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Oceancrest was selected by a group of investors to oversee the development of a Class A medical office building located in Wilmington, NC. The partnership worked with Oceancrest to provide a development proforma of construction budget and timeline.
The development posed a number of variables, thereby, determining the potetial return as dispoition was based on best and worse-case scenarios. This was done by stressing such variables as construction costs, lease rates, occupancy, timing, number of floors, and disposition of an adjoining outparcel.
Realistic expectations as to achievable leasing scenarios, cash inflows and outflows, and returns were diligently modeled. The criteria was based on several factors such as a portion of the building being owner occupied, the optimum number of floors to be built and its impact on development, and whether or not the outparcel was sold.
More floors allowed for a longer-term potential profit and for spreading the costs among more tenants, but required more financial risk. Less floors increased the outparcel return as it mitigated a number of parking stalls, but consequently, allowing for a larger land parcel to dispose of in a very desirable corridor. However there was the potential for a higher rent per square foot charged for both the tenants and owners, as well leaving the partnership with limited options to expand outside of the leased space. This issue was further compounded by the higher cost to construct per square foot.
Maximizing the building's revenue production during the lease period, as well as maximizing the potential profit upon disposition, required that a thorough analysis be done on the number of floors to be built and the impact of the outparcel, whether sold or not. The building specifications were continually reviewed and changes were a constant, as necesary to meet the needs of each investor and the partnership as a whole.