June 1988.
by Thomas Anderson, President Anderson Associates
The number of architects who are also serving as builders has doubled over the past ten years, according to a recent survey taken by the American Institute of Architects.
This trend is not surprising. There are a number of appealing incentives for architects to also serve as developers. In this role they not only have control of the aesthetics of the project, but also receive a larger cut of the profits. The role also allows an architect to dually approach a project as a design artist and as a businessperson. The end product is often both marketable and architecturally attractive.
While many traditional developers view a project solely as businessmen and are often eager to make aesthetic cuts to save money, architects understand that as long as you do not go overboard, a good design can pay for itself.
This new trend in the industry is also forcing architects to develop business acumen so they can compete on this new level. Many architect/developers are now operating complete real estate development companies. They research potential property, draw the architectural plans, solicit funding and in many cases even market the building.
Anderson Associates—Architects and Developers
In a recent project, Anderson Associates purchased one of the last remaining Brooklyn stables, built in 1888. The project was to gut renovate the building (without sacrificing the structural integrity of the landmark building) and convert it into 12 condominiums.
As an architect, I was insistent on a high level of aesthetics for the building and for each unit. As a developer, I wanted to devise an innovative financial package which would interest investors and also bring a healthy return to all involved.
At the time, tax laws permitted investment tax credits equalling 20 percent of qualified expenditures for historic rehabilitation projects, with the proviso that the original investor retain the property for five years or forfeit a portion of the credit (qualified expenditures are defined as practically all the monetary outlay associated with the job except for acquisition costs, taxes and real estate marketing costs).
In order to carry out the $1.4 million gut renovation of the stable, Anderson Associates formed a limited partnership with investors in which each investor held a number of shares. The advantage of a limited partnership is that each investor's liability is limited only to his investment. This is particularly appropriate in a construction project, which is often the riskiest phase of a development project.
Subject to limitations imposed by the current Condominium Law in New York State, the limited partnership provided the opportunity for each investor to exchange his shares, tax free, for ownership of one or more condominium apartments. In that transaction, investors received over $20,900 in tax credits per apartment And many of them have rented out their apartments for attractive prices.
While the financial package proved to be rewarding, it was not at the expense of the aesthetic features of the apartments. As a rare feature, each of the 12 apartments was built with an individual architectural design. It made the building enticing to potential residents and helped us sell the project more easily. From an architect's point of view, it's an old canard that you have to make apartments alike. It doesn't cost more than a couple of dollars a square foot to put thought into the design and give an apartment integrity.
It is from that particular vantage point of both architect and developer where some of the most intriguing financial packages are being combined with innovative design. On the basis of the success of Carlton Avenue, Anderson Associates is planning a series of other projects in the near future.
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