E-Lofts

4501 Ford Ave, Alexandria, VA 22302

E-Lofts

A sophisticated live-work space in Alexandria VA. Each unit has three uses: “live,” “live-work” and “work” giving tenants maximum control over their space.

Project details

• 200 Live-Work lofts. 240,000 sf, over 600 underground parking spaces.

• $52M renovation cost

• Permitted as matter of right

• 12 month construction

• Sold in January 2018 at 4.75% capitalization rate

Key innovations

• First project of its type in the U.S.

• US Patent

• High rise at “wood frame” cost - reprograming good “hardware” (a vacant office building) with new “software” (live-work units).

Property webpage here.

BEFORE picture

AFTER picture

Property Story

Background

From 2008 - 2015 the amount of vacant office space in the DC area more than doubled from 30M sf to over 60M sf. Why was this happening and why wasn’t anyone really talking about it?   The DC area had gained jobs every year since 2009 so it was not that we were losing employment.

We ultimately traced the change in office demand to improvements in telecommunication technology (specifically, the smartphone, mass marketed for the first time in 2008).  As the smart phone let people carry information everywhere they went, it had essentially liberated information from buildings.  

Technology & real estate

The needs of tenants (residential and commercial) have changed in the Information Age - has the real estate industry kept up?

We reflected on the underlying questions technological changes present for real estate:

• Were traditional real estate products really meeting the needs of changing markets?   

• What types of customers were not being well served by existing real estate products?

• How could we make a building that adjusted itself to customers needs rather than customers adjusting their needs to a building?

From this, the E-Lofts property was born.

Developing the property

Since the traditional office market was in free-fall, we began searching for vacant office buildings to purchase. With so much vacancy in the market we believed that we could buy great “hardware” relatively inexpensively.  Since office building values had been reduced largely because they had the wrong “programming” of allowable uses, the key to re-creating value was the freedom to increase the permitted uses and redesign the space to meet the largest audience.

Physically, office buildings have a lot of intrinsic benefits.  They are typically concrete structures, with tall ceilings, big windows and lots of parking.  They also tend to be deeper (wider) than most apartment buildings and are generally found in good locations.  Because of their deeper floor plates, residential developers normally ignore office assets in favor of narrower structures that better approximate traditional apartment configurations.  Fortunately, typical office floor depths seem to work very well for lofts, while the big windows and tall ceilings made them bright and cheerful whether you choose to live there, work there or do both.

The next steps were finding a building that we could buy, getting permission from the local jurisdiction to let us do something they had never seen and finding an equity partner and lender who would finance it.

We canvassed the universe of empty assets and settled on a vacant 240,000 square foot highrise office building in Alexandria, VA (a very good but somewhat overlooked location in the DC area).  The building was owned by a major institution and had been vacant for the past 7 years following a military realignment process. The building’s underlying zoning permitted either 100% residential or commercial use.  

We approached the owner and suggested a joint venture structure.  While they found our plan intriguing, following seven years of vacancy, they asked if we could PLEASE purchase the building instead.   We said we would be happy to do so provided the City would let us use the building for our intended program (live, work, live/work). We were soon granted an audience with the City Planning Director and made our pitch (make a building that worked like an apartment building but where each of the units could be rented as either an office, and apartment or a live/work space at all times).

Never having seen or heard of anything like what we were planning, the Director was both confused and intrigued.  After sharing video of what the place would become, she said, “I’m sold, yes, do it.”....Our next stop was the building department to establish which building codes would apply to enable multiple use occupancy at all times in all units.  The building department proved a great partner in helping identify and thinking through how to best weave together the disparate codes necessary to achieve 300% utility in one building at all times.

Lastly, for financing reasons, we had to make sure that under all circumstances the building could simply work as an apartment building (12 month leases, tenants pay utilities, typical apartment operating team, operating structure and marketing plan) with the additional, non residential uses serving as accretive additional demand.  By choosing an easy to understand apartment operating system, the building was easier to underwrite, lease and manage and, most importantly, all income could be valued at apartment “cap rates” providing the highest multiple on income at all times.

With both the prospective hardware and software identified and in place, we were then able to find a lender and equity partner with vision, to finance our vision and enable the creation of something truly revolutionary.