MIAMI—Post Brothers Apartments is currently working on four multifamily adaptive reuse projects. One of them Goldtex, is nearly complete.

Goldtex is a 163-unit, $40 million project in Philadelphia. The multifamily community, which is currently in the lease up phase, is notable because it was a major eyesore and is now a true trophy asset. Indeed, Goldtex is achieving rents at the top end of Philadelphia's multifamily market despite being in a pioneering location.

GlobeSt.com caught up with Matt Pestronk, president of Post, to discuss adaptive reuse development challenges in general—and how his firm specifically tackled the Goldtex project. Click here to read part one of this exclusive interview.

GlobeSt.com: What are the biggest challenges with adaptive reuse projects?

Pestronk: The constraints of the existing structure in adaptive reuse are by far the biggest challenge versus designing and building from the ground up, which by definition has no inherent challenges in the design and programming process. A common pitfall developers encounter is budgeting a project assuming that certain base building elements do not have to be replaced. The reality is that if you are planning on saving things you cannot see to make the project work financially, like 80-year-old pipes behind walls, then you should not be underwriting projects so aggressively because the margins have clearly become too thin at that point.

We make sure we buy adaptive reuse projects with the assumption that no elements of the building will be re-used besides the floors and the exterior walls. Other potential challenges are zoning, historic preservation concerns and other regulatory matters due to the typical age and nature of the particular market and its constituents.

GlobeSt.com: Can you give me an example of a creative way you've overcome challenges with an adaptive use project?

Pestronk: The existing facade on the Goldtex building was heavily deteriorated and could not be saved without a substantial investment. We turned the challenge into an opportunity. We put a new facade on the building which resulted in a building that would be much more energy efficient than a standard loft conversion.

Specifically, the façade is made up of seven different materials: four types of glass, solid aluminum and a planted green wall on the eastern side of the building. So, in addition to designing something that looks completely different than anything else in this market, we're also saving our residents money on energy costs.

GlobeSt.com: How does the ROI pan out on an adaptive reuse project compared to ground-up construction or renovation?

Pestronk: We aim for a 100 basis point minimum differential on an unleveraged basis versus ground-up in order to make adaptive reuse work.