For Investors

From a math (investor) perspective, this is a use arbitrage and value arbitrage model.  In most markets, apartments feature higher rents, lower expenses (tenants pay utilities) higher occupancies and lower cap rates (higher multiples on value) than office buildings.  Apartments also have a much more broad and deep pool of potential customers and much lower turnover cost (you don’t rebuild an apartment every time a tenant leaves). 

The question then is how do you make them more useful?  1)  lease them to small offices.  Residential occupancy is 1 person per 200 sf.  Office occupancy is 1 person per 100sf.  Therefore in a 1,000 sf office you can lawfully house a 10 person office.  Companies with 10 or fewer employees are 76% of US companies.  2)  Since 2011, the only segment of the office market that has grown are people who no longer go to the office (work at home). 

While the MF industry would seem to be the natural repository for these remote workers, building and zoning code as well as parking availability conspire against this growing and under served market.  By adding small office and home workers to the existing apartment demand, we accrete additional potential users that our competitors cannot effectively reach, thereby giving us pricing power with very limited additional fixed costs and no additional operating costs. 

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