Schine Memorial Hall, LLC Business Plan January 24, 2012
Table of Contents Introduction Page 2 Short Term (2012-2014) Plan Page 3 Short Term Capital Spending Plan Page 4 Short Term Rental Revenue Forecast Page 5 Short Term Cash Flow Forecast Page 6 Long Term (Beyond 2014) Plan Page 7 Long Term Capital Spending Plan Page 8 Introduction The Schine Memorial Hall is a historic commercial building conveniently located in the heart of downtown Gloversville. The building has approximately 30,000 sq. ft. of space on three floors and includes an elevator to improve access to the second and third floors. The members of our LLC have purchased the building because we are committed to preserving a historic building and wish to enhance the vitality of downtown Gloversville through the sustainable stewardship of this beautiful building. Due to the size of the building, we anticipate having three phases to the business plan. The first phase will concentrate on the ground floor; the second phase on the second floor and the third phase will encompass all of the third floor. The first phase is the short term plan. The main focus of this phase is preservation and sustainability as well as exploring a center staircase that will improve our ability to market the second floor. The third phase is the long term (beyond 2014) plan. As long as we meet our short term goals, our long term plan can be open and somewhat fluid at this point. 2
Short Term (2012-2014) Plan Our short term goal is to produce a positive cash flow. We will do this by making exterior repairs necessary to preserve the building and interior improvements to vacant ground floor store fronts and half of the second floor in order to have attractive rental space ready to be rented out. Ideally, we hope to have a rent roll great enough for us to be able to afford to hire a building manager to deal with all of the day-to-day building and tenant issues. Exterior Repairs Since we have already replaced the roof and have had the Main Street façade redone prior to the closing on the building, there are relatively few exterior projects remaining. The main exterior project is brickwork--particularly on the North side of the building. This needs to be addressed as soon as weather permits in the spring. Interior Improvements ** Oct 25, 2018 - We are pleased to report that much of the work has been completed and the entire second floor is rented. We are working on updates to the third floor for prospective tenants (two spaces on the third floor are currently rented). Also, almost all the ground floor shops are rented. ** Interior improvements in the short term phase have three components: improvements to the ground floor store fronts, second floor improvements, and the possible center staircase. The vacant ground floor store fronts have already received attention from us and the rest of the store fronts should only need improvements in the event of vacancies. The second floor office space currently ranges in condition from merely needing cosmetic work (painting, carpets, and touch-ups) to raw space. Luckily, the space in the best condition is closest to the elevator. We will focus on the northern half of the second floor and do minor repairs and cosmetic work to ready this space for tenants by June 2012. We also plan on improving the common restrooms available on this half of the second floor by renovating the existing bathroom and creating a second. This work will also be completed by June 2012. As tenant demand dictates, we will continue our improvements on the second floor. Currently, there are two staircases by which to access the second floor of the building. One is located at the south end of the building and one is located at the north end, in the theatre building. In order to improve the attractiveness of the space and to lessen our reliance on a staircase that we don t own, we are exploring a center staircase leading from the center of the ground floor up to the second floor. This 3
staircase could be the focal point of the building and should improve our ability to rent out the second floor. Once the tasks on the previous page are accomplished and we have increased our rent roll we have multiple options available to us. Some of the options include: 1. Renovating the raw space on the second floor on spec and then find tenants, 2. Working on the northern end of the third floor (where the current offices are in reasonable condition) on spec, 3. Try to find one larger tenant and build to suit in the southern end of the second floor, or 4. We could just hold tight. Depending on market demand, holding tight may be the best option, especially if we plan on going ahead with our mixed use development of the second and third floors. Short Term Capital Spending Plan Note: This capital funding plan focuses on the next 6 to 9 months. Exterior Brickwork $15,000 Improvements to Ground Floor Store Fronts $ 4,000 Second Floor Bathrooms $15,000 Second Floor Improvements $20,000 Center Staircase $25,000 Repair/Replace 2 nd Floor HVAC Units (as necessary) $12,000 Building Permits & Engineering Costs related to above $ 2,500 Total Short Term Capital Expenditure $93,500 4
Short Term Rental Revenue Forecast (On a Monthly Basis) Our current rent roll is as follows: Ground Floor: Street # Rent 40 $100 38 $500 36 $400 34 Vacant 32 Vacant 28-30 $500 26 Vacant Second & Third Floors Vacant Total Current Rent Roll: $1,500 Projected Rent Roll June 30, 2012: Ground Floor: Street # Rent 40 $100 38 $500 36 $400 34 $400 32 Permanently Vacant (stairwell) 28-30 $750 26 $400 Second & Third Floors Vacant Total Projected Rent Roll June 2012: $2,550 Projected Rent Roll December, 2012: Ground Floor: Street # Rent 40 $100 38 $500 36 $400 34 $400 32 Vacant (stairwell) 28-30 $750 26 $400 Second Floor (25% occupied): $800 Third Floor Vacant Total Projected Rent Roll December 2012: $3,350 5
Short Term Cash Flow Forecast (On an Annual Basis) 2012 Expenses Taxes $1200 Insurance $3535 Elevator Inspections & Repairs $5000 Accounting Fees $1500 Snow Removal $ 600 Window Washing, Decorations $ 400 Postal Box, Postage $ 160 Utilities $1800 Chamber Membership $ 200 Misc. Repairs & Upkeep $2400 Total $16,795 (Approximately $1,400/month) Projected Rent Roll $24,300 Projected Cash Flow $7,505 2013 Expenses Taxes $6300 Insurance $4000 Elevator Inspections & Repairs $5000 Accounting Fees $1500 Snow Removal $ 600 Window Washing, Decorations $ 400 Postal Box, Postage $ 160 Utilities $3600 Chamber Membership $ 200 Misc. Repairs & Upkeep $2400 Total $24,160 (Approximately $2,010/month) Projected Rent Roll $40,200 6
Projected Cash Flow $16,040 Long Term (Beyond 2014) Plan For the long term, we have a wide range of development options available to us. The three big issues that will limit our options are: 1. Parking 2. Current Zoning and Building Code requirements 3. Market Demand Parking We own very few parking spots and parking will play a big role in both the short term and long term plans for our organization. If we continue the commercial use of the building and need to provide parking to tenants, we can probably lease space from the church or other entities downtown since the code requirements for commercial space are not too onerous. The distance from the building/availability of spots is a potential negative that could affect the rents we can charge for the space. The requirements for mixed use development are more stringent. Were we to develop residential units on the upper floors, the code would require 1 parking spot for a one bedroom unit and 1 ½ spots for a two bedroom unit. (So, if we were to develop 2 one bedroom and 8 two bedroom units we would need to provide 14 parking spaces.) The parking spots generally have to be adjacent to the building. We have limited options when it comes to finding these spaces. Current Zoning and Building Code Requirements The building is currently in a commercial zone. This allows us to offer retail and office rental space, but may limit our options unless we can successfully obtain a zoning variance. In addition to mixed use (both commercial and residential) not being allowed without a variance, other uses would also be restricted. For example, if we were to restore the screening room on the third floor and open it up as a movie theatre we would probably need a variance. Obtaining a variance is not an insurmountable problem, but it requires a fair amount of time and is not guaranteed. The Building Code must be addressed whenever renovations are contemplated, but is a real obstacle when a conversion beyond the current use of a building is considered. As just one example, if we were to convert to mixed use by developing residential units for the upper floors, we would need to install a one hour fire barrier between the ground floor and the second floor. We would be required to install 2 layers of 5/8 sheetrock to the ceiling of the ground floor, severely inconveniencing our ground floor tenants. Realistically, if we decide to convert to mixed use, we will probably have 7
to have the building completely vacant for at least three months in order to build the fire break and rough in all the mechanicals on the ground floor. Market Demand All business ventures need to provide a product or service that the market demands. When talking about real estate in downtown Gloversville, it is a buyer s market as the supply far exceeds the demand. Regardless of the project, we need to differentiate our product to make it appealing to our market. The market for upper floor office space is not huge in Fulton County. The fact that our space is handicap accessible because of our elevator improves the marketability of the space, but will not guarantee us anything close to full occupancy. The market for residential rental space in downtown is also a buyer s market as there are a number of vacancies in other recent mixed use or residential conversion projects in downtown Gloversville. Long Term Development Ideas For Discussion Purposes We propose the following list merely as a starting point for our long term plans for the building: 1. Convert the Building to Mixed Use A. Residential Rental Units B. Residential Condo Units 2. Keep the Whole Building as a Commercial Use A. Build Out Executive Suites/Virtual Office Space B. Provide Co-office space (think cubicles for rent) C. Develop and market the raw space on the second and third floors D. Come up with a use and restore the screening room Long Term Capital Spending Plan Without a firm plan it is difficult to provide any projections for a long term capital spending plan. These numbers are wild guesses, but here are guesses for two different options: 1. Convert 2 nd & 3 rd Floors to residential space: 20,000 sq. ft. x $100/sq. ft. = $2,000,000. 2. Rehab the southern half of the second floor for office space: 5,000 sq. ft x $30/sq. ft = $150,000. 8