Prior to acquisition in 2001, the building had sat vacant for over a decade. MPF acquired the site, along with an adjacent parcel containing the parking structure, for $5 million. Originally planned for future development, MPF capitalized on an opportunity to sell the parcel containing the parking structure to a third party in 2003 for $5.5 million. The sales proceeds allowed MPF to return over 80% of original capital to investors in a short period of time, as well as pay down the construction loan while development on the Telegraph Lofts project moved towards completion.
Similar to previous conversions of commercial warehouses into residential use by MPF, the Telegraph lofts project required significant structural work, including demolishing the core of the old structure to create an open-air atrium in order to meet light and ventilation code.
As a rehabiliation project, we are able to utilize rehabilitation tax credits to generate additional capital and supplement returns. The decision to utilize 10% rehabilitation tax credits, rather than 20% Federal Historic Tax Credits, allowed us to add a penthouse level to the existing three story structure, creating 19,000 net rentable square feet and 12 additional units.
In addition to tax credit proceeds and the penthouse level, we were able to create additional value by converting the empty basement level into 28,000 square feet of income generating self storage space. Currently, the 180 self-storage units maintain at full occupancy and generate over $20,000 of additional income per month.
The building is currently capitalized with approximately 40% leverage in the form of a conventional commercial mortgage. With an in-house property management department, MPF intends to continue to operate the stabilized asset for the foreseeable future.