wilmore studios feasibility morgan hamer

Morgan Hamer ∙ May 2014

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WILMORE ARTIST STUDIOS

FEASIBILITY REPORT INTRODUCTION

The purpose of this site feasibility study is to evaluate the viability of converting an

existing warehouse into artist studio rental units with an attached gallery space. The facility

will contain 41 individual studios ranging from 300 to 1,500 square feet. The gallery will be

open to the public and feature resident artists’ work. The warehouse is located at 2213 Toomey

Avenue in the Wilmore neighborhood, two miles south-west of Uptown Charlotte, in the center

of Mecklenburg County (Map 1 & Map 2). It is positioned within a mile of the Remount Rd exit

on I-77, and a block away from Tremont Ave. and South Tryon St. The warehouse is

approximately 29,925 square feet on a 2.09 acre lot. The current asking price for the property

is $725,000.

The optimal locations of artist studios and fine art galleries are in culturally established,

diverse, and affordable neighborhoods and communities within proximity of the city center.

Older industrial and retail buildings provide an ideal location for studios due to their large

amount of available space, unique architecture, and the relatively inexpensive cost of

renovation and conversion into studio spaces. Locations that are within a reasonable commute

or walking distance of cultural attractions--restaurants and bars, other studios and galleries,

music venues, museums, theaters—often generate the traffic and exposure necessary to

sustain art studios and galleries. While surrounding galleries and studios generate traffic, they

may also act as competition.

The primary customers are the artists renting the studio spaces, and secondary

customers are the gallery visitors and art purchasers. The renters will be drawn from

surrounding Charlotte neighborhoods, and visitors will be primarily those who are patrons of

galleries and near-by attractions in Historic SouthEnd. IBIS World identifies some of the key

economic drivers for independent artists and consumers of art which include households

earning over $100,000/year, high rates of population growth, educational attainment, and per

capita disposable income. The presence of colleges and universities also indicates demand for

art and artists in a given market area.


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MAP 1: SITE LOCATION

GOALS

There are multiple goals for converting the existing warehouse into studios and

a gallery. The primary goal is to provide functional, affordable studio spaces for local

artists specializing in fine arts including painting, drawing, sculpting, printmaking, and

mixed media. Additionally, the purpose of this project is to create an environment that

facilitates and promotes creativity, community interaction, and collaboration among

the resident artists, as well as visitors from the greater Charlotte area. The secondary

goal is to create a gallery and viewing space open to the public where tenants and

outside artists may display and sell their work. The art displayed at the gallery will be

from the resident artists, and a standard, thirty (30) percent commission of all sales

will go to the studio.


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MAP 2: SITE LOCATION IN MECKLENBURG COUNTY


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CONSUMER PROFILE

The primary consumers of artist studio spaces are artists who specialize in different

mediums ranging from painting and graphic design to sculpture and installation. Artists will be

drawn from a variety of sources in the Charlotte area: professors, students, and graduates from

surrounding colleges and universities including UNC Charlotte, Charlotte Art Institute, Central

Piedmont Community College, and Queens University; residents of SouthEnd and near-by

bohemian art districts; and those already established artists in the surrounding communities.

There is no definitive profile for artists due to a variety of reasons. First, artists specialize

in an array of media ranging from traditional fine art, such as painting and sculpture, to more

contemporary work such as installation and graphic design. Second, artists come from various

backgrounds; some artists have little or no training, while others have completed high levels of

formal training. Third, sales of artwork may not be an artist’s primary income, creating

challenges when trying to use US Census data to assess the number of artists in a population.

Very few studio artists within the industry are able to support themselves financially with

consistent work and many are forced to find employment in other industries, such as retail,

education, or the service industry, to supplement their income (IBIS World, 2013).

GALLERY VISITOR AND BUYERS

Secondly, customers will be the patrons and visitors of the galleries within the trade

area. Gallery visitors come from a variety of sources in the Charlotte area. Because of the site’s

proximity to SouthEnd, a significant amount of visitors will be from those visiting restaurants,

bars, and other galleries nearby. Additional traffic will be generated by the monthly

studio/gallery crawl in SouthEnd. Art collectors and interior designers from the surrounding

market are also secondary customers.

APPRAISAL

Three recent sales of three properties within a mile of the site were identified as

comparable to the subject property. Each property evaluated is a warehouse sold in 2013. They

were each built within seven (7) years of the subject, which was constructed in 1969. The

average lot size of the three properties is 0.96 acres, which is significantly smaller than the

subject’s 2.09 acre lot. The average price per square foot in the selling price of these properties

was $27.44 per square foot (Table 1). The asking price of the property is currently $725,000,

which equals $24.23 per square foot. Given the average cost per square foot of the recent

comparable sales, the site would be valued at $821,142.


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TABLE 1: COMPARABLE SALES

Parcel

Address

Sale Date Sale Price Square

Feet

Price per

Square

foot

Zoning Year

built

Land Area (acres)

2000

Hawkins St.

3/21/2013 $750,000 28,400 $26.41 TOD-M 1962 1.03

3115 Griffith

St.

11/26/2013 $595,000 25,590 $23.25 I-2 1964 1.02

2250

Toomey Ave.

1/10/2013 $467,000 14.300 $32.66 I-1 1972 0.82

Average $27.44 0.96 acres

Source: Polaris 2014

IMAGE 1: EXISTING STRUCTURE

Source: LoopNet


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MARKET ANALYSIS CHARLOTTE MARKET

The site is located in the center of the Charlotte-Concord-Gastonia, NC-SC Metropolitan

Statistical Area consisting of ten counties as of 2013 according to the US Census Bureau. These

include Cabarrus County, NC; Gaston County, NC; Iredell County, NC; Lincoln County, NC;

Mecklenburg County, NC; Rowan County, NC; Union County, NC; Chester County, SC; Lancaster

County, SC; and York County, SC. 274 of the Fortune 500 companies have facilities in there,

eight of which are headquartered in Charlotte, ranking Charlotte sixth nationally in the number

of headquartered firms (Charlotte Chamber of Commerce, 2012). In addition, the MSA is home

to a multitude of colleges and universities including the Art Institute of Charlotte, Central

Piedmont Community College, UNC Charlotte, Davidson College, Johnson and Wales University,

and Pfeiffer University.

The primary city, Charlotte, NC, has undergone substantial growth for artists and

creative industries over the past decade. There are several colleges and universities with

prestigious Fine Art programs that offer BFA and MFA programs in the market area. The growth

of this artist community creates a growing demand for affordable studio space. The addition

of three large-scale, internationally-recognized art museums in uptown Charlotte—the Bechtler

Museum of Fine Art, The Light Factory, and The Mint Museum-- is a reflection the city’s growing

cultural presence. Charlotte is also home to the McColl center, an artist residency program

which hosts prominent artists from all over the world.

According to the 2012 Creative Vitality Index (CVI), the total employment of fine artists

including Painters, Sculptors, and Illustrators rose from 351 in 2011 to 589 in 2012, a 68%

change. In Mecklenburg County alone, there was an estimated total of 271 fine artists in 2012,

growing 46% since the previous year. The CVI measures a carefully selected set of economic

inputs related to the arts and creativity in a given geographic area, with measurements of both

for-profit and non-profit arts-related activities. The index has two major components including

measurements of community participation based on per capita revenues of arts-related goods

and services, and measurements of per capita occupational employment in the arts using data

from the US Census Bureau and Bureau of Labor Statistics.

The number of artist studios and galleries is continually fluctuating in the Charlotte MSA.

As different neighborhoods have undergone notable gentrification, increases in rent and

affordability have forced many of these tenants out. Consequently, small-scale studios and

galleries have appeared in some Charlotte’s smaller outlying cities, such as Concord and Rock

Hill, as these places have made attempts to rejuvenate vacant down-town spaces and improve

their city’s image.


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MAP 3: CHARLOTTE-CONCORD-GASTONIA, NC-SC MSA (2013)

Source: STDB and ESRI

There are only four comparable artist-studio locations identified in the Charlotte MSA.

In order to be considered comparable, the facility must have six or more rentable studio units

and include a gallery where resident or outside artists may display their work to the public. The

number of rental units is significant due to the benefits from agglomeration for artist

communities. These benefits include networking opportunities, creative inputs, sharing of tools

and materials, among many others. Indirect competitors include smaller-scale studio rental

properties, independent artist studios and galleries, and other art galleries. There is not

definitive data available both direct and indirect competition, however through Facebook,

Google search, Yellow Pages, and word-of-mouth, these locations were identified (Table 2).

Given my experience in the artist community in the market area over the past decade, I believe

my findings are accurate.


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TABLE 2: DIRECT COMPETITORS

# OF

RENTAL

UNITS

UNIT SIZE

RANGE

(SF)

RENT

PER SF

RENT RANGE LOCATION

ARTS COUNCIL

OF YORK

COUNTY

26 202-

1,400

$0.32 $135-$395 121 E. Main Street

Rock Hill, SC

X-FOUNDATION 7 300-500 $1 $300-$500 1900 N. Brevard St.

Charlotte, NC 28206

HART WITZEN 18 200-600 $1 N/A 136 E. 36th St.

Charlotte, NC 28206

CHARLOTTE

ARTS LEAGUE

17 50-300 N/A $68-$300 1517 Camden Road

Charlotte, NC 2820

Source: Collected by Author, March 2014

The majority of competitors are located within three miles of the city center (Map 4). All

have no vacant studio spaces available at this time. The first competitor identified is the X-

Foundation, housing seven working studios and Mona Gallery. It is located in the outskirts of

the NoDa neighborhood in a renovated warehouse. The owners of the X-Foundation came to

the North Davidson neighborhood in the mid 1980’s and purchased a block of vacant shops,

eventually creating a community of artist studios and galleries. As popularity increased in

NoDa’s art district, rents increased and those studios have all relocated to the outskirts of the

neighborhood and elsewhere. The Hart Witzen Gallery and Studio, also situated just outside of

the center NoDa, is another direct competitor located in a restored industrial building. Hart

Witzen is a privately owned, self-sustaining arts venue supported through rental of the gallery

and artist studios allowing it to function as an independent alternative arts space. Both Hart

Witzen and the X-Foundation also rent out space in their facilities for private events such as

meetings and weddings and feature work in their gallery by significant artists from all over the

world.

The third competitor identified is the Charlotte Arts League, a non-profit organization

featuring studios and a gallery located in the SouthEnd neighborhood. The final competitor is

Arts Council of York County’s Center for the Arts, centrally located in historic Old Town Rock

Hill, South Carolina. The Arts Council is a non-profit arts anchor on three blocks of Main Street,

housed in two 100-year-old buildings. It is currently home to the Arts Council offices,

classroom space, artist studios and three gallery spaces.


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MAP 4: MAP OF DIRECT COMPETITION IN MARKET AREA

Source: Google Maps

COMPARABLE MARKETS

The Charlotte-Concord-Gastonia Metropolitan Statistical Area is contrasted with to two

comparable market areas-- Winston-Salem, NC MSA and Greenville-Mauldin-Easley MSA-- to

determine the level of demand for an artist studio space in the Charlotte market area (Map 5).

These market areas were selected for several similarities with the Charlotte MSA: first, the

locations of similar studio facilities are close to, or within, historic districts close to the city-

center that have undergone notable gentrification; second, the locations of similar studio

facilities are in buildings that have been appropriated or converted into artist studio space;

Hart-Witzen

X-Foundation

Charlotte Arts League

Site

Arts Council of

York County


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third, each market area contains several colleges and universities where artists may be sourced;

finally, each of the market areas are located in the South East and have not yet achieved

international recognition for artists or a fine art presentence.

MAP 5: REGIONAL MAP OF COMPARABLE MARKETS

WINSTON-SALEM, NC MSA

The Winston-Salem, NC MSA contains Davidson County, Davie County, Forsyth County,

Stokes County, and Yadkin County (Map 6). The primary city is Winston-Salem, where the two

comparable artist studios identified are located. This MSA is home to several prominent

colleges and universities, including Wake Forest University and the University of North Carolina

School of the Arts. Winston-Salem, like Charlotte, is home to several corporate headquarters

including BB&T, Lowes Food, and Reynolds American. It is also home to several companies in

the fast-growing medical research and has been designated as the Piedmont Triad Research

Park for biomedical and information technology research and development.


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MAP 6: WINSTON-SALEM, NC MSA


GREENVILLE-ANDERSON-MAULDIN, SC MSA

The Greenville-Anderson-Mauldin, SC MSA is the largest MSA in SC containing Anderson

County, Greenville County, Laurens County, and Pickens County (Map 7). Downtown Greenville,

the primary city in this MSA has undergone significant urban renewal in past decades, creating

an inviting atmosphere for creative class individuals. This is where the three comparable studios

are located.


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MAP 7: GREENVILLE-ANDERSON-MAULDIN, SC MSA


CURRENT AND FUTURE DEMAND

There are few ways to measure the number of artists in a population. This is due in part

to a lack of data, and also because artist’s primary income may be from other forms of

employment. Because art is a luxury instead of a necessity, the surrounding market area must

have the economic means for purchasing art work in order to create a sustainable environment

for artists to create and sell work. IBIS World identifies some of the key economic drivers for

independent artists and consumers of art that include households earning over $100,000/year,

high population growth rates, high educational attainment, and per capita disposable income.

The presence of Colleges and Universities also indicate demand for art and artists in a given

market area.


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MARKET POTENTIAL

In order to gauge the existing artistic and cultural community in the Charlotte MSA,

cultural indicators in each trade area are compared. According to ArtPlace America--a

collaboration among 14 foundations, 8 federal agencies, and 6 financial institutions dedicated

to strengthening the field of creative place-making-- there a several variables that indicate the

cultural vibrancy and feasibility of creative development in a given location. Some of these

relevant creative indicators from each market area have been assessed and compared. These

include the percentage of workers creative occupations, the percentage of creative

establishments, and the percentage of independent, creative businesses in each MSA. (Table

3). This employment information for each of the Metropolitan Statistical Areas was collected by

the US Census Bureau in the 2011 MSA Business Patterns. The Nonemployer data for the

number of independent artists, writers, and performers originate from tax return information

of the Internal Revenue Service and was also provided in the 2011 Nonemployer Statistics from

the US Census Bureau. This data may not account for the total number of artists in each market

area if resident artists no not declare their trade as their primary form of employment.

TABLE 3: VIBRANCY INDICATORS WITHIN MARKET AREAS

Charlotte Greenville Winston Average

Total # Paid Employees 736,199 249,787 181,219

Paid Employees

Arts, entertainment & recreation

17,545 3,534 2,176

% of total paid employees 2.38 % 1.41 % 1.2 % 1.66 %


Total # Establishments 43,955 14,950 10,158

Total Establishments

Arts, entertainment & recreation

673 207 162

% of total establishments 1.53 % 1.38 % 1.59 % 1.5 %


Total Population 1,795,472 647,401 482,025

Total # Non Employer

establishments: Independent artists,

writers, and performers

3,675 1,055 991

% Non-Employer establishments:

Independent artists, writers, and

performers total population

0.20 % 0.16% 0.21% .19%

Source: US Census Bureau 2011 Non-employer Statistics and MSA Business Patterns


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The comparisons reveal that the Charlotte market ranks above average among the three

market areas for cultural vibrancy (Table 3). The percentage of paid employees in arts,

entertainment, and recreation in the Charlotte market far exceeds those in the Greenville and

Winston Salem MSAs. Additionally, the percentage of establishments in the arts, entertainment,

and recreation categories, along with the percent of nonemployer establishments who are

independent artists, writers, and performers within the Charlotte MSA exceeds the average of

the three MSAs.

Additional demographic factors are considered within each MSA (Table 4). According to

Esri’s 2013-2018 Demographic Updates, the population growth projection ranks highest in the

Charlotte-Gastonia-Concord MSA, and lowest in the Winston-Salem MSA. Population growth is

a key factor in predicting the cultural vibrancy of a market and trade area, and is indicative of

other underlying trends that create a favorable atmosphere for artists and art collectors

including employment growth and cultural diversity. In addition, the Charlotte-Concord-

Gastonia MSA ranks highest in income and income growth projections of the three comparable

market areas, according to Esri’s growth model.

Esri’s population predictions for 2000 to 2010 were relatively accurate, and with

improvements in technology, data sources, and modeling, the 2013/2018 population estimates

appear to provide a reliable growth forecast. Esri’s 2013/2018 population predictions are

created by current population change by block group from three primary sources: Experian, the

US Postal Service (USPS), and Metrostudy, in addition to several ancillary sources. Metrostudy

provides information on new and planned residential construction in the top US housing

markets. This database identifies individual construction projects by location by evaluating: 1)

Inventory of units under construction, sold, and/or closed; 2) types of housing—detached

homes, townhomes, condominiums, etc.; and 3) target markets such as families, seniors, and

empty nesters.

Esri's income forecast base is the income that was reported in the 2007–2011

American Community Survey. Esri evaluates an extensive list of sources for household income

trends that includes both federal and proprietary sources. The review of national surveys

includes the Bureau of Economic Analysis's local personal income series, the Current

Population Survey, and the Bureau of Labor Statistics’ Consumer Price Index. Esri's updates

emphasize the use of time series data from household surveys to establish a base trend line

(Esri, 2013).


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TABLE 4: DEMOGRAPHIC PROFILE IN MARKETS

Charlotte Greenville Winston-Salem

Population 2013 Est. Population 2,302,347 850,047 650,711

2018 Est. Population 2,465,303 893,643 669,585

2013-2018 Annual Rate 1.38% 1.01% 0.57%

Income 2013 Median HHI $50,909 $43,225 $43,942

2018 Median HHI $58,008 $51,871 $52,529

2013 Avg. HHI $71,376 $60,444 $60,869

2018 Avg. HHI $82,844 $71,217 $69,870

2013 Average Disposable

Income

$52,902 $47,585 $46,374

2013 Median Disposable

Income

$40,884 $36,827 $36,495

2013 HHI > $100,000/yr 19.3 % 14.3 % 14.1%

2018 Average HHI >

$100,000

22.6 % 17 % 16.9%

2013

Population

25+

High School Graduate 25.7% 29.4% 31.5%

by Educational

Attainment

Some College, No Degree 21.5% 19.5% 20.3%

Bachelors, Graduate, and

Professional Degree

30.3 % 25.5% 24.4%

Data Note: Disposable Income is after-tax household income. Disposable income forecasts are based on the Current

Population Survey, U.S. Census Bureau. Detail may not sum to totals due to rounding.

Data Note: Income reported for July 1, 2018 represents annual income for the preceding year, expressed in current

(2017) dollars, including an adjustment for inflation.

Income Source: U.S. Census Bureau, Census 2010 Summary File 1. Esri forecasts for 2013 and 2018.

Education Source: U.S. Census Bureau, Census 2010 Summary File 1. Esri forecasts for 2013 and 2018. Esri converted

Census 2000 data into 2010 geography.


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The Charlotte MSA ranks well above Greenville and Winston Salem as a suitable market

for sustaining creative industries. The presence of households making over $100,000 a year

was identified as an important factor in a sustainable market for artists, and the Charlotte MSA

leads the other market areas in current (19.3%) and future estimates (22.8%). Charlotte’s

population growth was estimated at 1.38% by Esri’s growth forecast, which was higher than the

other market areas. Additionally, the educational attainment levels in the Charlotte MSA were

higher than Greenville and Winston-Salem.

MARKET PENETRATION

To assess the current demand for an artist-studio in the Charlotte market, the number

of studios per creative employee is assessed in each market area MSA. The closest measure of

the number of artists within a given MSA was the number of employed independent artist,

writers, and performers reported to the US Census Bureau in 2011 (Table 5). The number of

creative employees and total population is compared with the total number of studio rentals in

each market area, revealing far Charlotte exceeds the average for numbers of creative

employees and total population per studio rental facility. The average is approximately 22

creative employees per studio rental facility and 394,764 total people per studio rental facility.

If the proportion of Charlotte’s artist-studio facilities matched the average of those in the three

market areas, according to the number of creative employees, Charlotte would have the

capacity for 7 studio facilities, and according to the total population, Charlotte would be able

to hold 6 studio facilities.

TABLE 5: MARKET PENETRATION COMPARISONS

Charlotte Greenville Winston Avg.

Total # Studio Competitors (2013) 4 3 2

Total # Independent artists, writers,

and performers (2010)

156 20 38

Estimated Total Population (2010) 1,795,472 647,401 482,025

Number of independent artists,

writers, and performers per Studio

Competitors (2010)

39 7 19 22

2013 Estimated Population (Esri) 2,302,347 850,047 650,711

Number of Total Population per Studio

(2013)

575,587 283,349 325,355 394,764

Source: US Census Bureau 2011 Non-employer Statistics and MSA Business Patterns


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CHARLOTTE GROWTH FORECAST

Given Esri’s growth projection for the total population in the Charlotte, there is the

availability for two additional studio facilities within the Charlotte Market (Table 6). However,

when considering the population per number of individual studio rentals within each unit, the

Charlotte Market can only sustain five more individual studio rental spaces in 2018. Given that

all of the available studio rentals in the Charlotte market are currently at full capacity with wait-

lists that range from a few months to two to three years, it is plausible to assume that the

capacity for individual rentals has not been currently met. Unfortunately, the number of

individual rental units within each studio facility in the alternate market areas was not available

to find an average saturation rate for units per population.

TABLE 6: CHARLOTTE GROWTH FORECAST

Total

Population

Number of

People per

Studio

Avg. # of

People Per

Studio in 3

MA’s

Avg. Capacity

for Studio-

Facility per

Person

# of Studio

Units in

Facility

Population per # of

Individual Studio

Rentals

2013 2,302,347 575,587 394,764 6 68 33,858

2018 2,465,303 616,323 6 73


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TRADE AREA ANALYSIS CHARLOTTE TRADE AREA

The trade area of my proposed site is located in the southwest portion of Charlotte’s city

center, spanning along the I-77 corridor from I-485 to Statesville Road. It primarily

encompasses Uptown Charlotte, Wilmore, Dilworth, and SouthEnd (Map 8). The existing

warehouses and industrial spaces stretching from South Blvd to I-77 have slowly been

converted into spaces with alternative uses. Tremont Music Hall, a few blocks from the studio

site was an industrial building converted into a music venue. Other industrial building and mills

have been converted into retail spaces, restaurants, offices, and upscale residential spaces.

There are several popular methods used to delineate trade areas. Gravity modeling is

one method that is often accurate, but is not sufficient for determining the trade area of the

given site because it assumes that no physical, social or information barriers exist. The space

filling approach is another common method of trade area delineation. This approach assumes

a rational firm does not intend to cannibalize its own sales, therefore its trade area is half the

distance between similar firms. The Space Filling approach is not a sufficient method of

measuring the trade area of an artist-studio rental property because of the benefits of

agglomeration in artist communities. Drive-time analysis factors in the average amount of time

to commute to a given location. For the purpose of this study, it is a suitable method of

assessing the trade area of artist studio rentals because these locations need to be relatively

easy to access by car or public transportation. The trade area is based from a seven minute

drive time model provided by TAS Online.

The Wilmore and SouthEnd neighborhoods lie within the site’s trade area, and play a key

role in the selection of this site. Southern Living Magazine recently listed Wilmore/SouthEnd in

the top ten “comeback” neighborhoods in the south. The growth of SouthEnd and proximity to

downtown facilitated the appeal of restoring and developing the once dilapidated Wilmore

neighborhood. The Historic SouthEnd neighborhood self-proclaims it is “where retro mixes

with contemporary, historical bumps up against trendy, and art intersects commerce, resulting

in a pulsing, vibrant neighborhood in the city with meteoric growth.” Historic SouthEnd hosts a

monthly gallery crawl featuring several notable galleries and the one competitor in the trade

area, the Charlotte Arts League. In addition, it is home to many of Charlotte’s most popular

restaurants and bars, and hosts a weekly gathering of Charlotte’s food-trucks

(Historicsouthend.com, 2014). The presence of growing prosperity, the cultivation of cultural

activity, and the recent development initiatives in the surrounding trade area provide a

favorable environment for artist communities and creative development.


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MAP 8: SITE TRADE AREA

Source: TAS Online

TRADE AREA COMPETITION

A direct competitor is a large-scale, artist studio rental property that also provides an

area or gallery for the public to view art. Indirect competition includes other art galleries,

museums, and artist studios within the trade area. Because of the nature of the art industry,

proximity to other artist studios, galleries, nightlife, restaurants, and other cultural activities is

essential. The only direct competitor within this trade area is the Charlotte Arts League in

Historic SouthEnd.


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TRADE AREA DEMAND

Demand within the trade area may be measured by a few different variables. These

include the number of artists per available studio space, education attainment levels within the

trade area, disposable income per capita, and average household income within the trade area.

Disposable income per capita is a large indicator of demand for arts: Disposable income is

affected by changes in real GDP growth, interest and tax rates, employment levels and the

household savings rate (IBIS World, 2013). The same growth forecast provided by Esri for the

market area is applied to the trade area analysis. As indicated in Table 7, the site’s trade area

is composed of a growing population, with growing income, and high educational attainment

rates.

ALTERNATE TRADE AREAS

Two alternative trade areas have been identified within close range of Uptown Charlotte.

They are NoDa and Plaza Midwood. These trade areas were selected due to their proximity to

the city center, their diverse residents, and their reputation for being creative, bohemian

districts in Charlotte.

NoDa, centered around the intersection of North Davidson St. and 36th street, was a

prominent neighborhood for Charlotte’s artist and gallery spaces from the late 1990’s through

2011 (Map 9). The neighborhood is described as “Charlotte’s historic arts and entertainment

district – a neighborhood where the people are as diverse as the art, live music, craft beers,

restaurants, custom gifts and tattoos you will find here. NoDa is dedicated to promoting the

arts, living eco-friendly lifestyles, supporting small businesses, encouraging diversity and

aiding fellow charities” (Noda.org). A bi-monthly gallery-crawl was hosted here for almost a

decade, but gentrification has forced resident artists to the outskirts of this neighborhood, as

previously mentioned.

Plaza Midwood is a Charlotte neighborhood known for its bohemian atmosphere and

unique restaurants, bars, shopping, and music venues (Map 9). “The Plaza Midwood business

district features an exciting blend of antique and consignment stores and art galleries. Boutique

shops offer unique clothing and home furnishings and accessories. Locally-owned restaurants

give diners the choice of everything from Southern home-style cooking to authentic ethnic

cuisine” (plazamidwood.org). This neighborhood is also planning a gallery crawl among the

shops, galleries, and restaurants that feature artwork.


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MAP 9: THREE TRADE AREAS

Source: TAS Online

Each of the trade areas are favorable due to projected growth rates, however Plaza

Midwood has a higher rate of growth in median house hold income for 2018. NoDa has a higher

projected population growth, in part due to proposed development, but the average income in

NoDa is still below the other two trade areas. Though Plaza Midwood ranks slightly above the

site trade area, the site’s trade area is favorable overall, with high-levels of educational

attainment, households making over $100k a year, disposable income, and income growth

projections for 2018 (Table 7). The rise in income and population growth in Plaza Midwood

may also be an indication of an unfavorable environment for artists, due to a decline in

affordability as this location increases in wealth and popularity.


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TABLE 7: ALTERNATE TRADE AREA CHARACTERISTICS

SUBJECT TRADE

AREA

NODA PLAZA MIDWOOD

POPULATION 2013 62,935 53,078 76,013

2018

68,081 57,620 81,417

TRENDS:

2013 - 2018

ANNUAL RATE

Population 1.58% 1.66% 1.38%

Median

Household

Income

4.27% 3.22% 4.43%

HOUSEHOLDS

BY INCOME

Average

Household

Income (2013)

$65,930 $51,519 $70,668

Average

Household

Income (2018)

$76,424 $57,333 $81,893

Median

Household

Income (2013)

$37,812 $32,974 $40,460

Median

Household

Income (2018)

$46,614 $38,636 $50,257

$100,000 +

(2013)

16.8% 10.1% 18.4%

DISPOSABLE

INCOME

Average

Disposable

Income (2013)

$47,390 $39,268 $50,151

EDUCATIONAL

ATTAINMENT

25+ (2013)

High School 20.1% 24.9% 19.3%

Bachelors and

Professional

Degrees

40.5% 26.8% 42.8%

Source: STDB and Esri


23

TABLE 8: TRADE AREA LIFESTYLE TAPESTRY

Site Metro Renters 31.9% Metro City Edge 21.34% Metropolitans 10.33%

NoDa Inner City Tenants 24.36% Metro renters 15.21 Metropolitans 10.32%

Plaza Midwood Metro Renters 33.49 % Great Expectations 13.33 % Inner City Tenants 12.98 %

Metro Renters

Young, educated singles, residents of Metro Renters neighborhoods are just beginning their professional careers in some of the largest U.S. cities such as New York, Chicago, and Los Angeles. Residents will sometimes share housing with a roommate to help defray the cost of their high rent. Households are either single person or shared. The median age of 32.1 years is younger than the U.S. median of 37.3 years. Approximately 30 percent are in their 20s; 14 percent are in their early 30s. This younger population is also more diverse than the U.S. population. Median household income is $49,852.

Inner City Tenants

: Inner City Tenants residents are a microcosm of urban diversity; their population is represented primarily by white, black, and Hispanic cultures. This multicultural market is younger than average, with a median age of 28.9 years. Household types are mixed; 34 percent are singles, 28 percent are married-couple families, 21 percent are single parents, and 10 percent share housing. Turnover is high in these neighborhoods because many are enrolled in nearby colleges and work part-time. These neighborhoods have an annual population growth of 0.46 percent.

Great Expectations

Young singles who live alone and married-couple families dominate the Great Expectations market, although all household types are represented. The median age is 33.2 years. Some residents are just beginning their careers or family lives. Compared to the U.S. figures, this segment has a higher proportion of residents who are in their 20s and a higher proportion of householders younger than 35 years. The median household income of $33,993 is lower than the US median. Nearly half of the population aged 25 years and older has some postsecondary education; 18 percent hold a bachelor’s or graduate degree.

Metro City Edge

Married couples, single parents, and multigenerational families are the household types found in Metro City Edge neighborhoods. The median age of this segment is 31 years because of the children, including adult children who still live at home. The average family size of 3.5 is slightly higher than the U.S. average. Seventy-two percent of the residents are black; 17.3 percent are white; and 4 percent are American Indian—four times the U.S. level. The median household income for this segment is $27,875.

Metropolitans Residents of Metropolitans communities prefer to live in older city neighborhoods. Approximately half of these households are singles who live alone or with others; 40 percent are married-couple families. One in four of the residents is aged 20–34 years; the median age is 37.1 years. Most of the population is white. Half of the residents who are employed work in professional or managerial positions. More than 77 percent of the population aged 25 years and older have attended college or completed a degree program. Thirty percent have earned a bachelor’s degree, and 22 percent hold a graduate degree. The median household income is $54,926.

Data Note: This report identifies neighborhood segments in the area. The index is a comparison of the percent of households or

population in the area, by Tapestry segment, to the percent of households or population in the United States, by segment. An

index of 100 is the US average. Source: Esri.


24

One final comparison among the trade areas was completed using Esri’s Lifestyle

Tapestry Segmentation report (Table 8). Segmentation explains customer diversity, describes

lifestyle and life-stages, and incorporates a wide range of data. Esri implements a large, well-

selected array of attributes to capture this diversity with the most powerful data available. Data

sources include Census 2000; Census 2010; the American Community Survey; Esri's

demographic updates; Experian's INSOURCESM consumer database; and consumer surveys,

such as the Survey of the American Consumer from GfK MRI, to capture the subtlety and

vibrancy of the US marketplace The selection process draws on Esri's experience in working

with the 1980, 1990, and 2000 censuses and includes a range of multivariate statistical

methods, in addition to factor analysis, principal components analysis, correlation matrices,

and graphic methods (Esri Tapestry Segmentation Methodology, 2013).

The top three lifestyle types and their profile for each trade area are listed in Table 8.

The site’s trade area and Plaza Midwood are most highly represented by “Metro Renters,” which

is also an indication of being favorable environments for creative communities. “Metro Renters”

are younger, highly educated, and more diverse than the rest of the US Population (Esri, 2013).

Diversity is an additional cultural vibrancy indicator according ArtPlace America. In addition,

locations closer to the city center with younger populations and cultural diversity are favorable

for artists because these factors act to stimulate creativity and create an environment for an

alternative lifestyles not found in outlying suburban areas (Ley, 2003).


25

SITE ANALYSIS SITE CHARACTERISTICS

The site is located at 2213 Toomey Ave in Charlotte, NC in the 28203 zip-code in an

industrial and warehouse district just south of Charlotte’s CBD. The residential Wilmore

neighborhood, is directly adjacent to the north of the site. To the west is I-77, which acts as a

boundary to the industrial and warehouse district. The building was constructed in 1969, and

has since been used as a warehouse for trucking supplies. Of the 29,925 square foot building

currently owned by Truck Equipment Manufacturing Co, 26,682 square feet is used as a

warehouse and the remaining 3,243 square feet is used for office space that may potentially

be converted into studio units.

The site features 50 parking spaces and excess land for outdoor storage on a 2.09 acre

lot (CIMLS). The excess land may be used as a community garden and picnic area for artists

and visitors. According to Polaris, the site is not located in a FEMA Flood zone (Map 10).

MAP 10: FEMA FLOOD ZONE PANEL # 3710454300K


26

IMAGE 2: AERIAL VIEW OF SUBJECT SITE

Source: CoStar, 2014

IMAGE 3: AERIAL MAP OF SITE

Source: CoStar, 2014


27

ZONING

The site is zoned I-1. Allowable uses include: studios for artists, designers,

photographers, musicians, sculptors, gymnasts, potters, wood and leather craftsmen, glass

blowers, weavers, silversmiths, and designers of ornamental and precious jewelry; and Retail

establishments, shopping centers, and business, personal, and recreational services, up to

70,000 square feet. The parcels surrounding the subject are primarily zoned I-1, I-2, and

various residential and mixed use zoning types (Map 11).

MAP 11: ADJACENT ZONING

Source: Mecklenburg County GIS


28

ACCESSIBILITY AND TRANSPORTATION

According to WalkScore.com, the site has a Walk Score of 66 out of 100. This location is

considered “somewhat walkable” so some errands can be accomplished on foot. The Hart

Witzen Gallery has a walk-score of 78, Charlotte Arts League has a walk-score of 86, the York

County Arts Council’s score is 72, and the X-Foundation has a walk-score of 63. Nearby parks

include Abbott Park, Revolution Park and Clark Griffith Park. The Charlotte-Douglas

International Airport is within 6 miles of the site, and the LYNX Blue Line is within walking

distance, as well multiple bus stops located on North Tryon Street (Table 8).

TABLE 8: TRANSPORTATION AND WALK-TIME

Travel Time Distance

Airport Charlotte-Douglas Airport 13 min drive time 5.6 miles

Light Rail East/West (LYNX Blue lines) 13 minute walk

New Bern (LYNX Blue line) 17 minute walk

Source: CoStar

MAP 12: SURROUNDING AMENITIES


29

ALTERNATE SITES

Two similar sites were selected in proximity to the proposed site to assess the overall

quality of the proposed site location (Tables 9 & 10). The site of the proposed studios ranked

last among the comparable sites. This is impart due to the location of the site. The alternative

sites were closer to transportation and to the heart of Historic SouthEnd, however these sites

have significantly higher appraisal value and less space available.

The neighborhood’s reaction to the sites was not a factor considered in the comparison

because it would be viewed as favorable for each location. This is due, in part, to the trends of

converting industrial spaces for other uses in the surroundings of this area. Additionally, adding

creative space offers economic and cultural opportunities in the SouthEnd/Wilmore

neighborhoods.

IMAGE 4: SITE 1 LOCATED AT 222 RAMPART ST

Image Source: Polaris

IMAGE 5: SITE 2 LOCATED AT 3115 GRIFFITH ST

Image Source: Polaris


30

TABLE 9: ATTRACTIVENESS MATRIX

PROXIMITY TO

ENTERTAINMENT

AVAILABLE

SPACE

SURROUNDING

ENVIRONMENT

TRANSIT

ACCESS

ZONING WALK

SCORE

BUILDING

CONDITION

PRICE TOTAL

Subject 5 10 6 6 10 6 7 8 52

Site 1 4 8 7 8 8 5 7 9 56

Site 2 7 7 8 9 10 8 9 0 58

TABLE 10: ALTERNATE SITE COMPARABLES

Subject Site 1 Site 2

Acres 2.09 1.03 1

Total SF 29,925 27,180 24,582

Type Warehouse Warehouse Warehouse

Year Built 1969 1964 1959

Appraisal (2011) $307,000 $789,500 $1,262,400

Sale Price $725,000 $595,000 $2,550,000

Zoning I-1 I-2 (CD) I-2

Walk Score 66 52 82

Source: Polaris and Walkscore.com


31

FINANCIAL ANALYSIS This section evaluates the financial feasibility of the project. The property value is

assessed by recent sales of similar properties within close rage of the site. One of the most

important factors in the feasibility of this project is maintaining affordability for the rental units.

Often, artist-developers invest in the creation of creative spaces to address the immediate

needs of the surrounding community and artist peers, as well as creating a facility to for their

own production. For this reason, the profits from developing a creative studio-space

community may be undermined by the gains in networking and public-recognition for the

individual or group of artist-developers (Walker, 2007).

Financing options for creating affordable artist studios are numerous and complex.

Studio spaces may be leveraged as a means of economic development for the city and

surrounding community. Donations by individuals and investors may be acquired by campaigns

sponsored by developers promoting community development. Funding from local, state, and

national CDC’s (Community Development Corporations) with creative initiatives may be

acquired for such projects (Walker, 2007). One such organization in Charlotte is the Arts and

Science Council which is dedicated to the creation of a strong cultural environment in the city.

In addition, creation of artist spaces in the SouthEnd and Wilmore neighborhoods further

reinforces local efforts to create a positive image of this area.

NET INCOME FIGURE

The overall net income is evaluated with consideration of low-range and high-range

renovation cost estimates, occupancy rates and rent from studio units, operating expenses,

and the cost of debt services. All of these factors are evaluated over a five-year time period.

ACQUISITION AND CONSTRUCTION COSTS

Estimating the costs of renovation and conversion of the existing warehouse into

individual studio rental units is challenging. Factors such as zoning, building-codes, and design

must be considered in effectively estimating the cost, however some of the most experienced

contractors face challenges in making these evaluations. Fortunately, the existing zoning

allows for office and studio rentals.


32

Property acquisition and renovation costs are shown in Table 11. Hard renovation costs

including plumbing, interior and exterior refitting, and electricity are estimated individually in

the low-range estimate. The property sale price is also reduced $25,000 from the current

asking price in the low-range estimate. The property asking price and half the estimated cost

of construction for a similar warehouse as indicated by RS Means are summed to determine the

high-range estimate for acquisition and renovations. The total cost of the property and

renovation with the low-range estimate is $1,109,625 and the total cost of the high-range

estimate is $1,784,250, roughly a $700,000 pricing difference.

TABLE 11: PROPERTY ACQUISITION AND RENOVATION ESTIMATES Price Per SF Low-Range

Estimates High-Range

Estimates

Property Sale Price $700,000 Property Sale Price $725,000

Renovations Estimated Cost Of Construction (RS MEANS)

Plumbing $40,000 $2,118,500.00/2 $1,059,250

Interior-Refitting $90,000

Electricity $5/SF $149,625

Exterior-Refitting $1/SF $30,000

Parking and landscape $100,000

Total Cost $1,109,625 $1,784,250

ESTIMATED REVENUE

The typical in the Charlotte Market is approximately $1 rent per square foot. In an

attempt to remain competitive in the Charlotte market, the proposed studio facility offers four

different sized studios, available for one-year leases, below market rate (Table 12). Given the

pricing structure, the maximum yearly income at capacity will be $208,200. Table 13 displays

a modest estimate of the five year annual income projection assuming a growth in occupancy

of the studio units over time with increased exposure to the market, increases in favorable

market characteristics, and the growing artist population in the area.


33

TABLE 12: UNIT SIZE AND PRICING STRUCTURE

Studio Type Individual

Studio Sizes

# of Rental

Units

Total SF Rent Total

Small 300 SF 22 6600 $275/month $6,050

Medium 500 SF 12 6000 $450/month $5,400

Large 1000 SF 5 5000 $800/month $4,000

Extra Large 1500 SF 2 3000 $950/month $1,900

Total 41 20,600 $17,350

Maximum Income Potential $208,200

TABLE 13: 5 YEAR ANNUAL INCOME PROJECTION

Year Small

Unit

$275

Medium

Unit

$450

Large

Unit

$800

X Large

Unit

$950

Total

Monthly

Income

Total Annual

Income From

Rent

Annual

Gallery

Sales

Annual

Gallery

Income

Total

Annual

Income

2014 12 5 2 1 $8,100 $97,200 $5,000 $1,500 $98,700

2015 20 5 2 1 $10,300 $123,600 $8,000 $2,400 $126,000

2016 20 8 4 2 $14,200 $170,400 $10,00 $3,000 $173,400

2017 21 11 4 2 $15,825 $189,900 $12,000 $3,600 $193,500

2018 22 12 5 2 $17,350 $208,200 $14,000 $4,200 $212,400

ANNUAL OPERATING EXPENSES

Operating costs tend to be quite low, are variable depending on utilities use, and

typically are paid by individual unit occupants. Rough estimates of electricity, water, building

maintenance, and a management fee are all considered (Table 14). The management fee is

estimated at $18,000/year assuming management works roughly 20 to 30 hours per week

earning $1,500/month.

TABLE 14: ANNUAL OPERATING COST ESTIMATES

Water Heat/Electricity Building

Maintenance

Management Fee Total

$2,400 $12,000 $35,000 $18,000 $67,400

COST OF CAPITAL

The cost of capital for low- and high-range estimates is considered with a 4% interest

rate and a 25% down payment for a 30 year mortgage (Table 15). The annual cost of debt

services for the low-range estimate is $47,676 and is $76,656 for the high-range estimate.


34

TABLE 15: DEBT SERVICES SUMMARY

Low Estimate High Estimate

25 % Down Payment $277,406.25 $446,062.5

Remaining $832,218.75 $1,338,187.50

Annual Debt Service $47,676 $76,656

After 5 Years $749,787 $1,205,640

FIVE YEAR CASH FLOW ANALYSIS

The five year cash flow estimates are calculated with both property acquisition and

renovation scenarios (Table 16 & Table 17). The estimated revenue, taxes, loan payment, and

operating expenses are all considered. The tax estimates are based on the current city and

county tax-rate for the property, which is 1.3012%. The total cumulative profit over five years

is $174,475 for the low estimate, however, due to the increased debt payment and tax rate,

cumulative profit is -$3,342 for the high estimate.

TABLE 16: FIVE YEAR CASH FLOW: LOW RENOVATION ESTIMATE

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue $98,700 $126,000 $173,400 $193,500 $212,400

Taxes -$10,828.83 -$10,828.83 -$10,828.83 -$10,828.83 -$10,828.83

Loan

Payment

-$47,676 -$47,676 -$47,676 -$47,676 -$47,676

Operating

Expenses

-$67,400 -$67,400 -$67,400 -$67,400 -$67,400

Profit -$27,204.83 $95.17 $47,495.17 $67,595.17 $86,495.17

Cumulative

Profit

-$27,204.83 -$27,109.66 $20,385.51 $87,980.68 $174,475.85

TABLE 17: FIVE YEAR CASH FLOW HIGH RENOVATION ESTIMATE


Revenue $98,700 $126,000 $173,400 $193,500 $212,400

Taxes -$17,412.50 -$17,412.50 -$17,412.50 -$17,412.50 -$17,412.50

Loan

Payment

-$76,656 -$76,656 -$76,656 -$76,656 -$76,656

Operating

Expenses

-$67,400 -$67,400 -$67,400 -$67,400 -$67,400

Profit -$62,768.50 -$35,468.50 $11,931.50 $32,031.50 $50,931.50

Cumulative

Profit

-$62,768.50 -$98,237 -$86,305.50 -$54,274 -$3,342.50


35

RETURN ON INVESTMENT

The return on investment is evaluated with low-range and high-range estimated

renovation costs with no land appreciation and 2% land appreciation (Table 18 & Table 19). The

ROI’s were evaluated based on the risk-free rate of return. Each scenario reveals a favorable

annual return on investment. The most favorable ROI is the low renovation estimate with 2%

land appreciation returning a 42% annual compounded ROI. The least favorable ROI is returned

by the high renovation estimate with no land appreciation yielding a 16% annual compounded

ROI, however this is still favorable. Compared to other national and local financial investments,

the ROI for each scenario is also favorable. The annual yield on a 5- year CD in Charlotte is

0.49% APY and the average money market account in Charlotte is 0.04% APY. The national

average for a 5-year CD is 0.73% APY and the national average for money market accounts is

0.07% APY (Gower, 2014).

TABLE 18: RETURN ON INVESTMENT WITH NO LAND APPRECIATION


Sale Price $1,109,625.00 $1,784,250.00

5% Sales Commission -$55,481.25 -$89,213.50

Loan Balance -$749,787.00 -$1,338,187.50

Net Profit from Sale $304,356.75 $356,850.00

5 Year ROI 173% 79%

Annual compounded ROI 34.5% 15.9%

TABLE 19: RETURN ON INVESTMENT WITH 2% LAND APPRECIATION


Sale Price $1,225,116.00 $1,931,330.00

5% Sales Commission -$61,256.00 -$96,567.00

Loan Balance -$749,787.00 -$1,338,187.50

Net Profit from Sale $414,073.00 $496,575.50

5 Year ROI 212% 111%

Annual compounded ROI 42% 22%


36

STATEMENT OF FEASIBILITY

Development of the proposed artist studio rentals and gallery space is viable based upon

the evaluations provided in the feasibility analysis. The Charlotte market and the site trade

area‘s economic, demographic, and cultural characteristics provide an optimal location and

sufficient demand for artists. There are potential issues and additional strengths that may

impact the feasibility of the project not mentioned in the previous analysis. A sensitivity analysis

is conducted to better assess risks involved with this project proposal.

Additional factors associated with the site’s surroundings that may create challenges to

the project were not previously mentioned. Some of the residential areas immediately

surrounding the site have high crime rates, poor housing quality, and high rates of poverty. In

addition, the relatively low walkability score may hinder access for some potential customers.

Additionally, issues of affordability may arise due to rising income, demand for housing, and

cost of living in the adjacent Historic SouthEnd and Wilmore neighborhoods. Though high rates

of income help foster creative industries, increases in affordable housing and amenities may

be an obstacle to attracting artists to the location.

There are additional factors not addressed in the feasibility analysis that may enhance

opportunities for the proposed site development. The LYNX Blue Line Extension of the Charlotte

light rail scheduled to begin operating in 2017 can potentially create extensive opportunities

for the project. The extension will connect the site to Uptown Charlotte, NoDa, and UNC

Charlotte, making it easier for customers to access this location from school, work, and other

creative districts in Charlotte. Also, there is potential for increased volume of gallery visitors

from the extension.

Another factor that may contribute to the project’s success is the potential for similar

creative development in sites surrounding the project’s location. There is still a number of

industrial buildings, warehouses, and vacant sites that could eventually be converted into

creative spaces, lofts, and galleries. Artist communities thrive in environments that allow for

organic, creative-development promoted by the availability of affordable space and potential

for additional creative development opportunities.

The last factor not previously addressed that may enhance the project’s success is the

availability of a variety of opportunities to offset costs. The project may fit requirements to

receive funding and grants from local and national programs that encourage creative-

development, cultural initiatives, and the arts. In addition, “if public policy declares that projects


37

like these merit public investments, outright subsidies that pay for the uneconomical portions

of projects can allow them to go forward” (Walker, 2007).

Cost reductions and increased revenue may be sourced in-house, as well. There is

potential to utilize excess land and building space and unoccupied units in the property for

event rentals such as weddings, workshops, private parties, and performances. The use of

“sweat-equity” by investors and tenants in the initial renovations and building maintenance

may offset costs. Examples of using “sweat-equity” include having the artist-investors or

potential tenants be responsible for painting walls, finishing floors, removing debris,

landscaping duties, and other light renovations for discounted rental rates. Also, this could be

implemented by requiring some form of shared maintenance responsibilities for renters, such

as cleaning or landscaping, to help maintain affordable rental rates.

RISK ASSESSMENT

Despite the feasibility of the proposed project, there are a number of various risks and

potential disruptions associated with this project. These are a few potential challenges to the

feasibility of this project. Unforeseen changes in market demand for artist studios may disrupt

the studio’s projected annual income. Changes in demand may result from lower population

and income growth rates than predicted that may be caused by a slow economic recovery in

the region. In addition, increasing the number of artist studio rentals in the next five years may

exceed the market demand. This is especially risky given the shortage of information necessary

to estimate the market saturation rates for studio-rental units.

Though the annual income projection for the studio was conservative, it may be too

optimistic. This may be due to challenges in advertising the available spaces, lower gallery

sales, or inadequate amenities. There are potential difficulties reaching the target market—

studio artists-- given the site’s distance from other art-related facilities and a weak artist-

network in the trade area.

There may be limited capital and human resources necessary to support the proposed

investment. The amount of capital required for a down-payment in both scenarios is relatively

large for an individual or small group of artist-investors. Outside funding from grants or

development by a commercial firm may be necessary to generate appropriate funding. The

estimated costs of renovation and operating expenses may be too low and/or the total

development costs go above the market value of the project after completion.


38

SENSITIVITY ANALYSIS

Two scenarios are evaluated that would reverse the feasibility of the project. The first

scenario is used to illustrate the importance of a attaining a low interest rate on a mortgage

with a sizable down payment, and the significance of slight increases in operating expenses.

Table 20 demonstrates the financial outcome if interest rates on a thirty-year mortgage were

increased to 8%, with a 15% down payment of $180,846, and slightly higher operating expenses

of $80,000 per year using the high acquisition estimate. The cumulative profit after five years

is -$317,761, which exceeds the net profit from sale ($276,636.50).

The second scenario illustrates the unfavorable results from increases in the operating

expenses and total acquisitions and renovation costs. This scenario assumes total cost of

acquisition and renovation is $2 million with a 30 year mortgages with 6% interest and 20%

down ($400,000). Operating expenses are increased to $125,000 per year. Again, the total

cumulative profit after five years (-$500,665) does not exceed the net profit from sale, which

is $300k.

TABLE 20: ALTERNATE SCENARIO 1


Revenue $98,700.00 $126,000.00 $173,400.00 $193,500.00 $212,400.00

Taxes -$18,456.22 -$18,456.22 -$18,456.22 -$18,456.22 -$18,456.22

Loan Payment -$124,896.00 -$124,896.00 -$124,896.00 -$124,896.00 -$124,896.00

Operating

Expenses

-$80,000.00 -$80,000.00 -$80,000.00 -$80,000.00 -$80,000.00

Profit -$124,652.22 -$97,352.22 -$49,952.22 -$29,852.22 -$10,952.22

Cumulative Profit -$124,652.22 -$222,004.44 -$271,956.66 -$301,808.88 -$312,761.10

High Estimate

Sale Price $1,784,250.00

5% Sales Commission -$89,213.50

Loan Balance -$1,418,400.00

Net Profit from Sale $276,636.50


39

TABLE 21: ALTERNATE SCENARIO 2


Revenue $98,700 $126,000 $173,400 $193,500 $212,400

Taxes -$20,819 -$18,456.22 -$18,456.22 -$18,456.22 -$18,456.22

Loan

Payment

-$115,114 -$124,896 -$124,896 -$124,896 -$124,896

Operating

Expenses

-$125,000 -$125,000 -$125,000 -$125,000 -$125,000

Profit -$162,233 -$134,933 -$87,533 -$67,433 -$48,533

Cumulative

Profit

-$162,233 -$297,166 -$384,699 -$452,132 -$500,665

High Estimate

Sale Price $2,000,000

5% Sales Commission -$100,000

Loan Balance -$1,600,000

Net Profit from Sale $300,000

CONCLUSION

There are a few factors that key to ensuring the success of this project. Reduction of the

costs of renovation and acquisition of the property is essential. There are a variety of ways this

may be accomplished if the developers and investors are resourceful. Maximizing the amount

of capital invested upfront and a attaining a low mortgage rate will also ensure the feasibility

of this project. Once the facility is operating, diversifying methods of revenue production in

addition to individual studio-leases—through event rentals, gallery sales, etc.--will also

increase the profitability of the project.

Effectively marketing the studio facility is another essential component of its success.

These types of projects do not require the same type of marketing strategies used for leasing

office-spaces or residential units because artists’ locational decisions are influenced by factors

that deviate from a majority of the population. Marketing strategies must accommodate the

following concepts: 1) artists are more likely to be attracted to community-based, grass-roots

organizations than to highly commercialized spaces due to the perceived loss of “authenticity”

in these types of locations; 2) artist are drawn to networking opportunities via exposure to

other artists, galleries, and visitors; 3) contemporary artists are attracted to diverse settings,

so marketing to artists of various ages, cultures, experience-levels, and media will help

establish a customer-base that will attract additional artists in the future; and 4) marketing


40

artist studio space is most effective through personal, informal networks such as community

blogs, social media, and word-of-mouth within local creative communities. Promoting the

studio spaces to art programs in nearby colleges in universities to students and professors is

one way to attract potential tenants. Advertising in locations such as local art-supply stores,

coffee-shops, alternative music venues, theaters, and art-related events are additional

examples of appropriate venues for marketing for this type of facility.


41

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APPENDIX SELF-ASSESSMENT

Though a significant amount of time, research, and attention to detail were invested in

this study, additional investigation and resources would have strengthened this feasibility

report. Insufficient information on the local artist population, studios in the current and

alternative markets, and the cost of renovations and operations reduced the accuracy of this

feasibility study. In addition to insufficient data, my inexperience and lack of exposure to this

type of project created some challenges. The following elements are those that I feel would

have strengthened this report:

A means of finding a more accurate measure of the number of artists in a given location

would have assisted measuring the supply and demand for studios in the market area.

Financial information, such as operating expenses, construction/renovation costs, and

revenue from similar facilities in the market would have helped estimate these expenses

for my own project and determine an estimation of potential revenue.

More information on rentals in the Charlotte and alternate market areas, including the

number of units, square footage, and rental rates would have be applied to find a more

accurate saturation rate.

Taking a physical tour of the proposed site and getting a professional estimation of the

costs of this project would have significantly aided the financial analysis.

More investigation on acquiring grants and financial aid for projects of this kind would

have also benefited the financial analysis of this proposal.

Assessing the feasibility of this project as a non-profit establishment and exploring

different funding opportunities and local incentives for creative development would offer

an alternative way of implementing this project.

Overall, I believe I was successful in creating a reliable, objective assessment of this project

given the available information.

wilmore studios feasibility morgan hamer

Documents

art studios

local artists

independent artists

outside artists

individual studios

gallery visitors

fine art galleries

resident artists work