I’m a member of a Masonic Lodge that meets in a lodge building in Edmonds, WA. We don’t own the building, another lodge does and we rent their lodge to hold our meetings in their building twice a month.
Our lodge has existed like that for more than 30 years.
About 12 years ago we purchased a piece of property that is adjacent to I-5 in Mountlake Terrace. We have wanted to build a new lodge building on that property for a long time but had to raise a bunch of funds in order to try and get it off the ground. In the mean time we have watched a bunch of other lodges loose their building since they have to pay taxes on properties whose value has increased drastically. The intent is always to build or renevate a new building, but if you sell a building for $400,000 and that is all the funds you have, then you will build a building with the money you have…namely $400,000 and you have to still pay all the taxes and so forth. A bunch of assets of Masonic Lodges have been squandered in the past 10 years or so in real estate deals that go awry. The result is fewer and fewer lodge buildings in communities and less and less visibility for this excellent organization.
So the mantra these days is that you have to have a Lodge building that has an income source to support your lodge. We have now done all the analysis on our land for building a 3 story office building where we use the ground floor and rent out the top two floors for office space. This entire building is about 34,000 square feet and would have about 22,000 square feet of rented office space.
So now the question is can we keep a building afloat while we pay off the mortgage on a $5 million dollar building. The monthly payments for this beast are going to be somewhere around $25,000. MONTHLY PAYMENTS! Man, I thought my home’s mortgage was a lot.
You can see how we might be a little nervous about undertaking such an effort. You hae $100,000. You build a building. You don’t have anyone to rent the space for 4 months…$100,000 is gone! Wee!
So in all my free time lately I have been looking into the world of Commercial Real Estate. I now know what Net Absorption Rates are, Vacancy rates and so forth. Vacancy rates in Mountlake Terrace are running around 11.2%. As a simple projection of what we can expect it should be good since we simply need to have a 61% occupancy rate to break even. Yet me in others are a little paranoid.
I should mention that 3 other lodges are considering joining in our little endeavor. Two of them already own aging buildings which equals pretty fat assets which can contribute to the funding of our mamoth undertaking. So we are currently beginning the process of convincing everyone that they should get involved in this including the members of my Lodge. Tonight I presented a powerpoint presentation to my lodge on the plan. It went very well and we had a unanimous vote afterward to continue moving forward with the plan. Success! The real cool thing about the whole project is that at some point in the future…presumably 30 years…our mortgage will be paid off. If you do a little math, our rental property will be bringing in about $50,000 in income per month…and that is before you add in inflating office rental rates. $50K per month is a TON of money. As a non-profit service organization, that is a lot of service money with which we can do some fantastic things for the community. Today we struggle to give a $500 scholarship once a year to a student at the local high school. In the future we will be able to give a handful of $30,000 scholarships. Today we fund a local school’s reading program. In the future we can fund a school district’s reading program.
I think this is the start of one of the more significant things that I have ever done in my life. I can’t wait to see this happen. Maybe in the coming days I’ll share some of the things I’ve learned about the world of commercial real estate.