Key Takeaways
- Adaptive reuse can create value by converting obsolete buildings at costs below new construction replacement cost.
- Historic tax credits (20% of qualified rehabilitation costs) significantly improve project economics for eligible buildings.
- Construction risk, permitting complexity, and lease-up uncertainty are the primary threats to adaptive reuse returns.
- Cap rate on cost (NOI / total project cost) is the key return metric for development and conversion projects.
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Test Your Knowledge
1.In the office-to-residential case study, what was the acquisition price per square foot?
2.What was the stabilized cap rate on cost for the adaptive reuse project?
3.What is the key return metric for development and conversion projects?