Currently it has a major medical care provider as the anchor tenant. That, along with the 90% pre-sales, more than justifies the cost of construction as well as the opportunity cost of not selling the building in the current robust market.
According to Wagner, the building could conceivably fetch $180 per sf to $200 per sf on the market as a rental. By divvying up the floor space into 3,000-sf to 6,000-sf medical condos, the company realizes a $275-per-sf sale price.
The company decided to convert the building to medical condos about a year ago, Wagner says. "Converting to office condos is much the same thought process as converting a multifamily to residential condos. For it to work, the deal still has to make sense as a rental building." There is no one path for a developer to take to convert an office building to condo, and the medical niche can be especially tricky, Wagner says. "Each deal is unique in that respect, whether the numbers will work or not."
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
