Can Adaptive Reuse Work With Large Projects?

MIAMI—Resource Real Estate has been buying, fixing, stabilizing, renting out and managing distressed multifamily assets since 1991. Part of the company's strategy is adaptive reuse development.

To gain insight into the opportunities and challenges, GlobeSt.com caught up with Alan Feldman, CEO of Resource. We asked him about multifamily rates, his development pipeline, adaptive reuse opportunities and more. Be sure to come back this afternoon for part two of this exclusive interview, in which Feldman will discuss the company's latest adaptive reuse projects and how he's overcoming development challenges.

GlobeSt.com: Do you see any major changes occurring in multifamily development with interest rates rising?

Feldman: Yes, in multifamily, along with many other real estate assets, interest rates always play an important function. In multifamily there is currently a lot of demand, with very little supply. With interest rates at their lowest level in 60 years, as they go up, more people will rent, which will ultimately lead to more development.

GlobeSt.com: Is your firm doing more multifamily development this year than last year? If so, why? If not, why not?

Feldman: We have continued to get busier and busier over the past two to three years. Apartment owners are seeing increased rental revenue. 2014 will be an extension of 2013. There are a lot of neglected assets that we're considering for purchase.

GlobeSt.com: How are adaptive reuse projects creating opportunities for developers?

Feldman: These projects make for a much cheaper initial investment in a property. When you build something from the ground up, by definition you are paying retail price for everything, so it is very difficult to make a profit unless you build up an apartment for the wealthiest renters.

Conversely, Resource Real Estate caters to the workforce housing demographic and renter. Instead we chose to redevelop assets, keeping our overall cost basis low, so that we can provide attractive workforce housing at a reasonable cost.

GlobeSt.com: When does the adaptive reuse strategy work? When does it not work? What factors help you decide whether to pursue the opportunity?

Feldman: From what I have experienced, it generally works better on a small scale because it allows for more creativity. Too much change can take up a lot of time and get very expensive for the property owners.