[Property Search] Open Thread for Discussion

During my final checklist and going over things with a fine-toothed comb on the Parmer/Metric property, I reviewed my notes from last year’s childcare center training. I had questions on zoning, and if a permit, or a certificate of occupancy would be required from the City of Austin (certificate of occupancy was mentioned during licensing orientation, and also from a peer who moved her in-home program offsite last year). After calling the city, they confirmed that the property is zoned LO (light office) which will allow for a daycare, however, based on the permit history, they had never obtained permits for a daycare. According to the city, although the current zoning allows for a daycare, in order to establish that use legally, there are permit requirements to change the use (this addresses building code, fire code, etc.) The process to get the permit is 2 steps, and I was ready to start it over spring break.

When our realtor brought this to the landlord’s attention, he and his broker insisted no other permits are required by the city, that it’s zoned LO. Our realtor asked his broker to forward the written ordinance, she said she would. An hour later, she called our realtor back to inform us the owner did not want to lease to us because we were raising an issue they say did not exist. Our realtor told them he would not, in good conscious, advise us not to do due diligence on any possible jurisdiction that might later show up and say we are in violation. The broker told our realtor, they had made up their minds. We were all shocked, and I, heartbroken.

Over spring break, we’ve been scouring the area for properties, and did come across a new prospect. There were children and staff present so I couldn’t take photos of the inside. We’re unsure about this one, but I thought I’d share the details below:

There’s a daycare at Lake Creek Village shopping center, the corner of 620 and Lake Creek Pkwy, about 1/4 mile west of Lakeline Mall on 620 (ironically, about one minute from our house, where the Roaster’s coffeehouse is). The space is 3500 sf and has an outdoor play area. The current tenant has been there over 10 years and is now marketing to WIC clients, and in the landlord’s words, “very low-end clientele”. Landlord is not fond of what they are doing, the current day care is really struggling, so they are now on a “month to month basis”. The landlord wants this to be a unique shopping center, not really a retail type shopping center, as several of the tenants appeal to more high-end clientele. It has some unique high-end businesses from downtown Austin like Vivo and Grapevine Salon.

The space is similar to the Parmer/Metric in that it needs major updating and cleaning, but the landlord is willing to do some finishing out as he wants his space updated. There are 6 (small) classrooms, with a restroom in 5 of them, a small kitchen, a middle gathering area, and a director’s office. Some of the rooms are small, so we talked about knocking some walls down on one side to make the classrooms bigger, and there is space for an Atelier.

The pros: the landlord is willing to do a couple months free rent since we won’t be able to bring in revenue until we’re licensed there (which takes about 2 months), and then offer reduced rent while we build our business; it’s been childcare for 10 years, so it’s already set up, and it’s roomy. Currently licensed for 80 kids, which translates to about 30-40 for us.

The cons: well, it’s in a shopping center, and they are definitely going to want a 5 year lease, with triple net and 3% increase each year. The base rent is reasonable, it's the triple net that adds to cost, and I’m not sure if I want to be locked into a shopping center for 5 years.

We sat down with the realtor, did some number crunching, and we all basically came to the realization, that we need more cash on hand in order to start out of a place like that. Since we’ve never looked at this type of property (shopping center) there were costs we weren’t aware of. (i.e. commercial electric deposit: $2000; signage $4500; letter of credit or min 3 months up front of rent; cash in reserves, etc). He’ll still tell the landlord we’re open to considering it, but will let him know we are not quite in the financial position to start out as big as the place is.

This week, my brother told me about this nature-esque property that he has driven by for months that he thought would be perfect for Terra Luz, it’s only 3 miles from my house on the way to Volente.  I drove by it, called on it, and it’s about to go under contract.

So, this is where we are now. What we need is an investor, or a business loan for what I’m trying to do, and the latter is extremely hard to come by right now with the economy.

We will continue aggressively on the search, but I want families to be aware of the shrinking timeline for our Terra Luz.

Warmest,
Andrea