A Steel Fabrication Plant from the Past Still Shines
A Diamond in the Rough
a riveting past
The first steel mill in Chicago, the North Chicago Rolling Mill Company, opened in 1857. As time went on, more and more steel mills sprouted up throughout the Chicago MSA. Chicago’s steel industry grew in large part due to access to waterways and an abundant labor pool. The Great Lakes and Calumet River/Chicago Inland Waterway System were used to transport raw materials in, and finished products out of the city. An interesting fact: by 1952, the greater Chicago area, including Gary, Indiana had produced more steel than all of Great Britain.
The manufacturing of steel involved loud, strenuous, dangerous working conditions, in large, crane-served buildings equipped with blast furnaces. At one time, these sites were the heart and soul of our nation. For the team at Argianas, we see these historic properties for the future opportunities they hold.
The Best Buildings aren’t always the shiniest
Old buildings might appear obsolete, remnant structures from a bygone era. However, we have the experience to understand and measure property values based upon their features and capabilities. In the case of an old steel mill, we looked at:
- access to rail, river barge terminal, and interstate highways
- heavy reinforced concrete floors
- overhead traveling bridge cranes (sometimes with as much as 500 ton lifting capacities)
- heavy power and water services
- blast furnaces
- 30-40′ ceiling heights
- air makeup systems needed for specialized production needs
- elevator-equipped loading docks
While these features might not appeal to all space users, a market remains for what the untrained see to be nothing but an old, rusted manufacturing plant.
Building components in historic industrial properties can include wood block floors, raised ceiling centerlines with rows of windows that provide natural light, and subfloor chambers that allow for conveyor belts and other specialty equipment. Although not current for all operations, some of these old buildings still offer significant functional utility not easily found in newer properties, more institutional in character. And for users that need these features, the reality of building new structures to meet these specifications is oftentimes cost prohibitive.
Not everyone wants or appreciates heavy industrial manufacturing properties in their backyard. However, for the reasons stated, there remains a demand for older products, even buildings 100+ years old.
functional, physical, and external obsolescence | an opportunity for all
The cost approach is primarily of value for a property that is newly constructed. As a property ages, the components begin to depreciate in utility and value. Even still, a good appraiser will assess the extent and degree to which a property’s functional, physical, and external obsolescence exist. In the case of a property we recently valued, the building’s exterior shell provided sufficient protection from the elements for the desirable interior features. There were large, open floorplates, in-building/drive-through railcar loading and unloading, and natural light considered a must by the occupant. These details, plus the complex’s industrial manufacturing location within a loud, heavy truck-trafficked area 24/7/365, are key demand features for which certain users are willing to pay a premium. Upon close inspection, we also noted the complex featured new roofs, solar panels, and heavy concrete surfaces outside to support container storage of product.
the present worth of an old steel plant | priceless
Older yet still functional properties can allow manufacturers to conserve their operating capital for production – this is important because real estate investment is not always a concern for industrial plant operators. While such properties appear rough around the edges, they can be a diamond in the rough. The team at Argianas took the time to disclose and qualify the unique qualities and characteristics of the subject and we explained why they added value.
No One argues with these taxes
Real estate taxes can be a contentious topic; however, the appraiser needs to consider a property’s situs within TIF and empowerment and opportunity/trade zones, which can result in significant real estate tax reductions. These economic incentives need to be considered in the valuation of all properties, especially those that, at first blush, appear to have little or no value.
value conclusions strong as steel
We take pride in the work we do and appreciate out-of-the-ordinary opportunities that come across our desks. In this case, we saw the value in the property brought before us that others did not. With clear explanations, we identified the property’s unique qualities. In the end, and with our valuation expertise, lender and bond financers were able to fund the manufacturer’s operations at levels that might not have been easily achieved otherwise.
Do you have a diamond in the rough? Are you looking for a team able to identify and understand its nuances? We welcome the opportunity and promise to bring our hard hats and steel-toed boots to the inspection. Give us a call at (630) 390-01113 or email us at [email protected]nas.com for more information on how Argianas can make a difference in your real estate valuation needs.