Reports and budgeting exercises commissioned to determine the viability of redeveloping the south campus of the former Montana Developmental Center found that high costs associated with renovating two historic buildings on the site would likely preclude efforts to profitably rent them out or sell units inside, but demolishing them would also be costly.
At a public presentation on Nov. 18, representatives from FourFront Design, SMA Architects and Highland Economics unveiled cost estimates for demolishing buildings five and nine, renovating one or the other, and renovating both buildings, as well as projected rental rates and sale prices required to offset renovation costs.
Building five, a former dormitory built in 1923 and designed by the same firm as Helena’s Civic Center, has been vacant for more than 40 years, according to a preliminary architectural report from SMA. The structure was built well, “has an open plan to support almost any building program” and received a new roof in 2011. Building nine, formally named Griffin Hall, was completed in 1912 and was the original building of the Montana State Training School, according to SMA. The report said that Griffin Hall was damaged by fire in 1964 and that subsequent repairs resulted in the abandonment of the fourth floor. Presenters at the meeting also noted damage from a deteriorating roof and pigeons that live in the building. Both buildings contain asbestos and lead-based paint, and would require abatement of both if the buildings were demolished or renovated.
Demolishing both buildings could cost up to $1.87 million, according to the report; demolishing only Griffin Hall could cost up to $1.25 million, and demolishing only building five could cost up to $631,758.
But renovating the buildings was projected to cost far more.
Rehabbing both buildings into usable condition was projected to cost as much as $21.22 million, the report stated; renovating only Griffin Hall could cost as much as $14.76 million and building five could cost up to $7 million.
The report also noted the option of doing nothing and stated that, “in that case, the building conditions would remain as they are now, continuing to deteriorate to the point that renovation would no longer be an option, making demolition inevitable.”
“The historic buildings and incredible character within would be lost forever to the Boulder community,” the report continued. “Times are gone that provide budget to create such quality and unique buildings, composed of local materials and joined by local craftsmen.”
But the time may also have passed where budget numbers work to renovate the buildings: A budgeting exercise from Highland Economics showed that rental and sale prices needed to recoup the money spent to renovate the buildings would be far above market rates.
“From a developer’s perspective, this is not an attractive investment,” Travis Greenwalt, a financial analyst with Highland, said when presenting the numbers. He also presented 2020 census data showing that Boulder had 556 housing units, 40 of which were empty. Residential proposals for the two buildings would produce a combined 50 units, he said.
The exercise included matrices of various rental and sale rates based on internal rates of return for a developer ranging from zero percent to 15%, and based on renovation performed with and without historic preservation grants or incentives of approximately the same amount it would cost to demolish the buildings.
Residential units of about 700 square feet in Griffin Hall would range from $1,320 per month—assuming the use of grants and incentives, and a zero percent return rate—to $4,874, assuming no grants or incentives and a 15% return rate. Comparable units in the area rent for $600–$1,200 per month, according to Greenwalt. With $1,500-per-month rent—still well above market rate—and grants and incentives, the building could offset only about $9.15 million in capital expenses, far short of the $14.76 million needed to rehab the structure.
Building five’s economics were not much better. Projected monthly rental rates ranged from $1,533 to $5,511 a month. If rents were set at $1,500 per month and the building received grants and incentives toward renovation, it could offset only $3.82 million in capital expenses—barely half of the $7 million needed to renovate the building.
Hypothetical condo sales in the buildings were also well over the market rate for comparable units of just over $200,000, clocking in at $284,000 to $480,000 in a variety of scenarios. Commercial lease options could cost up to $56.44 per square foot—more than double the going rate of comparable spaces currently on the market—according to the exercise.
Becky Lawson of SMA Architects said that renovating the buildings would cost about $600 per square foot, including utilities and other infrastructure around the buildings. Similar new construction, she said, currently costs about $550 per square foot, but that figure doesn’t include the demolition of building five and Griffin Hall that would be needed before new construction in their place.
“I think it’s really clear that there is no clear answer,” Jessica Holdren, a project manager with FourFront Design, said.
