different companies . The owners wife told me that No Chemicals or Haz-Mat type of things were ever mfg'd there . BUT ALSO at one point there was an open area for Machine maintenence where they kept some industrial cleaners , a few 50 gallon drums for Machine Lubricant purposes  and a rack for Propane tanks that were used on the tow motors . That area has been removed but you can still see some oil stains on the floor . T o me Not a problem it can probably be cleaned . But Realistically My biggest concern is having to Get / Pay a EPA compliance company to come in and tell me everything is OK or wether some type of Remedial work needs to be done to be in compliance before the project even begins . 

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  • Scott Meyers
    Investor · Fishers, IN · Member since 2012 · 520 posts · 499 votes
    11y

    Bob, 

    I also have experience in Records Storage - and enough to know that the 1st step is to add that piece to your feasibility study to determine if there is enough need to warrant the initial outlay in bar coding, scanning equipment - racking, and yes, HVAC equipment.  In addition, some clients prefer sprinkled, and some say Absolutely not ( threat of burning, vs. threat of false alarms drowning and ruining all their documents).  At the end of the day - that's a business with a lot of moving parts, and is in no means passive in nature like Self-Storage or Industrial storage.  Your call. 

    Keep me posted after your discussions with the City. 

    Talk soon, 

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  • Bob Baldwin
    OP
    Investor · Shelbyville, KY · Member since 2011 · 93 posts · 20 votes
    11y

    Scott : I understand where you are coming from . You almost have to have 2 locations for the haves and The Nots . LOL Not sure if Insurence costs are different ,but you are right about the extra set-up and Labor costs .

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    I have been thinking about doing this in my area, but in smaller units. 1,500 to 2,000 SQFT. There are no available shops that size and huge demand. I can't find any suitable buildings to divide up, so building is an option I am looking at. 

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  • Michael RIstau
    Residential Real Estate Broker · Newport Beach, CA · Member since 2013 · 23 posts · 10 votes
    10y

    @Bob BaldwinCurious what happened with this deal?

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  • Bob Baldwin
    OP
    Investor · Shelbyville, KY · Member since 2011 · 93 posts · 20 votes
    10y

    Micheal : I bought it for 501 K knowing that " The Town Officials Mandated EPA compliance was needed "  I put 45 K into doing that  Cheaper than I was planning !! At that time my mother had a stroke and Dementia getting worse . I put the project on hold and went down to  Clearwater Florida / . While there about 2 weeks I got a  email from a local developer who had heard about the transaction . We exchanged contact info ,he looked the place over with his partner and a week later called me back with an offer .

                   I settled at 701K  Plus had them write me out a seperate check splitting the cost of the EPA compliance document .
                   I guess you would call this a Commercial Wholesale Deal !!

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