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The Atlanta Tech Village is a social enterprise designed to enhance the Atlanta technology and startup community while also generating a return on investment. Being a double bottom line business, which is a first for me, generates many interesting questions, especially around how much do we subsidize tenants, or certain tenants (like startups), vs focusing on a target percent investment return (e.g. 7%).

One idea is to be more open and transparent about our costs and revenue, the economics of the business, so that everyone can better understand how it runs as well contribute ideas to make it more successful.

Here are the economics of the 100,000 square foot building, 90,000 square foot parking deck, and 1.42 acres of land (the land comes into play as part of property taxes) on an annual basis:

• Property taxes: $260,000
• Utilities: $200,000
• Janitorial: $50,000
• Security: $40,000
• Miscellaneous contracts (landscaping, elevators, etc): $50,000
• General repairs: $50,000
• Property management: $100,000
• Total: $750,000

So, $750,000 per year to break even as a generic office building.

If it is a generic office building, purchased for $12.5MM, and annual expenses of $750,000, to make a 7% per year return on investment, it would need to have rental income of $1,625,000, resulting in a profit of $875,000.

Now, add in the extra annual costs to run it as a tech hub, event facility, coworking space, etc:

• Staff: $200,000
• Gigabit fiber internet: $100,000
• Consumables (food, supplies, etc): $50,000
• Total: $350,000

The grand total is $1,100,000 in expenses per year to break even.

Now, with a $4,500,000 renovation (interior, exterior, lobbies, bathrooms, furniture, audio/visual, etc), for a total investment of $17MM, and annual operating costs of $1,100,000, to generate a 5% per year return on investment instead of 7%, it would need rental income and membership fees of $1,950,000, resulting in a profit of $850,000.

If the building was purely Atlanta Tech Village memberships, and had a maximum capacity of 400 members based on the size of the parking deck, fire code, etc., memberships would need to have a blended average fee of $4,875/member/year or approximately $400/member/month. Due to the volatile nature of technology companies and startups, churn is going to be a challenge, resulting in the need for a solid waiting list such that when members leave, new members are ready to take their spot.

Membership costs would vary from $250/member/month to $600/member/month depending on the type of membership resulting in a blended rate of $400/member/month.  Is $400 per month per person viable? Yes, flex office space is significantly cheaper than traditional office space and the value of the ATV community will make being in the building significantly more valuable. Comparable space for a 1-30 person company in Buckhead rented with a long lease term, furnished, and outfitted with fiber internet would run $600 – $800/employee/month (one of the reasons it is much higher is that there aren’t the same economies of scale with a receptionist/office manager, fiber internet, leasing space vs owning the building, etc. for a smaller company).

So, in the end, I’m confident that the Atlanta Tech Village will be a successful social enterprise that becomes the number one tech/startup facility in the southeast within five years while also providing a modest return on investment.

Note: this analysis leaves out the benefit of depreciation expense which is off-set by reduced income during the renovation and ramp-up period.

What else? What are your thoughts on the economics of the Atlanta Tech Village?

Update: see the additional ideas on the economics of the Atlanta Tech Village.

After giving quite a few tours of the Atlanta Tech Village, and talking about the coworking areas with private offices, one of the more common refrains is that people don’t like working in a large open area with 20 other people around them. More specifically, they’d prefer to share a private room with just their colleagues that’s in an area that has the amenities and surroundings of a large coworking space. My understanding, not having worked in a big open area, is that noise and distractions become more pronounced the larger the area, as you would imagine.

One of the questions we’re researching is what’s the balance between communal desks and private offices. Here are a few questions:

• What percentage of the space should be communal desks vs private offices of different sizes?
• How much more are companies willing to pay for a private office that seats 2-5 people?
• How many companies will get both communal desks and a private office that they coordinate sharing internally?

With a target community of tech companies, satellite offices for tech companies headquartered elsewhere, startups, creative people, and professionals that serve the tech community, there’s a range of desires. My guess is that companies want more private space in the facility of a larger community.

What else? What’s a good balance between desks and private offices in a coworking space?

Earlier today we were looking at a few different suites in the Atlanta Tech Village to see what spaces might work as temporary coworking offices while we do phase one renovations over the next 6-8 months. Currently, we have room for upwards of 50 people in the non-renovated coworking space on the 3rd floor and will have room for upwards of 200 people after we finish the first two phases of renovation at the end of this calendar year (2013).

While we were looking at a small suite on the 5th floor that could accommodate 8 people in a coworking style, one of the fellow entrepreneurs with me commented that coworking is about community as much as working. Yes, we could offer it up to people but such a small space, especially in generic, non-renovated form, won’t have the community and amenities of a suite that holds 20+ people.

Here are a few reasons coworking is about community:

• If community isn’t important it’s easier for most people to work from home 
• People are naturally social creatures and want to be part of a tribe or group
• Social experiences like discussing the weekend, debating the quality of a cup of coffee, or going out to lunch happen naturally in a big communal environment
• Learning and sharing information happens naturally in a group setting providing for a richer, more fulfilling day

Coworking is much more than a desk with good internet. The community element is integral to any coworking facility.

What else? What are your thoughts on coworking being about community as much as working?

Core values are an important part of any business. For me personally, I like to approach them slightly differently than other companies by having two simple ideas. For the overarching idea, I like “be the best place to work and the best place to be a customer.” For the people values, which are the most important, I like “positive, self-starting, and supportive.”

Now, with the Atlanta Tech Village being a double bottom line enterprise having goals of helping enhance the Atlanta technology community while also being a for-profit enterprise, I want to have more descriptive core values that cover a wider range of items, while not being so numerous that they are easily forgotten.

Here’s a laundry list of ideas for core values for Atlanta Tech Village that I’d like feedback and input on from the community:

• Pay it forward
• Be scrappy
• Be lean
• Be respectful
• Be open and honest
• Don’t be annoying
• Never stop learning
• Share openly
• Value relationships
• Deliver on promises
• Treat people well
• Work hard, play hard

Core values become especially important with large coworking areas where people from different companies are regularly interacting, and a common standard has to be met. We need strong core values to create the best technology and entrepreneurial center possible.

What else? What core values do you like and what values would you add?