This project recommends taking the two current small apartments and redoing them. The total project costs (hard and soft costs) are estimated at $94,489.
The pro forma is done with a ten year note at 5% interest and rents at $1,200 per month. With these numbers it shows a slight operating profit of $2,546 per year. More favorable interest rates or a longer term may increase this profit. Also, more owner equity (monetary or direct involvement in management) may reduce the operating loss. The pro forma also assumes that the landlord incurs some utility costs. Eliminating some of this could also change the operating loss. The team overall feels very positive about this project.
The factor to consider is that on-site parking is not available but the city lot is across the alley. Downtown property owners are encouraged to work with the city to establish a downtown resident’s parking area with cover, an amenity that many of the survey respondents preferred. This may raise monthly operating expenses depending upon who pays for the parking (tenant or landlord).
Urban Development Services assembled a team to examine a range of issues that impact the ability of a historic structure's second story to be adaptively reused. The vast majority of second stories in Nebraska are vacant, or underutilized space often relegated to low cost storage. Reoccupying the upper floors of a downtown's buildings represent a significant impact because they can house new uses without having to install new infrastructures such as streets, sewers and other utilities. This can give the community several million dollars of new tax base for minimal, if any, public investment. Most of these spaces were constructed of quality materials and finishes unique to today's typical buildings which give the older buildings a much sought after look. Most importantly, occupying upper stories starts to make downtown appear more viable, especially in the evening.
The UDS Team
The UDS team is composed of professional consultants that have spent the majority of their careers dedicated to working in downtowns and/or with historic buildings.
- The Urban Development Services Team brings a comprehensive skill set to this project. The team was headed by Scott Day, principal of UDS, who has spent his entire 30 career working on urban design, urban development and architectural issues in Main Street communities across the United States. UDS produced the first ever Downtown Master Plan for Sidney in 2009 and has since worked on the 11th Street Corridor entrance and Hickory Square Concepts. Mr. Day manages 15 residential properties in San Antonio, is a former general contractor and has rehabilitated over 25 historic structures.
- Shelley McCafferty is an architect from Chadron, NE. Ms. McCafferty was an Associate Planner for the City of Iowa City acting as the staff to the Historic Preservation Commission. She worked with homeowners and contractors assisting with the design of alterations, additions and new buildings located in Iowa City's many historic and conservation districts. Additionally, she negotiated with builders and developers to improve the quality of the architecture and design of planned developments, as well as new construction within established older neighborhoods. Ms. McCafferty produced the Sidney Historic Preservation Master Plan in 2013 and recently completed the Sidney Historic Preservation Handbook.
- The Upstairs-Downtown Team is composed of Dan Carmody and Mike Jackson. Dan has hands on-experience from his time in Rock Island Illinois as the head of Rock Island Renaissance which developed several downtown buildings. Mike is an architect in Springfield IL. Mr. Jackson was the former Division Manager of Preservation Services in the Illinois Historic Preservation Agency and was Chief Architect for Preservation Services of the Illinois Historic Preservation Agency. Mr. Jackson is a visiting professor of architecture at the University of Illinois at Urbana Champaign. He is an active member of the Association for Preservation Technology and directs the Building Technology Heritage Library project.
Scope of Services
The team focused almost exclusively on housing as Sidney is experiencing a housing shortage. Reusing the space for commercial purposes would mean installing an elevator where as a small number of residential units does not require this.
The team's goals were to:
- Evaluate buildings to meet fire code for a proposed use
- Examine common fire separation and egress issues,
- Determine a reasonable potential occupant load,
- Develop measured drawings of five different buildings,
- Expand the Preservation Board's photo library,
- Interview and work with property owners,
- Provide plan options towards feasible upper floor development activities
- Walk through incentive ideas with building owners
- Determine market demand
- Develop a simple cash flow analysis to determine any possible gap or shortfall in the second story rental market.
Project was funded by a grant from the Nebraska State Historic Preservation Office. All Certified Local Governments are eligible for grants to assist in the implementation of local preservation programs. These grants can be used to finance a variety of preservation related activities including survey work, preparation of National Register nominations, education programs, publications, staff support, workshops and preservation events. Besides being eligible for grants, Certified Local Governments receive technical assistance and training from the State Historic Preservation Office about historic preservation.
Implementing the Projects
Projects are advised to submit plans to the City of Sidney before proceeding. The general contractor and subcontractors will need to be meet the City's construction code for electrical, plumbing, heating and cooling, structural, insulation, etc. Highlighted below are some of the key regulation issues related to fire separation, egress etc.
Working with Common Code and Regulations Encountered
There are four code or areas of regulation to consider for an adaptive reuse project that will potentially govern construction in Downtown Sidney: The Local Zoning Code, the 2012 International Building Code, Fair Housing Act of 1991and the 101Life Safety Code, 2000 Edition, of the National Fire Protection Association (NFPA). Each of these codes is briefly summarized in the following section with a breakout on the most common issues. This commentary is not to taken as the final determination regarding these issues as each of these jurisdictions will need to see final designs and construction documents. Our discussions with them were only preliminary to explore possible solutions to the some of the challenges that might arise.
2012 International Building Code
Sidney is under the 2012 International Building Code (IBC). What it covers:
A large portion of the International Building Code deals with fire prevention. It differs from the related International Fire Code in that the IBC addresses fire prevention in regard to construction and design and the fire code addresses fire prevention in regard to the operation of a completed and occupied building. For example, the building code sets criteria for the number, size and location of exits in the design of a building while the fire code requires the exits of a completed and occupied building to be unblocked. Some of the topics that would apply to existing buildings:
- Interior finishes
- Natural light and ventilation
- Foundation, wall, and roof construction
- Fire protection systems
- Materials used in construction
- Elevators and escalators
- Means of egress
Local Code Official: Bradley R. Rowan, CBO Chief Building Official, Sidney, NE
Typical Code Issues:
- Natural Light and Ventilation: Natural Lighting: Section 1205
- Spaces intended for human occupancy (generally considered to be residential spaces other than kitchens, baths and closets) are required to provide natural light equivalent to 8% of the floor area.
- Natural Ventilation: Section 1203
- Spaces intended for human occupancy (generally considered to be residential spaces other than kitchens, baths and closets) are required to provide natural ventilation equivalent to 4% of the floor area.
- The typical downtown building has a small front facade sidewalls with no windows. These dimensions make the "light and ventilation" code requirements a critical point of design. The plans that have been developed have living and bedrooms on the front or rear facade. Ventilation can be place away from the exterior walls. In some cases, an interior “sleeping area" that is not a complete room with full height walls can be utilized with a "borrowed light" to meet the lighting requirements.
- Means of Egress: Section 10
- Second story residential occupancies with more than four units are required to have two means of egress. IBC 2012 Table 1021.2(1)
The proposed plans are all below the four units count so that a single means of egress can be utilized. For a couple of the project a second means of egress has been proposed to make the plan more efficient and to facilitate the addition of an outdoor space for some apartments.
Fair Housing Act of 1991: Accessibility and Elevators
The Department of Justice ("DOJ'') and the Department of Housing and Urban Development ("HUD") are jointly responsible for enforcing the federal Fair Housing Act (the "Act"),1which prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status, and disability. One of the types of disability discrimination prohibited by the Act is the failure to design and construct covered multifamily dwellings with certain features of accessible design. This Joint Statement provides guidance regarding the persons, entities, and types of housing and related facilities that are subject to the accessible design and construction requirements of the Act. The Fair Housing Act requires all "covered multifamily dwellings" designed and constructed for first occupancy after March 13, 1991, to be readily accessible to and usable by persons with disabilities. In buildings with four or more dwelling units and at least one elevator, all dwelling units and all public and common use areas are subject to the Act's design and construction requirements.
It also does not apply to buildings constructed before 1991, the year this law was enacted. State of Nebraska Accessibility Guidelines (Nebraska Fire Marshall)
Purpose: Places of public accommodation and commercial facilities. These guidelines do not apply to residential occupancies.
Elevators are not generally required by the IBC for buildings under four stories in height. For two-story buildings such as downtown Sidney, elevators are not required for residential occupancy in renovated buildings. They are desirable to improve the "marketability" of units but are not required even for accessibility purposes for buildings under 3,000 sq. ft. per floor.
Life Safety Code
Sidney is operating under the 2000 Edition of NFPA 101Life Safety Code. (National Fire Protection Association)
The Life Safety Code is the most widely used source for strategies to protect people based on building construction, protection, and occupancy features that minimize the effects of fire and related hazards. Unique in the field, it is the only document that covers life safety in both new and existing structures
Regional Code Official: Dana Reese, Deputy State Fire Marshall, Nebraska State Fire Marshall, 308-249-5054
30.1.2 Mixed Occupancies.
- 126.96.36.199 Where another type of occupancy exists in the same building as a residential occupancy, the requirements of 6.1.14 of this Code shall apply.
- 188.8.131.52 No dwelling unit of a residential occupancy shall have its sole means of egress pass through any nonresidential occupancy in the same building.
- 184.108.40.206 No multiple-dwelling unit of a residential occupancy shall be located above any nonresidential occupancy.
Exception No. 1: Where the dwelling unit of the residential occupancy and exits therefrom are separated from the nonresidential occupancy by construction having a fire resistance rating of not less than 1 hour.
Exception No.2: Where the nonresidential occupancy is protected throughout by an approved, supervised automatic sprinkler system in accordance with Section 9.7.
Major Code Requirements
Mixed Use Occupancies such as residential above commercial uses.
Buildings without an automatic sprinkler system are required to have a one-hour fire resistance rating between the occupancies. Changes to a second floor from a prior commercial use to a new residential use will "trigger” an evaluation of the ceiling of the first floor to achieve the one-hour fire separation.
Special Issue: Tin Ceilings
Many older downtown buildings have stamped steel ceilings (tin ceilings). This material only has a 15-minute fire separation rating. The construction option to change the ceiling to a one-hour rating used to be quite complicated, as it meant the removal of the decorative tin ceiling and installation of a new one-hour separation material such as two layers of 5/8" Type x drywall. As part of this project, the office of the State Fire Marshal was contacted and we learned that the use of a "intumescent" paint on the existing tin ceilings can be used to achieve the required one hour fire resistance. In some cases, the use of an improved fire resistance covering on the second story floor surface can also be used to calculate the improved fire resistance. Both of these options are less expense than the installation of an automatic sprinkler system.
Special Issue: Windows for Rescue, NFPA 101Section 220.127.116.11
Residential spaces other than bathrooms shall have at least one outside window suitable for emergency rescue.
- Buildings with automatic sprinkler system
- When the room has, a door leading directly to the outside of the building
Commentary about Sprinklers
Automatic sprinkler systems are one of the most important life safety devices for any building. Unfortunately, commercial systems for mixed-use downtown building can be very expensive. For small-scale buildings, a more cost-effective program will include upgrades to fire detection and warning systems and fire separation requirements. The complete renovation of upper floors with all new mechanical, electrical and plumbing systems also provides additional improvement in the safety of the building. This combination can often, but not always, be more cost effective than a complete automatic sprinkler system. When a complete automatic sprinkler system is installed, there can be savings in the reduction of fire separation and other requirements so this "calculation” of relative benefits can be somewhat complicated.
Zoning is generally defined as the separation or division of a municipality into districts and regulates buildings and structures in such districts in accordance with their construction and the nature and extent of their use, and the dedication of such districts to particular uses designed to serve the General Welfare.
Downtown Sidney is covered by C-1Central Business District Zoning.
A C-1Central Business District Zone is a zone permitting all types of business enterprises, except manufacturing and other industries which are incompatible with a business district, comprised primarily of retail sales and service businesses. It also allows residential on the upper floors. (Ord. 1049. Passed 2-26-85.)
Major Zoning Requirements
Residential and most other commercial occupancies are permitted in the Central Building District Zone.
There is no on-site parking requirement.
The initial pro forma provided is based upon small projects completed in a variety of places.
Pro forma is a framework or model for how a project could possibly preform which is based on the developer's or owner's end goals. Typically pro forma go through a constant process of refinement and recalculating as the development process evolves. As project due diligence conducted for any specific project reveals more accurate information the pro-forma is fine tuned. In this instance we're at the very beginning of the process. These pro forma are intended to provide an assessment tool and as an outline of project income and expenses that is continually refined about that specific project.
Typically, it's best to include expenses when in doubt so that the pro forma is meeting the most demanding of scenarios. If the project still shows that it breaks even in terms of cash flow (meeting expenses) or better yet shows a potential profit then all the better. Typically, as the project matures in the first few years, cash flow should begin to improve if rents can increase. Tenants also tend to become more stable over time reducing vacancy.
For larger projects, property managers typically charge between 5% and 10% of rents collected. For very small properties a nominal amount is used as a placeholder to remind building owners that there is a real cost in terms of time or expense to screen, select, and manage tenants, to oversee maintenance, and to complete the bookkeeping and record keeping functions.
Includes things like parking for tenants, costs associated with providing amenities such as fitness equipment, community room, or shared laundry facilities. Mise fees are contingency fees and typically range in percentage from about 1% of annual rents.
Grounds expenses are associated with lawn care and any other landscaping related expenses as well as snow plowing or shoveling. Urban settings don't typically have a lot of lawn but often times there are side lots, back lots, or setbacks that need to be maintained.
Real Estate Taxes
Real estate taxes were based on Sidney's tax rates. Real estate taxes can vary greatly depending upon how the local assessor treats upstairs investments. At the high end, some assessors use building permit data as the increase in value while other assessors see the upstairs improvement as a marginal increase to the buildings value which is mostly created by the primary use of the building (commercial) and the perceived value of the neighborhood. Real estate taxes are estimated from a range of completed projects in a variety of places but should be used as a place holder and further research with the local tax assessor should be completed to validate likely real estate tax that the project will generate.
How are projected rents calculated?
At the top of the pro forma page you will see a likely range of rents that gives you a range of gross income the project might generate. In the far right column a specific rent per square foot is selected from which the pro forma is based.
Rents are somewhat based on square footage but also what you can typically get for a unit of that size and amenities. This means that the market might be best for two bedroom units but the building is not ideally laid out for this so you might end up with a generous one bedroom or a two bedroom with a small left over space that isn't large enough for a three bedroom. Thus, your rents per square foot can vary slightly from one project to another.
Replacement reserves were estimated between $333 and $500 per unit per year. For very small projects it is a difficult number to determine. The quality of initial appliances and carpet can vary greatly as does their anticipated life expectancy. Tenant load can also impact the life expectancy. For example, two people sharing a one bedroom unit will typically wear out systems more quickly than just one person.
Industry standards for larger projects are between $500 and $1,000 per unit per year. Operating reserves are typically based on a percentage of rent for larger, multi-unit projects
Upstairs Downtown Development ProForma