Adaptive Reuse/Downtown Revitalization

Felicia Oliver
Editor, HousingZone.com

To revise the refrain of a popular song, remodelers who know they need other remodelers, are the luckiest remodelers in the world. This is especially true if you believe luck is the cross section of opportunity and preparedness.

Remodelers who build relationships with each other and with other building professionals with experience in the arena of adaptive reuse projects - especially remodelers who have a good track record and have built good reputations - increase their chances of getting a foot in the door for these projects in the future.

Relationship building paid off for both Brinkmann Constructors and The Lawrence Group as the general contractor and architects, respectively, for the Pet Milk Building project in St. Louis.

"We had done several other projects with the developer " says Tim Rowbottom, project manager from The Lawrence Group. "[But] the work we've done with them has been mostly [from] ground up."

Andy McDonell, Brinkmann's project manager on the Pet Milk Building renovation, also says the company's involvement in the project was a result of a successful past working relationship with the developer, St. Louis-based Balke Brown Associates [2].

"It is a key focal point of our business to build, maintain and continue relationships with developers, owners, and even subcontractors," McDonell says.

Members of an investment partnership, lead by Balke Brown, purchased the former Pet Milk office building, which sits adjacent to Busch Stadium, home of the St. Louis Cardinals. Fans will say goodbye to the historic stadium this year, and welcome a new Ballpark Village that is part of the city's revitalization.

Balke Brown and its partners plan to invest $25 million in the property. Demolition has begun on the interiors and construction will begin in the fall of 2005. The project is scheduled for completion in November 2006.

"The new baseball stadium really influenced our decision to move ahead with this project," says Steve Brown, co-owner and president of Balke Brown. "We were also convinced by the success of residential development downtown and the uniqueness of the building itself."

"The Pet Milk Building is a modernist masterpiece and an icon on the St. Louis Skyline," says Rowbottom.

A key challenge for both companies is to update the building's interiors and systems while leaving architecturally significant features intact - a necessity in successfully applying for historic tax credits for an adaptive reuse.

In fact, the Pet Milk Building's unique architecture helped the project qualify for tax benefits for which it would not have otherwise qualified.

Owners of properties listed in the National Register of Historic Places, which is administered by the National Park Service may be eligible for an investment tax credit for the rehabilitation of their structures. But the Pet Milk Building was technically not eligible for listing on the National Register. Buildings on this list must be at least 50-years old; the Pet Milk Building is only 38.

But there is a statute, according to Rowbottom, that says if a building is of architectural significance for a particular period and style, it can be nominated for the register before the 50-year timeframe.

"We made the application under the premise of architectural significance," says Rowbottom, in that it's the only New Brutalist-style building in the state of Missouri.

"Any time you're dealing with a renovation project in a mature downtown market such as what we're dealing with, you need incentive programs," Rowbottom continues. "The federal historic tax credits are 25 percent, and the state tax credits are 20 percent. With those two programs, there was a really large incentive for the project. Without that, the project wouldn't move forward at all."

But adherence to the integrity of the original historic structure which, again, is required in order to qualify for tax credits, can add time to the completion of a large renovation project. For example, a certain type of glass must be used for all exterior windows on the Pet Milk Building, in order to mimic the look of the original glass - furnished by a manufacturer that is no longer in business.

"We have to submit a set of documents, once a window contractor is selected, to the National Park Services," says McDonell. "You can't even start to manufacture the windows until they are approved, obviously, because you don't want to jeopardize the status of your tax credits.

The challenges of completing this project are not just financial.

"The building has four different structural systems," says Rowbottom. "We're trying to insert residential units into it. In order to be as [efficient] as possible, we need to stack bathroom cores, kitchen cores, dryer bandings, etc. So we're weeding our way through four different structural systems from the top of the building to the bottom of the building, and conversely with the plumbing from the top down."

"You're trying to really massage the plans so that you have nice, marketable layouts [with] efficient distribution of your engineering and mechanical systems," Rowbottom says.

But because of the relative "newness" of the building, things were not as bad as they could have been.

"Usually buildings a hundred-years old and older … are made of wood," says McDonell. "The wood rots and deteriorates, and the brick needs tuckpointing. There are a lot of difficult processes involved in a structure like that.

"This particular project," McDonell continues, "was built in 1966, and is all pre-cast and cast-in-place concrete. So structurally this is one of the best buildings we've ever worked in, in terms of a retrofit project."

McDonell offers some advice for the novice company interested in working on adaptive reuse projects.

"Understand the municipality that you're going to work in," says McDonell, "and what their requirements are in regards to code compliance and the requirements on any of the existing structures. Secondly, surround yourself, team up and partner with people who have experience doing it. Don't bring all new team members onto a renovation project. …It's key that you bring in subcontractors or other entities that already have experience so that you're not recreating the wheel."

Rowbottom says cities like St. Louis are struggling to reinvent themselves, and that's what the city wants to do with residential massing and population.

"A lot of what has occurred here is loft development," he says. "What's interesting about the maturity of the market now is that we're starting to see different product types, with different notions of what living can be, come on the market."

On the other hand, demand for the type of apartments that the Pet Milk Building will feature - nine-foot ceilings, floor-to-ceiling windows, high-quality finishes and parking within the building - is fairly new to downtown.

"It's the first of this type [of apartment] on this type of scale," McDonell says. "We really hope it creates a market."

St. Louis, as is the case in many cities across the country, has a greater demand for adaptive-reuse in its downtown areas of late.

"As a general contractor, from what I've seen in St. Louis," McDonell says, "there certainly is a demand for the reuse of exiting structures, only because costs are so high downtown to acquire property, demolish it and build new structures."

Rowbottom feels adaptive reuse projects are a good fit for The Lawrence Group's overall business strategy.

"Most of the large projects that we're doing in the city are all restoration projects," he says. "We focus on a lot of large-scale residential, mixed-use and planning projects. … I would say within a mile radius of our office we have about $250 million worth of projects either in construction or in design and documentation."

Rowbottom says it's hard to say whether adaptive reuse projects tend to generate more revenue than other types of multi-family projects. A lot has to do with the original costs, which can be significant when it comes to adapting an existing building to a new use.

"Typically none of the systems meet current code, so you're forced to retrofit all the systems," he says.

"From a development, pro forma perspective, I think they provide a comparable return, which is certainly what developers are seeking," Rowbottom adds. As to whether they provide a better return, I really couldn't say one way or another."

"I think all things being equal," says McDonell, "probably an adaptive reuse building is probably going to be more expensive than a newly built building. Assuming land costs were equal, and everything was equal, it would probably be more expensive to renovate a really old building that was in a bad way than building a new one. But there are so many variables in that that it's really hard to tell."