Investment Info:

Office Space commercial investment investment.

Purchase price: $1,500,000

60k sqft office building that we are redeveloping into 78 market rate apartment homes in 2026. In 2021 we bought the building for $1.5M using private lenders, pushed the occupancy from 50% to 80% occupancy and it appraised for $3.125M, allowing us to pay back the private mortgage.
Right now, we are in the predevelopment process of design and piecing together the capital stack for the redevelopment deal, which will be made up of historic tax credit equity, RestoreNY Grant, DRI Grant, etc.

What made you interested in investing in this type of deal?

Over 5 years ago, I used to marvel at the architecture of this building and told myself that I'd own it one day and reimagine it. It was built as an office building in 1888. Office has been in decline for several decades in downtown Rochester, so it's highest and best use is residential.

How did you find this deal and how did you negotiate it?

I called the leasing broker and asked if the owner would be open to an offer. We negotiated it down from their original asking price of $1.8M but it needed to be a cash deal because the building was 50% occupied and of what WAS occupied was month to month office tenants. (Banks typically want to see 1 Year+ leases). The deal was contingent upon 60 day due diligence and a clean Phase 1 environmental assessment.

How did you finance this deal?

One of our long time investment partners wrote the check for the entire $1.5M. We paid them 9% interest (they put a private mortgage on the property) and give them 19% membership interest in the holding company LLC

How did you add value to the deal?

Phase 1 was quickly leasing up small office space. I bought it from 50% occupancy up to 80% occupancy. Primarily through Facebook Marketplace, Loopnet and Craigslist.

What was the outcome?

We got it appraised for traditional financing and it came back at $3.125M so we were able to get our investor their $1.5M back. We have been keeping it as office use until we get our construction financing set up along with all of the other funding sources.

Lessons learned? Challenges?

Beware of elevators in old buildings. This is an 11 story building and both passenger elevators went down at the same time for about 3 months. Tenants ended up demanding concessions or just plain skipped out of their lease and disappeared.
Also, unbeknownst to us, the former owner tried poaching all of the month to month tenants to their building across the street. It was a gut punch to see the tenants whose income we were counting on mass exodus the building right after we closed

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nextier Bank out of Butler PA was our lender for the refinance. They were super great to work with!