Investors in the Buvinger Building, a successful Small Change offering listed in 2016, have had their investments returned earlier than expected and with a return well above projections.
“It feels great,” says Shawn Kichline, principal of Oxide Real Estate Development, LLC, the developer of the project. “To see the results of our efforts to bring this building back to its full potential, to see it help the neighborhood thrive, but more so, to provide investors the ability to see tangible investments – that’s why crowdfunding is so impactful. I’m very happy that our Small Change partners have all seen a better-than-expected return on their investments.”
Oxide redeveloped the historic Pittsburgh building, once home to a Civil War surgeon, into a boutique mixed-use building with four thoughtfully updated residential units and re-leased the ground floor to a new street-food inspired restaurant. The building is now completely occupied
“Raising funds for a project like this in Pittsburgh, where Small Change is based, is particularly satisfying,” says Eve Picker, CEO and founder of Small Change. “We hope to repeat this many times. Our goal is to connect every day people to investment opportunities that make their own communities better.”
The original offering projected a five to ten-year hold period and a 13-16% IRR. Oxide Real Estate Development refinanced the building based on the strong cash flow the building is generating and was able to return investors capital above the projected returns. Investors happily have had their equity returned after just two years along with a 21%+ IRR.
The project is fully occupied and stabilized. Construction costs and change orders are under review. Once finalized the developer will make the final construction loan draw.
The project is fully leased with Ki Pollo, a fast-casual Korean fried chicken taking occupancy in September. They opened this month. The restaurant group also runs the highly successful Ki Ramen right next door. And residential units were fully occupied as of November 1.
Renovation of the apartments is now complete.
The developer has also signed a lease for the retail space, at rent 27% higher than initially projected, with a new restaurant tenant to be operated jointly by two of Pittsburgh’s star restauranteurs – Roger Li of Umami and Domenic Branduzzi of Piccolo Forno and Grapperia. The restaurant will be called Ki Pollo and is a fast-casual Korean fried chicken restaurant. They’re opening a ramen restaurant, Ki Ramen, two doors down as well.
The apartments have seen strong traffic in interest and showings. After some slight inspection and delivery delays, the developer is in the final stages of city inspections and has staged two of the apartments.
Since the last update, the developer has received a final building permit, closed the construction loan and started construction. The construction is roughly half complete with an anticipated completion date in May. There has also been interest from two parties for the retail space – a restaurant that would be operated jointly by two of Pittsburgh star restauranteurs and a proven, regional boutique desert bakery concept with three existing locations. The developer is actively negotiating with both, and the existing tenant is occupying the space on a month-to-month basis.
The branding and website for the Buvinger Building have also been completed and are live. These highlight the boutique, historic nature of the building and its distinctive product. The units are uniquely different from the large-scale, newly-constructed apartments being offered nearby. A leasing agent for the residential space has also been selected — a local start-up that uses local residents for showings and broadcasts the availability of the units to over 60 websites.
The final round of permit comments from the city included additional fire and life/safety requirements that increased the construction budget as previously expected. Additionally, the closing costs for the loan, including legal expenses, were higher than anticipated. These costs will be covered by the construction loan. An additional equity raise (at the same terms as your investment) is anticipated for retail leasing and reserves (currently budgeted to be $20,000). Residential and retail rents are higher than originally projected and we’ll bring the restaurant to market rents much sooner. The net result of this is that the updated projected investor returns have improved from the original offering.
It’s been a busy time. Since we closed the offering the developer has received zoning approvals, completed design drawings, negotiated a construction contract, submitted plans for a building permit and secured construction financing for the residential units. Construction start is anticipated in late January and is expected to take three – four months, ready for the spring leasing season. Sota Construction has been engaged as the construction manager.
The retail space is being marketed. At the same time neighboring buildings are also undergoing redevelopment, including four new restaurants including a local ramen restaurant to be opened by a homegrown star. Other retail stores are sprouting all around.
The budget has been increased to allow for additional fire and life safety requirements following review of permit plans, and some additional soft and hard costs. But these increases will be offset by residential and retail rents that are poised to exceed original expectations.
Images courtesy of Oxide Development