The Commercial Real Estate Alpha Site

BY RICHARD LAWSON via Costar/Loopnet

Pair Buys Vacant Apartment Property, Splits 20 Units Into 40 Micro-Units

With the pandemic in full effect about two years ago, two buddies since high school decided to cut their teeth on real estate development by taking on an affordable housing project, a complex property niche that even seasoned veterans tend to avoid.

Richard Taylor and Kyle Cleland learned real estate lessons as they navigated the world of raising funds to convert a vacant apartment building in an Atlanta neighborhood full of dilapidated structures and high crime rates into a fully furnished affordable housing micro-unit development.

…

While politicians and civic leaders express the need for affordable housing, financing those projects isn’t as simple as putting up a certain percentage of equity and a single bank lending the rest. Such deals don’t generate the returns typical investors want because the projects don’t command market-rate rents that rise easily over time. 

Oftentimes, developers of affordable housing units need government help in the form of low-income tax credits or grants to make projects financially feasible. Taylor and Cleland managed to put together a deal without using government subsidies to buy the property at 1200 Mobile St. in Atlanta and transform it into an affordable housing development. The $4 million conversion into what is now called 12Hundred Studios opened for leasing in early May and marked the first commercial real estate deal for Taylor and Cleland. 

The 12Hundred Studios redevelopment is small by comparison to many real estate deals, even affordable housing, but that was by design. Tai Cohen, a friend of Cleland’s who works in commercial real estate at Cushman & Wakefield in Charleston, South Carolina, suggested they start small so that any mistakes that were likely to be made were also small.

And they made mistakes, but those errors cost thousands of dollars instead of millions of dollars, which was “much more palatable,” Taylor said. The project finished ahead of schedule and under budget, he said. The deal won a 2022 CoStar Impact Award in Atlanta.

For complete and full story, CLICK here to visit Mr. Lawson’s article.