Commercial Office Tower's 2.5x Profit Flip in 18 Months

Table of Contents

1. Introduction
2. The Acquisition of Newell Tower
3. Plans for Newell Tower
   1. Lobby Renovation
   2. Maker Creator Space
   3. The Annex Building
   4. The Basement Speakeasy
   5. Micro Apartment Suites
   6. Rooftop Bar
4. Challenges and Changes in Plans
5. Lessons Learned
6. Conclusion

Introduction

In this article, we will take a closer look at the acquisition and subsequent development plans for Newell Tower, a commercial real estate property in Chattanooga, Tennessee. We will explore the vision behind the project, the unique features of the building, and the challenges faced during the ownership period. Additionally, we will Delve into the decision to let go of the property and the valuable lessons learned from this experience.

The Acquisition of Newell Tower

Newell Tower was acquired by a commercial real estate investor in January of 2021. The investor, who had been actively seeking off-market deals in the Chattanooga Market, was introduced to the property through a referral. The building, located on East 7th Street, stood out as an exciting opportunity due to its affordable price and potential for redevelopment.

Plans for Newell Tower

Upon acquiring Newell Tower, the investor had a clear vision for the property's transformation. The plans included several key renovations, design features, and additions that would enhance its appeal and value.

Lobby Renovation

The first area of focus was the lobby, which had an outdated Glass block wall that was deemed unattractive. The investor intended to transform it into a modern cafe, serving as an amenity for the building's residents. The lobby had unique vaulted ceilings, a remnant of older construction styles rarely seen in contemporary buildings. Its natural lighting and distinctive ambiance would Create a welcoming space.

Maker Creator Space

Another innovative idea for Newell Tower was the creation of maker creator spaces. The building's glass walls, originally intended for office spaces, presented an opportunity to designate each area for a different craftsman or business. These small spaces would accommodate artisans like hat makers, shoemakers, and tailors, providing a platform to display their craft and attract customers.

The Annex Building

Newell Tower consisted of two interconnected buildings; the Second building, referred to as the Annex Building, was initially designated for office space. However, recognizing the growth of Chattanooga's tech industry, the investor considered converting the Annex Building into additional office space. This expansion would serve the increasing demand for tech-focused workspaces in the city.

The Basement Speakeasy

The basement of Newell Tower presented an exciting opportunity to create a speakeasy, capitalizing on the building's historical Charm. The investor planned to preserve the exposed brick walls and original marble stairs while adding a concealed fire suppression system and a bar. This unique space would offer visitors a chance to enjoy a glass of whiskey in a nostalgic environment.

Micro Apartment Suites

Micro apartment suites were a key component of the redevelopment plans for Newell Tower. These compact units, ranging from 400 to 500 square feet, were designed to cater to young professionals and students seeking affordable housing. With Chattanooga's micro apartment market not far behind Nashville's in terms of rental rates, the investor saw the potential to generate substantial returns by offering these well-designed, moderately priced units.

Rooftop Bar

The rooftop of Newell Tower held immense potential to become a popular amenity for both residents and visitors. The investor envisioned transforming the rooftop into a lively bar, taking AdVantage of the breathtaking views and the building's central location. The only challenge was the need to expand the elevator system to make it fully accessible, ensuring compliance with ADA guidelines.

Challenges and Changes in Plans

Despite the initial enthusiasm and well-thought-out plans for Newell Tower, several challenges arose throughout the ownership period. One significant hurdle was the sudden withdrawal of the bank that had initially approved the financing for the project. To salvage the deal, the investor negotiated seller financing with the Current owners as an alternative funding option.

Additionally, unforeseen costs, such as interest carry and various soft expenses, significantly increased the project's budget. The need for extensive construction, demolition, and design work also added to the overall expenses. These unexpected obstacles required the investor to remain flexible and revise their plans accordingly.

Lessons Learned

The experience of acquiring, developing, and ultimately letting go of Newell Tower provided valuable lessons for the investor and their team. Firstly, it reinforced the importance of having multiple exit strategies and maintaining flexibility throughout the development process. Plans A and B may not always pan out, and it is crucial to adapt and explore alternate options to ensure the project's success.

Furthermore, the experience highlighted the significance of thorough due diligence before committing to a project. Understanding the market dynamics, financing options, and potential challenges can help investors make informed decisions and mitigate risks.

Conclusion

Newell Tower served as an exciting venture for the commercial real estate investor, showcasing their vision for repurposing an underutilized property. While unforeseen complications led to the decision to let go of the project, valuable lessons were learned along the way. The experience of acquiring, developing, and subsequently relinquishing Newell Tower highlights the complexities of commercial real estate and the ever-present need for adaptability and flexibility in this dynamic industry.

Highlights:

• Acquisition of Newell Tower in Chattanooga presented an exciting opportunity for commercial real estate investment.
• Plans included lobby renovation, maker creator spaces, the Annex Building conversion, basement speakeasy, micro apartment suites, and rooftop bar.
• Challenges arose throughout the ownership period, including unexpected costs and changes in financing.
• Lessons learned emphasized the importance of having multiple exit strategies and thorough due diligence.
• Letting go of the project provided valuable insights for future investments in commercial real estate.

FAQ:

Q: What kind of renovations were planned for Newell Tower's lobby? A: The lobby was to undergo a renovation that involved removing the outdated glass block wall and transforming the space into a modern cafe, serving as an amenity for the building's residents.

Q: What were the plans for the Annex Building? A: The Annex Building was initially intended to be office space but was later considered for conversion into additional office space to cater to Chattanooga's growing tech industry.

Q: Were there any unique features in the basement of Newell Tower? A: Yes, the basement was intended to be transformed into a speakeasy, utilizing the building's historical charm. The exposed brick walls, original marble stairs, and a concealed fire suppression system would create a unique atmosphere.

Q: What market was targeted with the micro apartment suites? A: The micro apartment suites were designed to cater to young professionals and students. The goal was to offer affordable, well-designed, and moderately priced units in a market comparable to that of Nashville.

Q: Was there a plan for a rooftop bar at Newell Tower? A: Yes, the rooftop was envisioned as a rooftop bar that would take advantage of the building's central location and offer stunning views. Expanding the elevator system to ensure accessibility was one of the challenges associated with this plan.