Adaptive use of the Lozano cigar factory, Tampa, Florida : an economic feasibility study

Material Information

Adaptive use of the Lozano cigar factory, Tampa, Florida : an economic feasibility study
Series Title:
Lozano cigar factory preservation documents
Baldwin, Christopher B.
Place of Publication:
Gainesville, Fla.
Christopher B. Baldwin
Publication Date:


General Note:
Completed for Materials and Methods of Preservation, Spring, 1984

Record Information

Source Institution:
University of Florida
Holding Location:
University of Florida
Rights Management:
All rights reserved by the source institution.

Full Text



Tampa, Florida


(Economic Feasibility Study)

Presented by:

Christopher B. Baldwin



A privately funded adaptive-use project implemented to
take advantage of the tax incentives offered under the federally
mandated Economic Recovery Act of 1981. The developer has
completed all preliminary economic and market analyses and has
entered into a pre-construction, long term lease agreement with
the major tenants thus assuring availability of construction


The intention was to design a flexible floorplan, that
although suitable for the specific tenants, would easily adapt to
the needs of potential tenants requiring office space in the
future. The direct impact on the existing building, in terms of
modifications, is minor. Infill partitions, a new stair tower at
the west end, alteration of the clerestory cupola, and addition
of an entry patio were the changes of note. Each level is
designed to be served by zoned HVAC systems thus increasing
flexibility. Parking has been added at the west end of the site
and the trees impacted have been relocated when possible.


A large corporate law firm with thirteen partners, five
associates and support staff is the primary tenant and occupies
levels one, two and part of the basement. A graphics agency with
six partners and support staff occupies level three. A small
cafe and service bar lease space in the basement level and serve
primarily the in-house employees and their clients.


My area of interest on this project was economic
feasibility as it applies to historic structures which qualify
for the 25% tax credit, as allowed under the Economic Recovery
Act of 1981. My readings also exposed me to the "hard" and
"soft" costs of development economics.



The Lozano Cigar Factory complex has been purchased by a
developer for an adaptive-use conversion, to be done on a
speculative basis. The developer has $225,000 dollars of
personal funding available for investment and must borrow
the remainder for the project from private lenders. Since
the building has historic significance within its context in
Ybor City, the developer plans to nominate the building to
the National Register and thus qualify for the 25% investment
tax credit as allowed under the terms of the Economic
Recovery Act of 1981. The major consideration here is the
limitation imposed, which prohibits alterations affecting
more than 25% of the existing facade. This requirement will
impose a severe limitation on the designer. The tenants who
will eventually occupy the complex have signed pre-
construction long-term lease agreements with the developer,
thus allowing him leverage when approaching the private
lenders for construction financing. Since this is a
speculative venture, the developer is interested in
maximizing his investment return, thus he will encourage a
conservative approach to the actual design. This will
encourage flexibility so that the space will only require
modest alterations for future tenants.


Changes to the existing facade will be minimal and will
involve a new entry deck and a fire stair tower at the
western end of the main building. Infill partitions,
creating a double loaded corridor parti, will be added in a
configuration which will allow flexibility for future
functional alterations, should they become necessary. A
large parking lot to accommodate the functional code
requirements will be located at the west end of the site.
All salvageable landscape materials located in the affected
area will be relocated on the site.

Architectural Criteria:

1) No compatible design/additions will be made on the
facade excepting a new entry and a fire stair
2) A new hydraulic elevator will be fitted into the
existing service shaft.
3) The existing structural system will serve the
proposed function, however sections of flooring will
be removed to facilitate atrium openings between
4) Removal of 14 roof trusses to accommodate a lofted
conference area above the third level.

5) Enlarging the existing cupola into a rooftop
monitor to admit adequate light into the lofted
conference area.
6) All modifications shall avoid destruction of
historic fabric and shall be compatible with the
character, materials, and color of the existing
7) All interior modifications will be completed to
tenant specifications, excepting the decorative
finishes and furnishings (to be provided by



This level, which is partially below grade has as its
primary tenant a small cafe with a service bar. The
envisioned clientele are building tenants, with services
available to off street traffic also. Other functions
housed at this level are a 1600 square foot legal library
and filing area accessible by internal stairs from level
one, a maintenance shop, tenant storage areas, restrooms and
elevator lobby circulation areas. Access to this level is
possible by the elevator or stairs.

Existing space available 6748 sq. ft.
Proposed expansion (cafe) 200 sq. ft.
Gross available space 6948 sq. ft.


Legal Library 1152 sq. ft.
Dead File Storage 432 sq. ft.
Maintenance 624 sq. ft.
Tenant Storage 1700 sq. ft.
Restrooms (public) 392 sq. ft.
Elevator Lobby/Circulation 837 sq. ft.
Cafe/Service Bar (incl. expansion) 780 sq. ft.
Kitchen 616 sq. ft.
Cold Storage 180 sq. ft.
Employee Locker area 235 sq. ft.

6948 sq. ft.

Total (Basement)

Level One

This is the main entry level for the building, both from the
east and west sides. A new entry with courtyard is located
on the West side. The major building tenant, a large
corporate law firm, occupies this level and also level two
and a portion of the basement. Level One houses five
partners, a large conference room, a lobby with
receptionist, a small conference room, the administrative
and bookeeping department, an employee lounge, public
restrooms, and a general lobby/circulation area. Access to
the law library in the basement and the second level are
achieved through an internal stair. Since client
confidentiality is important, all attorneys offices will
have full height partitions. The secretarial stations will
be housed in modular 'Steelcase* units.

Existing space available 6628 sq. ft.


Partner's Offices (5 @ 258 ea.) 1291 sq. ft.
Lobby/Reception 638 sq. ft.
Lge. Conference Room 448 sq. ft.
Small Conference Room 252 sq. ft.
Entry Lobby (public) 400 sq. ft.
Secretarial 365 sq. ft.
Restrooms 184 sq. ft.
Admin/Bookeeping 320 sq. ft.
Manager's Office 192 sq. ft.
Employee Lounge 400 sq. ft.
Circulation 648 sq. ft.

Total (Level One) 6308 sq. ft.

Note: Some space lost on this level due to two storey
height of library below.

Level Two

This level is occupied by the second level of the law firm
and is connected to level one by an internal stair. Level
Two houses nine partners, five associates, secretarial
staff, a small waiting area with atrium openings to the
first level, a small conference room, and a xerox/supply
room. Space layout and square footage allotments are
consistent with those of level one.

Existing space available 6628 sq. ft.
Space lost to atrium openings 240 sq. ft.
Gross available space 6388 sq. ft.


Lobby/Waiting 192 sq. ft.
Partners Offices 3094 sq. ft.
Small Conference Room 252 sq. ft.
Secretarial 1096 sq. ft.
Associates 600 sq. ft.
Xerox/Supplies 160 sq. ft.
Restrooms 225 sq. ft.
Circulation 769 sq. ft.

Total (Level Two)

6388 sq. ft.

Level Three

This level is occupied by a graphics design firm which wants
to take advantage of the open plan possibilities offered by
this space and the open trusses. The office and production
areas will be open plan, however since many of their clients
are on a corporate level, traditional spaces have been
provided for client comfort. A number of roof trusses have
been removed so that a lofted conference room or area for
the partners to brainstorm can be constructed. This firm
has six partners, reception/lobby, a production studio with
a darkroom, a large formal conference room with screening
equipment, and an administrative area.

Existing space available 5470 sq. ft.
Expanded loft area 300 sq. ft.
Gross available space 5770 sq. ft.


Reception/Lobby 900 sq. ft.
Conference Room/Screening 300 sq. ft.
Lofted Conf./Work Area 300 sq. ft.
Partners 1800 sq. It.
Production/Dark Room 1096 sq. ft.
Admin/Bookeeping/Secretarial 720 sq. ft.
Restrooms 220 sq. ft.
Circulation 434 sq. ft.

Total (Level Three)

5770 sq. ft.

Analysis of Economic Feasibility

The positive cash flow, prior to the application of
available tax benefits in my established hypothetical, is
only $10,790, which represents a Return on Investment (ROI)
of 6% per annum. This figure can be boosted to a much
greater ROI through application of the 257% rehabilitation
credit, allowed for rehabilitation of a certified historic
structure, under the provisions of the Economic Recovery Act
of 1981. In addition, when the owner takes the allowable
depreciation on the adjusted basis (the acquisition of the
building plus renovation expenses) of the building, either
through straight line or the accelerated method, his income
position would improve significantly. Under the guidelines
for speculative ventures a ratio of 1.1 (Net Income divided
by Debt Service) is usually considered a safe margin or
indicator of success. When dealing with the potential
unknowns involved in adaptive use/renovation projects, a
ratio of 1.4 is almost imperative. This could be considered
a required margin of error for the investor/developer.

Under the terms of the scenario, established at the
project's inception, the developer will implement all
physical changes to the building and site, excluding
interior decorative finishes and furnishings in the tenant
areas. The strategy was to offer significant reductions in
the per square foot rental fees and thus ensure 100%
occupancy. The tenants benefit from this arrangement by
getting the opportunity to tailor their environment to their
needs, achieving a large tax write-off on finishes and
furnishings, and paying a lower rental .fee.

In retrospect,this project served as an object lesson which
played the groundwork for embarkation on my thesis. The cash
flow analysis should always be performed prior to the design
phase of any project, so that it may serve as an established
parameter for the designer. I purposely chose a
conservative solution for this project and then applied the
economics upon completion of the design. Had I investigated-
these economic issues prior to the design phase many more
options may well have been available. In retrospect the
function assigned and the economic scenario established by
me was incorrect for this particular site.

Project Data

Land Use Information:
Site Area 1.66 acres
Gross Building Area 25,597 square feet
Building Coverage 8,775 square feet 12% of site
Parking 50 cars x 350 sq. ft./car 25% of site

Economic Information:
Acquisition $224,000 (land and building)
Land Value $41,500
Real Estate Taxes $2,688 yearly based upon assessed
value of $134,400 (60% of market value). Industrial tax
rate of $2/$1,000 of assessed value.

Rehabilitation Costs:
subflooring to be played over existing
mechanical systems (A/C units and ductwork)
utilities (wiring,plumbing,phones, and security)
stair tower
Subtotal at $28.00 per square foot $784,000

Hydraulic Elevator:
four levels x $10,000 per level = $40,000

Site Work: $50,000
demolition of existing slabs and walks
landscape (relocate trees from proposed parking area)
grading (cut and fill)
new walks and sidewalks

Parking Lot: $40,000
Construction of new lot including entry/egress, service
drive, and dumpster access. ($1.00 per square foot)

Architectural/Engineering Fees (10 12% of project cost)

Carrying Costs of Construction Loans (14% yearly)

Leasing Commission (typical rate is $1.45 per sq. ft. for
commercial spaces)

Interior Finishes: Due to the long term lease agreement and
the tax depreciation advantages, the tenants are responsible
for all floorcoverings, wall treatments, specialized

lighting, and furnishings within the confines of their own

Total Development Costs $1,245,000
($44.50 per square foot)

Hypothetical Cash Flow Analysis

Gross Annual Revenues
Gross Building Area
Net Leasable Area
Annual Rents (per square foot)

Annual Income at 100% occupancy
Vacancy Factor (5%)

Gross Annual Revenues

Net Income Before Debt Service
Gross Annual Revenues
Operating Expenses for Owner
Utilities ($1.42 per sq. ft.)
(common areas only)
Insurance ($0.30 per sq. ft.)
(whole building covered)
Cleaning ($0.90 per sq. ft.)
(common areas only)
Management Fee (Corporate Expense)

Net Income Before Debt Service

25,597 sq. ft.
21,704 sq. ft.









Economic Value
Capitalization Rate (assume good developer credit) 10%
Net Income (N.I.) $139,310
Economic Value (N.I. divided by .10) $1,392,310

Mortgage Loan Obtainable
Loan to Value Ratio (max. allowed by bank)
Economic Value (E.V.)
Maximum Morgage (75% of E.V.)
Owner Funding Available
Owner Funding Required (25% of E.V.)

Annual Debt Service
Mortgage Constant (from Amortization tables)
Maximum Mortgage
Annual Debt Service (.123 x $1,044,232)

Cash Flow Before Adjustment for Income Taxes
Net Income (annual)
Debt Service (annual)

Cash Flow Before Taxes


$ 128,440



a. C ) fY _)& _
- ^y^j--z t -A.^,




0 10 20 40 50 100

0 5 10 15 2D




I "l. | L I I L


0 10 a 20
Ml rL L




0 5 10 15 20

0 B 10 15 20





-4 -" 5 1

0 S 10 IS 20




0 5 10 15 20



0 5 10 I 20

Full Text
xml version 1.0 encoding UTF-8
REPORT xmlns http:www.fcla.edudlsmddaitss xmlns:xsi http:www.w3.org2001XMLSchema-instance xsi:schemaLocation http:www.fcla.edudlsmddaitssdaitssReport.xsd
INGEST IEID ESZCM549X_BL767R INGEST_TIME 2011-07-19T14:46:56Z PACKAGE AA00000571_00004