Kokomo — Discovering Kokomo
Broughton originally came to Kokomo to save some properties he’d purchased in bulk, some of which had been slated for demolition as part of Goodnight’s increased emphasis on code enforcement.
Goodnight, McKay and other city officials started talking with Broughton, who showed interest in purchasing some tax sale properties, and convinced him to look at some of the commercial development opportunities downtown.
When Broughton’s aspirations of purchasing hundreds of tax sale properties, which would then be bundled and sold in tranches to other investors, ran into resistance from county officials, he started to focus on the old downtown buildings.
The attraction, he says, is the low price of getting into the buildings, either through the city, on contract from an owner, or through an outright purchase.
Developers like to talk about capitalization rates, defined as the yearly income a property can produce, divided by the total cost of the project.
In California, Broughton said, his cap rates are usually around the 6 percent to 8 percent range, meaning it would take 12 to 15 years for the income on a property to pay off the investment cost.
In Kokomo, he’s envisioning cap rates of 20 to 25 percent. His hope is every building he finishes gets leased, and that he can leverage the lease income to obtain long-term financing on other projects.
For now, however, Broughton said he’s doing projects on a cash basis. The two projects furthest along include plans for a bakery (some of the kitchen equipment already has been delivered) at 503 N. Buckeye St., and for a pizza place to be called The District, that will be located in the former Elks building, 107 E. Sycamore St.
Above the bakery, Broughton’s crew of 18 is building four apartment units, which Broughton envisions as extended stay, corporate rentals.