2401 Mission S

(Tyler Maran) #21

Agreed. While it’s a tried and true strategy of letting tenents improve a space - then selling it off at an improved value. We can get around it through a well structured lease.

It would be a lot of negotiations - but if we got something like a 2 year lease at $5 - $6k with a 2 year extension option for no more than $6-$8k, it would be a pretty good deal.

(Trent) #22

I mean why do a lease, just ask if he’ll privately fund the mortgage. We pay something like a 30 year schedule and he’s going to save a TON of money on taxes over a sale.

(Lady Red) #23

So we went to this space and after looking over it with an actual contractor estimating how much costs are in order to get this space functional and up to code, it seems like a nonstarter. It has a single tiny staircase to enter it, and it’s like a dirt floor with standing water and no lights and ventilation. To move in would require a ton of electrical work, hvac work, and building additional stairs and elevators (which would have to exit through existing stores which would lose that space…) It’s supposedly a minimum of a million dollars of construction before it is ready. There’s no way that would happen by august. I call this one DOA

(Trent) #24

I would defer to Jarrod for construction costs. I love doing the labor on those. Is there a way I could reach out to the owner and take another look and discuss financing with him? It sounds like it might be someone we can worth with financially and that could make a big difference. Constructing floors and walls is not a major concern compared to getting a permanent space if I could work out a private mortgage situation.

(Lady Red) #25

I’m not talking about constructing walls and doors though Trent. The estimate of a million dollars doesn’t include any windows/doors or other aesthetic work.

I’m talking about major building renovations like installing staircases where there currently are none, rerouting plumbing systems, potentially installing a brand new elevator, installing a hvac system and electrical… it has nothing.

We toured it with another guy who was gonna split it with us - the deal would potentially be that we’d do all the window/door/tenant improvement stuff, and he’d do the bigger infrastructure stuff. The contractor he brought estimated his costs to be at least a million dollars.

(Trent) #26

For some reason I thought this property was 4MM dollars. It sounds like it is actually 16MM which is not even reasonable for us to consider?

(Tyler Maran) #27

The owner wants to split the building into three floors (Tenants in common) with each floor having a separate entrance and elevator. This allows him to sell the property as three pieces.

In this arrangement, he wanted $2-3MM for the basement - but the entire building was in the $16-20MM range. I think following the quote from the contractor, he will just lease the basement out as storage space (which requires significantly less safety standards).

(Lady Red) #28

Buying the basement alone might be tricky though because in order to use it, we need to install additional exits. Currently it has one tiny staircases. I think it would need an elevator and maybe another staircase? Those would need to go into the first floor

(Tyler Maran) #29

Oh I agree. I think the basement is a total non-starter for us. I was just explaining the proposed offer.

(Trent) #30

So even if the owner split the building into a TIC, and retained ownership of everything else, and sold the basement to us, and he financed the loan (so we paid him and no bank was involved), it still would not be possible?

As a thought experiment: even if we could do electrical, plumbing, stairs, and eh lets even say we were able to do a open platform style service elevator?

(Tyler Maran) #31

Say the owner did a $3mln loan to us to acquire the building. We would still have to pay at least $15thd a month as loan repayment. Assuming he is willing to give us a ‘bank-like’ deal (30 year 4%).
Seeing that we don’t have collateral, a down payment, and he does not have the legal recourse of a bank, that would be a really unlikely outcome.
And in the situation where we are paying back the loan at around $15k a month, we would also need to come up with the capital to remodel the place - estimated at $1mln.

The remodeling is primarily things we could not do by ourselves (either technically or legally). Some sections of the concrete flooring need to be repaired and inspected. Installing HVAC units on the roof. Running electricity to the space. Running plumbing and sewage (think large iron piping, not pvc). It would take some serious time and money, of which we have neither.

(Tyler Maran) #32

Alright got an updated offer from the building owner (Jared). This is early in the consideration - but I want to make details public as soon as I get them.

Ascend Body (the gym up stairs from the basement) is going under and the owner needs the rent to cover his mortgage - so he’s looking to replace them. I believe they are behind a month or so on rent - so they could be forced out immediately. The gym is pretty posh, nice lighting, bathrooms, handicap accessible, etc.

We could rent the 4,000 sqft of the gym for $10,000 a month. This is a bit smaller than NB right now, and at the top of our budget.

Here’s the kicker - if we rent the gym, we can also rent out the basement for $1/month. Provided of course, that we make a meaningful improvement on the space. This could be a good or bad deal - it just depends on the definition of “meaningful improvement”.

I have a call scheduled for tomorrow afternoon with Mark (RE Agent) and Jared (owner) to get some more color on the offer, but wanted to get some opinions from everyone ahead of time.

(David) #33

Get them down to 8k. We would make damn good tenants :slight_smile:

(David) #34

Another idea as to why we are the desired tenant and deserve a lower rate - we can rent some portion of the basement and then help him rent the rest of it. Having Noisebridge in the same building will make renting parts of the basement more desirable to crafts people and artisans who would be his likely tenants anyway. (Trying my hardest here :slight_smile: )

(Tyler Maran) #35

I got him down from $12k to $10k on the potential property tax savings he would have for leasing to a 501.c.3.

We could definitely make the basement more desirable - but there is a LOT LOT to be done there - and we could not do half of it ourselves.

My thought was to pitch maximum $50k worth of NoiseBridge renovations over the course of a 2 year lease. This works out to the $12k the gym space was being leased for. This is a benefit to him - the basement is nicer and looks more rentable/buyable. And for us - we would be interested in building cool stuff anyway - and it’s a good way to rent 17,000sqft (4k gym + 13k basement) for cheap.

(Trent) #36

Any way we can get a 5 or 10 year lease? I don’t think it’s sustainable to have to reconsider in 2 years.

(Tyler Maran) #37

I agree - the 5 year would be better. Keep any other questions coming and I will run them past the realtor tomorrow. I will bring this up at the meeting tonight to get everyone’s thoughts.


Fixing up this place would be a perfect target for grant monies. (cc @LilyRaabe @ruthgrace @gaardn)

If we can knock the rent down to $7k by offering to fix it up on condition that we become co-owner for the building. Looks like 2018 property taxes were $90219.60. Split three ways, that works out to being about $2506.10/mo for us.

The lot is currently zoned NCT/55-X, which is the same as our current zoning. I’m honestly still not sure how to determine if the parcel is PDR or not with the new SF planning map website, but we’d pay as little as $0 or as high as $30,000.

$10k for the amount of work we’d need to invest in this is absurd. But $7k in rent plus $300,000 in improvements to the building over 5 years works out to be $720,000; $10k/mo plus no improvements is $600,000 over that same time period.

Here’s an idea: we figure out all the work that it would take to bring the space up to use for us, get a quote for it. This includes electrical, HVAC, an elevator, a bigass ramp while the elevator is being built, etc. Then add $7k/mo rent over 5 years to it, minus our share of property taxes, to come up with a figure of our net value add. Then pit that figure against the owner’s proposal of $600,000 over 5 years. I’m confident we could convince the owner that giving us some equity in the building in exchange for us investing a million into it is a damn good bargain compared to renting it out for any value or risking it be left empty in a recession.

Looking forward to today’s call.

Call with Owner/Agent tomorrow - would like 1 or 2 additional voices
(nicole) #39

Cool. Let us know how that chat goes with the owner.

(Lady Red) #40

the gym plus the basement for 10k is a muuuuuuch better deal than just that basement by itself. I know we can do some awesome stuff with that basement, but it will take work and plenty of time, so having a noisebridge sized space for our actual tools and a fun, do-ocratic expansion project seems great.

I like the suggestion of getting a 5 year lease or a lease where we get to decide if we want to extend it - just some security so that we will get to enjoy the investments and build-outs we put into the space.

EDIT oh I just saw this is like two weeks old. What happened in the call?