3L is founded on the first three rules of real estate: “Location, Location, Location.”
Location drives successful development. With this in mind, 3L pursues dynamic landscapes that allow for the adaptive reuse of historic and underutilized structures that possess untapped potential. 3L uses this non-disruptive and creative reuse model to strategically meet the needs of an increasingly demanding market that readily passes on size and ownership for centrally located and high quality rental spaces.
City-centers attract a rapidly growing workforce of young adults who seek the employment and cultural opportunities urban life has to offer. These individuals are attracted to lively, amenity filled neighborhoods, and they demand high quality, affordably priced, transit-oriented living. 3L uses strategic adaptive reuse projects to not only meet the needs of this growing market, but to transform vintage and idle structures into desirable revenue generating community assets.
Specifically, Chicago, Milwaukee, and other evolving development landscapes possess the ideal opportunities for 3L’s adaptive reuse strategy, particularly in the current period when governments, universities, and corporations are off-loading properties – many of them underutilized – that they have accumulated over time. These properties present unprecedented opportunities for investment and transformation into residential or residential/commercial assets.
The Place To Start
Location and cost drive the decisions of young adults, and over the last ten years the demand for rental housing has skyrocketed. Between 2005 and 2015, the number of renters in the US increased by nearly nine million – a historic high – to 43 million. Further, due to a change in the economy and attitudes towards home ownership, the number of renters under the age of 30 has increased by nearly one million across the country.
In Chicago and Milwaukee – ideal development landscapes for 3L’s adaptive reuse approach – the percentage of housing occupied by renters stands at 55 and nearly 57 percent respectively, while the population of 20-34 year olds has increased to roughly 27 percent. These city centers attract a growing number of young renters because of ample job opportunities, established universities, and transit-friendly lifestyles. In fact, over the past ten years almost two-thirds of Chicago’s building permits have been filed within a half mile of rail stations. In order to continue this trend, in November of 2015 the city expanded a transit oriented development (TOD) ordinance that is expected to add $450 million to neighborhood retail and $200 million to the tax base of local governments.
Urban areas with established educational institutions are of particular interest to 3L with tens of thousands of full-time students and new graduates driving demand for revitalized and affordable apartments. These urban areas provide hundreds of thousands of jobs within a 30 minute commute that retain first-time job seekers after graduation. Focusing on these locations allows 3L to infuse unrealized revenue into neighborhoods with residential and residential/commercial conversions.
3L’s ultimate goal of converting historic and vintage buildings into predominantly residential space is the key to unlocking previously untapped value in heavily sought after city-centers. By creating efficiently sized apartments at the price points a young workforce can afford, 3L strategically creates value in an underutilized urban landscape. These conversions multiply revenue, reclassify buildings under residential tax rates, generate a diversified revenue stream, and open up financing channels unavailable to non-residential projects.
The typical acquisition will be an older building of under 200,000 square feet, lying dormant or being used in a capacity short of its potential, and where the underlying zoning permits for residential use. While some of these buildings may have appreciated in the current market, these buildings are those where conversion to residential use will enhance value and cash flow earnings.
Some of the prospective redevelopment projects may have occupants who can remain in the building during construction, providing a steady cash flow while the construction projects are geared up and permitted. Downtown locations offer ground floor retail potential and other mixed-use opportunities that include new loft-office spaces that many of today’s start-ups desire.