Board invests in income-generating asset
Posted Jan. 1, 2003
This spring, the AVMA headquarters property on North Meacham Road in Schaumburg, Ill., will begin undergoing several months of renovation. The property will emerge a safer, more attractive, more valuable investment for the Association.
In November, the Executive Board approved a $775,000 expenditure for partial renovation and remodeling of the building and some related landscaping, according to a schematic developed by the The Affinity Corporation of Arlington Heights, Ill.
The firm has been working with an Architectural Design Committee formed by Dr. James H. Brandt, AVMA immediate past president and current board chair. Dr. Brandt had proposed the project in 2001 as a presidential initiative, and the board empowered him to create the design committee. In June 2002, the board authorized $19,000 for the committee to commission Affinity to carry out three design steps in preparation for the proposed project.
The board's unanimous vote to proceed with the renovation came after a visual presentation by Affinity representatives at the November meeting, a display of the building materials, comments from Dr. Brandt, and thorough board deliberations about the proposed expenditure. The board decided that because the current return on invested monies is at an all-time low, this expenditure is an investment strategy that will yield a higher return.
Included in the renovation are the main entrance, lobby, and canopy of the 23-year-old building, along with landscaping. The five-story building, purchased by the AVMA in 1991, enjoys a prestigious location in the village of Schaumburg, the largest center of economic development in Illinois, aside from Chicago. The renovation will involve necessary maintenance combined with mild modernization. Safety features such as a new handicapped-access ramp and a snow-melting system are part of the plan. This is especially important because the lessees include a health maintenance organization, some of whose patients are physically challenged.
Addressing the board, Dr. Brandt said, "We came up with an acceptable compromise of what we need, what we want, and what we can afford."
The biggest question in everyone's minds, Dr. Brandt acknowledged, is the money involved. He explained that improving the property will not only increase the value of the AVMA's asset but also serve to make the building more attractive to lessees, in an area with many rental properties. Lease income is an important source of revenue for the Association. AVMA Business Manager Daniel Murawski projected that in 2002, the AVMA would net $535,000 in lease income. Currently, the AVMA is leasing 83 percent of the available space.
Executive Vice President Bruce W. Little noted that the AVMA invested $1.4 million in remodeling when it purchased the building 12 years ago. Since then, the property has appreciated from $2 million to $7 million. The renovation will preserve the property value and may increase the appreciation in the property if the village continues to move forward with plans to build a convention center, hotel, and performing arts theater complex across the street from AVMA headquarters.
AVMA President Joe M. Howell said, "Anyone who has a $7 million property should expect to invest 10 percent periodically in upkeep, upgrading, maintenance, repairs, renovation, and appearance to be able to continue the cash flow and the rental savings it generates."
AVMA Treasurer James F. Peddie, a nonvoting member of the board, took a neutral position, but added that in financial terms, the timing would be right to undertake this project now. Under the design committee's proposal, most of the money would have come from the AVMA reserves. Instead of those funds earning "a paltry two percent," as they are now because of the national economic situation, Dr. Peddie said, they would be put to work to increase an AVMA asset.
In fact, the board elected to take the entire amount from the reserves instead of appropriating $430,000 of the $775,000 from the budget for current and long-term maintenance, as proposed by the design committee.
The expenditure will be amortized over 10 to 31 years, depending on the expected useful life of the various components. The renovation and remodeling work is expected to begin in March or April and last from two to four months.
Members of the Architectural Design Committee chaired by Dr. Brandt are Drs. James O. Cook and R. Tracy Rhodes, Executive Board; and Dr. Janis H. Audin and Darlene M. Berend, AVMA staff.