Repurposing the Right Way

Existing and historic buildings are a hot commodity in a market that's moving back to the city. But are you ready for the risks?

November 15, 2012

Bill Robson knows someone who bought a beautiful, historic mill house and turned its picturesque environs into the cutest little restaurant. To make his patrons comfortable, the restaurateur installed air conditioning for the first time in the building’s history.

And comfortable they were, until they found wriggling things in their soup. Turns out the change in humidity and temperature brought on by the A/C caused worms to migrate out of the building's ancient beams and into the food.

Robson, founder of Gabriel Consultants LLC, told this tale as one of many examples of how repurposing buildings can lead to unexpected changes at an educational session during the 2012 REALTORS® Conference & Expo in Orlando last weekend. Robson urged thorough inspection and due diligence to prevent your clients from experiencing situations like what happened at the mill-turned-restaurant.

Steven Arthur, a building scientist who works with Robson through ECS Mid-Atlantic, seconded that.

“You could comply with codes all day long and still have huge problems,” Arthur told attendees. "Almost anything you do will change something else in the building.”

Robson and Arthur suggested forming an investigative team to create a comprehensive due-diligence report. They said real estate professionals should consider legal, structural, and scientific experts tailored to the specific age and condition of the building their client requires.

For example, if the building in question is from the post-1985 era, a due-diligence team should focus on any necessary zoning changes, and on determining whether the building is up to local codes and compliant with federal regulations, such as the Americans with Disabilities Act.

If the building was erected between 1950 and 1985, the team will also want to look for environmental and structural issues, as well as the presence of hazardous materials. As your client’s target buildings reach back further in time, you’ll just have to add more items to your checklist.

“You have to recognize that the older the building is, the more the intensity of the study,” Robson said. And don’t think you’ll spend all your time staring at maps and plats, either. “You can’t do a due-diligence report sitting in your office.”

Beyond logistics, Robson cautioned real estate professionals against using certain language in marketing buildings for repurposing.

“Be very careful how you advertise historical buildings,” he said. Even if the building you’re marketing looks like "it could make a perfect B&B ... any kind of use that is not part of that base zoning" could get you in trouble later on.

While risks exist, the legwork should pay off, according to these experts.

“There are huge opportunities to miss very important information on buildings,” Arthur said. Due-diligence reports can help avoid those opportunities, either by steering clients away from troublesome structures or by pointing out stitch-in-time fixes that clients can undertake to prevent major issues later on. “It can be good news. It can be bad news. [But either way] they're very grateful.”

And the timing is right, too. Robson said urban renewal is setting the scene for more redevelopment.

“There has been a shift back to the city,” he said. “With this shift in demographics ... there are some great opportunities for acquisition.”

Meg White

Meg White is the former managing editor of REALTOR® Magazine.