The three-story, 13,000 square-foot brick Armory Building has been vacant for several years and needs rehabilitation but retains values due to its historic architecture and deep ties to the history of the City of Delta and the State of Colorado.
The building was also a significant hub for community functions and included other business uses after the departure of the National Guard. The building has been vacant for several years and needs rehabilitation. Even with the need for redevelopment, the building possesses significant re-use potential. Two similar Armory Buildings in Colorado have been successfully redeveloped in Craig, CO and Golden, CO. For the City of Delta, there is a similar opportunity for the armory building which could support multi-family housing in downtown or could be developed into a multi-use community space. The building is three stories, including a basement. The lot the building sits on encompasses three quarters of an acre. The basement and main floor are each 5,822 SF. The upper floor is an additional 2,064 SF. There is a preliminary plan in place to redevelop the Armory Building into 10, two-bedroom flats, though additional engineering could be completed to lower the basement and increase the number of units that fit into the existing structure. The Armory building is located just east of Main street and could promote walkability and connectivity to downtown businesses, residential development to the east, and other destinations. The property is approximately eight city parcels, including a large parking lot that makes up about half the site and could support additional development. There is also an opportunity to redevelop additional properties in the same city-block as the armory. The block is currently anchored by a United States Post Office, but if redeveloped for the highest and best-use, the armory could become a major destination and anchor for this block and downtown. While a development of a second building on the adjacent parking lot could support ten to fifteen two-bedroom flats, there is also an opportunity to develop new public space.
ROI and Initial Conditions
Scenario A: builds off the financial sources and uses summary above. This assumes the development of 10-15 market rate lofts in the armory building. Rents for each unit would range from $1,200 to $1,600 per month. This structure anticipates an 8% cap rate and the use of local assistance and historic tax credits. This scenario anticipates a total cost to redevelop the building of approximately $2.7 million. An Opportunity Fund equity investor could reasonably participate in 26% of the deal by investing $700,000. An investor could likely expect a 5-7% annual return on investment and an ownership interest that could be refinanced and cashed out at the end of 10 years subject to final
terms.
Scenario B: A slightly different set of terms and conditions would apply should the Armory Building project expand its scope and include development of the adjacent parking lot. In this case, a public-private partnership could be formed between the developer/investor group and the City of Delta and/or DURA. Currently the building and adjacent land are one parcel. Subdividing the building and land could be considered to increase the value of the land/new development and the existing building. The objective in this scenario will be to incorporate attractive private and public uses into the redevelopment plan for the property. Subdividing the property will allow land to be developed subject to land configuration and development type. Scenario B potentially offers both the community and developer several options making the project more beneficial to both parties. Including one or more public uses would be attractive to the community and increase activity on and around the site. A trade-off could include increased housing density on the site leading to more innovative design while improving the potential return on investment.
OPPORTUNITY TYPE
The Armory Building’s current property owner is an experienced developer who has completed many extensive renovations throughout Colorado. The owner is willing to partner with investors and is flexible on financial terms and participation. He is also willing to sell the property to a developer/investor. The City of Delta and Delta County could participate in the project if it were to include a community-oriented component. Public uses of interest include co-working, cultural, gathering, community garden, and recreation uses.
Key parties include the property owner/developer, the City of Delta, and Delta Urban Renewal Authority (DURA) which promotes redevelopment in the City of Delta’s downtown and can provide incentives to do so. Public participation for the project is possible through potential partnerships with the City of Delta and DURA.
- Property Owner/Developer – Likely will be the lead developer for this project and oversee construction and maintain majority ownership in the building.
- Investor – An investor could provide additional equity in the project to help increase scale of the project and promote development of other properties on the Armory Building Block.
- City of Delta – The City of Delta can assist with the entitlement process and may provide financial assistance or public improvements to promote the project.
- Delta Urban Renewal Authority (DURA) – DURA can provide Tax Increment Financing (TIF) for the Armory Building project.
