Opportunity Among The Volatility: Atlanta Firm Sees Potential In Adaptive Reuse

Commercial real estate can be a noisy, confusing sector. Today, tight credit, high interest, loan maturities and a lack of available financing are making projects difficult to pencil. At the macro level, office vacancies remain high despite calls for workers to return to the office, and there is no end in sight to the country’s housing shortage.

But despite the disruption, Rahim Charania, who heads a firm specializing in the acquisition, development and management of commercial properties in the Southeast, said his team has detected a strong signal amid all the noise. 

As the founder and managing partner of Atlanta-based Woodvale, he said he sees a fertile environment for what he called the “great real estate reset.” Rather than retrenching, this is a time to view the market with fresh eyes and implement newly viable ideas, he said.

“This is far more than a temporary market dislocation and, in fact, is a once-in-a-generation opportunity to redefine the future of real estate,” Charania said. “Woodvale, with more than $500M in assets under management, is uniquely positioned to lead this transformation by converting market disruption into long-term opportunity.”

The opportunity that has caught his attention is the adaptive reuse of underutilized or vacant office or hospitality spaces to create much-needed mixed-use specialized housing.

Myriad older office properties across the country can be acquired at a steep discount. Charania said that converting unwanted office space or underutilized hospitality assets to in-demand residential use is particularly financially viable in this market.

“When you're buying something for $300, $400 or $500 a SF, your options for creativity are limited,” he said. “But when you're buying the same asset for $30 or $50 a SF, all of a sudden, alternatives and options that were otherwise cost-prohibitive are now viable while still allowing you to honor your fiduciary responsibilities to stakeholders and investors.”

Not only does the current climate make adaptive reuse a viable option, but it also presents an opportunity to rethink how buildings or sections of buildings can be most effectively converted to new uses, Charania said. 

Every floor plan is unique, requiring developers to tailor plans specifically to each property, rather than resorting to one-size-fits-all paradigms. This perspective provides options that can more effectively utilize space so that the units provide the square footage that today’s tenants seek. Yet that is not how many developers are approaching the challenge, Charania said.

“What I have seen so far in the marketplace is a focus on trying to fit a modern apartment box into an adaptive reuse that doesn't work,” he said. “We cannot use yesterday’s solutions to solve tomorrow’s problems, because it's like putting a square peg in a round hole.”

Woodvale’s approach is to reimagine and then reconstruct the floor plans, resulting in layouts that allow for larger individual units that can fetch higher rents.

“The combination of high demand and low inventory in the residential market creates the perfect storm that allows for this opportunity to exist right now,” he said.

Woodvale has put its adaptive reuse ideas into practice in Covington, Georgia, where it is converting a 72K SF building once used for industrial into a new office and headquarters for local utilities. Charania said the project pencils because, first, his firm acquired it for a low enough price, and second, Woodvale worked to identify the best way to convert the building to appeal to new users.

Charania said Woodvale’s record — in addition to half a billion dollars in assets under management, the firm has more than $295M in capital deployed and a portfolio of more than 30 projects — demonstrates that it is well suited to making other asset conversions work, even if the CRE market remains volatile. 

“Woodvale employs a differentiated execution model that combines institutional standards with entrepreneurial agility,” he said. “Our results are driven by our ability to seek out and find deals, our high standards and unique capabilities in executing investments, all thanks to our experience and history in the market.”

This article was produced in collaboration between Woodvale and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.