By Celia Fernandez via CNBC Make It
When an abandoned high school in Homestead, Pennsylvania, was listed for sale in 2019, Jesse Wig saw an opportunity.
The sellers were asking for just $100,000.
The 34-year-old real estate agent bought the school and then reached out to a friend who connected him to Adam Colucci, a 35-year-old real estate investor and owner of an audio-video business.
“I was made aware of the school, and to be very honest, I wasn’t sure what made the most sense to do with the building,” Wig told CNBC Make It. “But for that price, I had to acquire it and hoped we could come up with a good option in the future.”
For two years, Wig and Colucci went back and forth on what to do with the structure. They considered a wedding venue, a beer garden, and even WeWork space.
“We had big eyes, and after two years of spinning our wheels, all the professionals told us that all roads lead to residential eventually,” Colucci said.
The two realized they needed help and connected with Dan Spanovich, a 41-year-old full-time developer and multifamily property manager.
“These old buildings can be very challenging to convert,” Spanovich said. “We were willing to take a risk regardless of what use we would have for it. We knew that at this cost, we would be able to find some use for it that would generate enough return to satisfy everybody.”
The former high school classrooms became new, modern apartments with in-unit washers and dryers, and the auditorium turned into a shared space. They also added a full gym with a half basketball court, weights, and Peloton bikes to the ground floor.
The professionals told us that all roads lead to residential eventually.Adam ColucciREAL ESTATE INVESTOR
The high school, which hadn’t been used for many years, was 50,000 square feet. With that much space, the three partners were hoping to get about 60 apartments.
In the end, they were left with only 25,000 square feet of leasable square footage due to the large hallways, staircases, gym, and auditorium, which amounted to 31 apartments.
Colucci added that it was important for them that the building retain some of the school’s elements. “We worked closely with the National Park Services to ensure it kept its historical significance,” he said. “We went out of our way to ensure the school kept its historical look.”
The partners received historic tax credits from the federal level and the state of Pennsylvania though they wouldn’t disclose the exact amount.
After purchasing the school in May 2019, construction on the building started at the beginning of 2020 and wrapped in October 2021.
Spanovich said rent in the building ended up at $1,400 a month for some 1-bedroom units and up to $1,650 for 2-bedroom units.
When it comes to sharing profits and expenses, Colucci said that he, Wig, and Spanovich split everything based on a proportional share of the building.
The partners are already on to their next projects
When Colucci learned that the school across the street from their property was for sale, it was already under contract with another investor.
“I told the guys that if that deal ever fell through, they needed to jump on buying the building,” he said.
That second school, purchased in August 2020, cost them $90,000.
But Spanovich said their experience with this school has been very different. The first property needed to be renovated entirely.
The second one did not, but it did look like a haunted house.
“When the buildings look nice, you got a lot of people bidding on them, so you almost want them to look like haunted houses, so you have less competition,” Spanovich added.
This new property needs some extensive repairs that include fixing a leaky roof. They also need to conduct an environmental study to make sure the structure of the building was in good shape, despite years of water damage.
Colucci said it has proven to be in worse shape than the first school and will be a more challenging renovation.
The plan is for the second high school to have 33 residential units, consisting primarily of one-bedrooms and some studios.
“Someone once told me that ‘you’ll go broke falling in love with beautiful old buildings, so be careful,’” Colucci said. “Luckily, we have Dan on our team, and he was able to figure out the logistics to make it work.”
The partners said the game plan is for residents to be able to have access to the amenities from both buildings, like the auditorium in the first school, the double-decker parking garage, and a rooftop deck that’s available in building number two.
Since Wig, Colucci, and Spanovich’s interview with CNBC Make It in September, the three have bought two more schools.
Wig says his biggest takeaway from these projects he and his partners have taken on is the difference the buildings are making in the community.
He lives just a few miles away and is a member of that community himself. “It has been rewarding and beneficial to see the community improve,” he said.
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