SBA 504 Feasibility Study Case Study: A 16-Unit Flex Park on Sovereign Row in Oklahoma City, Bought by the Contractor That Will Occupy Half of It, Feasible as Restructured

An HVAC and plumbing contractor with 22 employees proposes to buy Fretz Business Park, a 38,717 square foot, 16-unit office and flex property at 1231 Sovereign Row, just south of Interstate 40 off South Meridian Avenue in Oklahoma City, listed by Price Edwards and Company at $2,900,000, or $74.90 per square foot, at a 7.8 percent in-place capitalization rate on 94 percent occupancy, through an eligible passive company financed with an SBA 504 loan. As proposed, the contractor would occupy six units, about 38 percent of the building, and keep ten leased, which is an investment property under SBA's rules and not an eligible project; and even with the contractor in 51 percent at the rent the tenants pay today, about $6.22 per square foot net, the real estate entity's debt service coverage ratio (DSCR) is 0.79 times in Year 1 and 0.88 times in Year 5 at the $2,900,000 price and the standard 10 percent contribution. Restructured with the contractor in eight units, 19,800 square feet and 51.1 percent of the building, at $11.50 per square foot net, the market rent for flex space in Oklahoma City on CBRE's second-quarter 2026 figures, with a 15 percent contribution of $471,700, the park covers at 1.26 times in Year 1, 1.34 times in Year 3 and 1.42 times in Year 5. Determination: not feasible as proposed; feasible as restructured, conditioned on eight units being delivered vacant to the contractor at closing, the rent roll, the I-2 district on the city's zoning map, and the Phase I.

Model study prepared by MMCG Invest | Michal Mohelsky, J.D., FMVA | October 3, 2026

MMCG concludes that the proposed acquisition of Fretz Business Park is not feasible as proposed and is feasible as restructured. The property is the right kind of building for the borrower: a sixteen-unit park of office suites and flex bays with warehouse and office space, in the I-2 district where the city's use list permits construction sales and services, just south of Interstate 40 in the Southwest submarket, in a metro where CBRE reports industrial availability of 6.7 percent, flex availability of 9.5 percent and a flex asking rent of $11.37 per square foot, and whose construction employment reached 35,000 in 2025 with 21,700 in the specialty trades. The proposal fails twice. The borrower's plan to occupy six of the sixteen units, about 38 percent, and keep the rest leased makes the building an investment property, and SBA does not finance investment property: under 13 CFR 120.131 the operating company must occupy at least 51 percent of an existing building at closing. And when the plan is corrected to 51 percent, the arithmetic fails, because the park's in-place income of $226,200 is $6.22 per leased square foot, well below the flex market, and a 504 loan on 90 percent of a $3,148,800 project costs $242,000 a year; with the contractor paying what the tenants pay, the real estate entity covers at 0.79 times.

Restructured, the park works, because the contractor pays the market rent for the space it takes. Eight units of 19,800 square feet at $11.50 per square foot net, in line with CBRE's $11.37 flex asking rent, the $11.00 plus utilities asked on Cornell Avenue and the $13.09 modified gross asked for new small-bay units, against $7.75 to $8.44 net for older shop space, produce $227,700 of first-year rent against $123,100 at the in-place rate; with the contribution raised to 15 percent, $471,700, and the debenture reduced to 35 percent, debt service falls to $228,900, and the real estate entity covers at 1.26 times in Year 1, 1.34 times in Year 3 and 1.42 times in Year 5, with a Year 3 yield on total project cost of 9.8 percent. The contractor's cash flow carries the rent: on the model operator's $612,000 of cash flow before occupancy, after $95,000 of existing debt service and $150,000 of taxes and distributions, $367,000 remains against a total occupancy cost of $268,200, a cover of 1.4 times. The determination is conditioned on the eight units being vacant and delivered at closing, which in a 94 percent leased park depends on the rent roll and the expiration schedule the brokerage holds; on the I-2 district being confirmed on the city's map, since the listing's label was not verified; on the Phase I for a park whose tenant history is not public; on the building facts the listing omits, including the year built, clear heights and doors; and on debenture pricing at funding.

This is an MMCG model study: a complete feasibility analysis performed on a real, publicly marketed multi-tenant flex property using public data, prepared to show 504 lenders, certified development companies and owner-user borrowers how MMCG tests the purchase of a leased small-bay park by a business that will occupy part of it. It is not a client engagement. MMCG has no relationship with the owner, the listing brokerage, the tenants or any prospective buyer, and the analysis does not represent an offer, an appraisal or a recommendation to buy the property. The contractor is a model operator constructed for the study. Figures drawn from the listing, the City of Oklahoma City Municipal Code and the city's published I-2 use list, the Oklahoma County Assessor's 2025 notice of value, the Oklahoma State University mill levy report, the city's utility rates, the Census Bureau, the Bureau of Labor Statistics, the Oklahoma Department of Commerce, CBRE's second-quarter 2026 Oklahoma City report and the Oklahoma City listing inventory are identified as such. Figures labeled MMCG assumption are underwriting inputs set by MMCG. Items that could not be verified from a primary source at the study date are listed in the Conditions and Limitations section rather than estimated silently: the parcel number, lot size, year built, clear heights, doors and parking, the rent roll, unit sizes and expirations, the assessed value and tax bill, the parcel's taxing district and millage, the FEMA panel, the official zoning map, the parking and screening standards, and the property's prior uses.

The operating company is a mechanical contractor organized in 2012, licensed for HVAC and plumbing, with 22 employees, about $6,800,000 of revenue and a cash flow before occupancy cost of 9 percent, or $612,000 (MMCG assumption for the model operator), serving commercial and residential customers across the Oklahoma City metro from a leased 8,000 square foot shop at $84,000 a year. It needs about 20,000 square feet: a warehouse for equipment, ductwork and pipe with grade-level doors, a fabrication bay, a dispatch and office suite, and parking for 18 service vans. Its principals will form an eligible passive company to buy the park, lease eight contiguous flex units to the operating company under a net lease running at least the term of the loan, and keep the other eight units leased to the existing tenants under a local property manager. The operating company guarantees the loan.

Operations plan

The contractor moves into the eight units in one phase after closing, with the warehouse bays racked, one bay fitted for sheet-metal fabrication subject to the district's standards, and the office suites used for dispatch, estimating and administration. The real estate entity manages the eight third-party units at 5 percent of collections, carries leasing costs of $0.35 per square foot a year for turnover and a capital reserve of $0.20, and holds a 10 percent vacancy and credit loss allowance on the third-party space.

Building program

The park sits at 1231 Sovereign Row in the 73108 zip code, just south of Interstate 40 off South Meridian Avenue, in the Southwest industrial submarket that runs between the interstate, the airport and the Meridian Avenue hotel and office corridor. The Cornell Avenue flex property at 1101 to 1121 Cornell, on 5.16 acres in the I-2 district, and the Class C office complex at 1103 Sovereign Row, are its neighbors on the listing inventory. The parcel number, lot size and frontage were not retrieved, because the Oklahoma County Assessor's search returned an error at the study date, and the FEMA panel was not retrieved; both are conditions.

Oklahoma County had 796,292 residents at the 2020 census and 822,125 at the July 2025 estimate, a gain of 3.2 percent. Construction employment in the Oklahoma City metro reached 35,000 in 2025 from 31,300 in 2021, with specialty trade contractors at 21,700, and Oklahoma County authorized 6,803 housing units in 2025 against 5,157 in 2023, which is the contractor's demand base. The metro's recent industrial announcements include Hapco Pole Products' 270,000 square foot manufacturing plant off Interstate 240 in south Oklahoma City, which broke ground in August 2026 with more than 80 jobs; McKesson's $179 million, 330,000 square foot pharmaceutical distribution center in Moore, announced in June 2026 with 200 initial jobs rising to 633; and expansions by EquipmentShare and Simple Modern in the second quarter of 2026 reported by the Oklahoma Department of Commerce.

The site's liability is the one every multi-tenant acquisition by an owner-user carries: the building is full. Ninety-four percent occupancy on sixteen units leaves one unit vacant, and the contractor needs eight, so seven tenants must leave by expiration, surrender or relocation before closing, and the leases that permit it were not public at the study date.

The City of Oklahoma City Municipal Code, Chapter 59, governs. The listing labels the parcel I-2, Moderate Industrial, and the city's published I-2 district summary states the district is intended primarily for the conduct of light manufacturing, assembly and fabrication, and for warehousing, wholesale and service uses. The I-2 use list shows Construction Sales and Services under Section 8300.31, Industrial, Light under 8350.8, Industrial, Moderate under 8350.7, and Wholesaling, Storage and Distribution: Restricted under 8350.16 as permitted uses, and Outdoor Sales and Display and Outdoor Storage under 8300.54 as a conditional use; the same use is conditional in I-1 and permitted in I-3, so the district matters. The study maps a mechanical contractor's shop, with its equipment warehouse, fabrication bay and dispatch office, to Construction Sales and Services, which is the classification the city's code uses for contractors; the definition text was not retrieved and the city's confirmation is a condition. The contractor's vans are parked, not stored, and no outdoor storage of materials is planned; if the contractor needs an outdoor yard, a conditional use permit is the path.

The parcel's district was not verified on the city's official zoning map, and the district's parking minimums for warehouse and office and its screening standards were not retrieved. The study carries the city's confirmation of the district and of the contractor use as a condition, and assumes no rezoning, variance or conditional use, since the park's existing mix of office and flex tenants is the use proposed.

The SBA occupancy test is written into the program. The operating company must occupy at least 51 percent of the rentable property at closing, which is 19,746 square feet; the study carries eight units of 19,800 square feet, which requires units above the building's average of 2,420 square feet; at the average size eight units total 19,360 square feet and nine are needed, and the unit sizes from the rent roll decide which.

Water and sewer are supplied by the City of Oklahoma City under rates effective January 1, 2025, with commercial water at $4.60 to $7.75 per thousand gallons by consumption band and sewer at $5.58 per thousand gallons plus meter charges, costs the tenants and the contractor bear under net leases. Electricity is supplied by OG&E; its Power and Light tariff as summarized from the regulatory database carries a $91 customer charge, demand charges of $16.87 per kilowatt in summer and $8.87 in winter and an energy charge of 1.10 cents per kilowatt-hour before fuel and riders, and the general service schedules for small units were not retrieved. Oklahoma Natural Gas serves the area under commercial schedules effective June 26, 2026. Each is a tenant cost and none affects the real estate entity's statement.

Property tax in Oklahoma County is assessed at 11 percent of fair cash value, per the assessor's 2025 notice, with the increase in a non-homestead property's assessed value capped at 5 percent a year except in the year after a transfer of title. The parcel's taxing district and millage were not retrieved; Oklahoma County's total levies by school district ran from 72.59 to 122.90 mills with a mean of 86.65 in fiscal 2025, and the study carries the mean, which on a fair cash value at the $2,900,000 price produces about $27,600 a year, or $0.71 per square foot, recovered from the tenants and the contractor under the net leases; the contractor's share at 51.1 percent is about $14,100. The current tax bill was not retrieved. Insurance is carried at $9,000 a year for a concrete multi-tenant building in central Oklahoma (MMCG assumption), recovered under the leases.

The demand case for an owner-user acquisition is the contractor's business, and the market analysis prices the eight third-party units and tests the contractor's rent against what the space would earn from anyone else.

CBRE's second-quarter 2026 Oklahoma City report puts industrial availability at 6.7 percent, down 40 basis points in the quarter, with net absorption of 593,000 square feet, deliveries of 39,000 and an average asking rent of $7.64 per square foot net; its R&D and flex product line, the nearest published figure to small-bay space, shows 9.5 percent availability and an asking rent of $11.37, and the Southwest submarket, with 64.3 million square feet, 7.0 percent availability, 261,000 square feet of absorption and a $7.29 asking rent. The small-bay listings in the subject's area at the study date ask $11.00 per square foot plus utilities for 2,650 to 23,081 square feet at 1101 to 1121 Cornell, a 1981 building in the I-2 district; $13.09 per square foot modified gross for 1,375 square foot units at 5000 SW 20th Street, built in 2026 with 14 foot clear height and a grade door per unit; $8.44 base plus net charges for an 8,250 square foot shop with three overhead doors at 1528 SE 27th Street; and $7.75 net with $1.16 of common area charges for 6,145 square feet at 2804 SE 59th Street. The subject's in-place average of $6.22 per leased square foot sits below all of them, which is consistent with a park that has been held for income with legacy leases, and is the reason the contractor's rent at $11.50 is the market figure rather than a premium: it is what the space would ask if it were vacant.

The study carries the eight third-party units at the in-place average with 3 percent annual escalation and a 10 percent vacancy and credit loss allowance from the first year, above CBRE's 9.5 percent flex availability, for eight small tenants; it does not assume that the legacy rents are marked to market on renewal, which is upside the lender may ignore.

MMCG identified four for-lease and four for-sale flex and small-bay properties in the Oklahoma City metro at the study date; years built and clear heights were not shown for several and are disclosed.

Comparable Number 1 1101 to 1121 Cornell, Oklahoma City 73108 A 23,081 square foot flex property built in 1981 on 5.16 acres in the I-2 district with about 16 foot clear height, offered for lease in units of 2,650 to 23,081 square feet at $11.00 per square foot a year plus utilities by Hassan Properties.

Comparable Number 2 5000 SW 20th Street, Oklahoma City 73128 A 44,000 square foot small-bay building completed in 2026 with 14 foot clear height and a 14 by 12 foot grade door per unit, offered in 1,375 square foot units at $1,500 a month modified gross, or $13.09 per square foot, by Adept Commercial Real Estate.

Comparable Number 3 1528 SE 27th Street, Oklahoma City 73129 An 8,250 square foot shop with 2,000 square feet of office and three overhead doors, offered at $5,800 a month plus net charges, or $8.44 per square foot base, by Equity Commercial Realty Advisors.

Comparable Number 4 2804 SE 59th Street, Oklahoma City 73129 A 6,145 square foot unit offered at $7.75 per square foot net with $1.16 of common area charges by CBRE.

Comparable Number 5 4102 S High, Oklahoma City 73129 A 12,456 square foot four-unit flex building built in 1976 and renovated in 2026, with 12 to 14 foot clear height and four grade doors, 100 percent occupied, listed at $920,000, or $73.86 per square foot, by Adept Commercial Real Estate.

Comparable Number 6 1639 NW 5th Street, Oklahoma City 73106 A 38,710 square foot four-unit industrial building built in 1950 in the I-3 district with 20 foot clear height, three docks and six drive-in doors, about 40 percent leased, listed at $1,895,000, or $49 per square foot, with owner financing noted, by Eagle Creek Property Solutions.

Comparable Number 7 7400 Plaza Mayor Boulevard, Oklahoma City 73149 A 41,964 square foot single-tenant building built in 1989 in the I-2 district with 13 foot clear height, listed at $5,495,000, or $131 per square foot, by Foraker Company.

Comparable Number 8 200 SE 19th Street and 2001 S Broadway, Oklahoma City Two fully leased buildings of 28,750 and 20,350 square feet built in 1999 and 2005 in the I-2 district with six drive-in doors, listed at an 8.70 percent cap rate.

The subject's $74.90 per square foot sits with the renovated four-unit building at $73.86 and well under the single-tenant building at $131, and its 7.8 percent cap rate sits between the 8.70 percent on the fully leased two-building listing and the yields the market pays for stabilized flex; the price is a market price for the income in place, and the study does not condition it.

The contractor's rent is set at $11.50 per square foot net, which is the market rent for flex space in Oklahoma City on CBRE's $11.37 asking figure, the $11.00 plus utilities asked on Cornell Avenue and the $13.09 modified gross asked for new small-bay units, while older shop space asks $7.75 to $8.44 net, and which is also what the real estate entity needs to cover its restructured debt service at the lender's floor with the third-party income carried conservatively. The contractor can pay it: on the model operator's $612,000 of cash flow before occupancy cost, after $95,000 of existing vehicle and equipment debt service and $150,000 of income taxes and distributions, $367,000 remains against a Year 1 occupancy cost of $268,200, comprising $227,700 of rent, $14,100 of property tax, $4,600 of insurance and $21,800 of common area cost, or $13.55 per square foot, a cover of 1.4 times. That cover is adequate rather than ample, and the study says so: a contractor's cash flow moves with the construction cycle, and the lender should underwrite the operating company's three years of statements and its backlog, which are conditions.

The lender's check is the appraisal. At the in-place income of $226,200 and the listed 7.8 percent cap rate the implied value equals the $2,900,000 price, and the bank's first lien of $1,572,200 is 54 percent of it, with the bank and the debenture together at 92 percent; at the contractor's rent the income approach values the park higher, which the lender may discount.

Closing is carried in the first quarter of 2027 with the contractor in occupancy at closing and the first full year carried as 2027. Rents escalate 3 percent a year (MMCG assumption). The eight third-party units are carried at the in-place average from the first year; no lease-up is required because the units are occupied, and no mark-to-market on renewal is assumed.

Location: 1231 Sovereign Row, Oklahoma City, OK 73108 Size in SF: 38,717 Units: 16

Source: listing; MMCG

The debenture fees are carried at about 2.65 percent of the debenture, comprising the fiscal 2027 upfront guaranty fee of 0.50 percent, which is not waived for a contractor in a metropolitan county, and the CDC processing, funding and underwriting fees. The capital allowance is an assumption pending the inspections; on a park whose year built the listing does not state, the roof and the sixteen units' rooftop equipment are the items most likely to move it.

Loan Assumptions (as proposed)

Loan Assumptions (restructured)

The restructuring holds the price and the bank's position, adds $156,800 of equity, and takes it out of the debenture, which cuts debt service by $13,100 a year; the larger change is the contractor's rent, which at $11.50 rather than $6.22 adds $104,600 of first-year income, and together they move coverage from 0.79 times to 1.26 times.

The project is an eligible SBA 504 project only as restructured. Under 13 CFR 120.131 the operating company must occupy at least 51 percent of the rentable property of an existing building, and the as-proposed plan to occupy six units, about 38 percent, with ten units leased to others is an investment in rental real estate, which SBA does not finance under either 7(a) or 504; the restructured plan puts the contractor in eight units of 19,800 square feet, 51.1 percent, with the remaining 48.9 percent leased to third parties, which the rule permits. The real estate is owned by an eligible passive company and leased to the operating company under a lease running at least the term of the loan, and the operating company guarantees the loan.

The borrower contribution is 10 percent under 13 CFR 120.910, because the contractor has operated for more than two years and a flex park is a general-purpose building; the study carries 10 percent as proposed and 15 percent as restructured, as a lender's condition. The job opportunity standard is one job per $95,000 of debenture for loans approved on or after October 1, 2025, which is 14 jobs at the as-proposed $1,259,500 debenture and 12 at the restructured $1,100,600, against the contractor's 22 employees, met on retention. The debenture is fixed-rate over 25 years; fiscal 2027 fees are 0.50 percent upfront and 0.203 percent annually, neither waived. SOP 50 10 8.1 governs the file; the acquisition is of real estate only, so Appendix 15 does not apply. The combined SBA exposure is inside the $10 million limit.

The environmental screen turns on the tenants. A mechanical contractor is not among SBA's environmentally sensitive industries, but a sixteen-unit flex park may have housed automotive repair, painting, printing or fuel in any of its units, and the park's prior uses were not public at the study date; the study carries a Phase I environmental site assessment as a condition and the tenant history as a question for the brokerage.

The real estate entity's expenses under net leases are the items the leases do not recover: management of the eight third-party units, the leasing commissions and tenant improvements of turnover, a capital reserve and the owner's own costs. Taxes, insurance and common area maintenance are recovered from the tenants and from the contractor.

Recoverable expenses carried for the occupancy cost test (Year 1): property tax of about $27,600 at 11 percent of the $2,900,000 price and 86.65 mills (the district's millage to be confirmed); insurance of $9,000; common area maintenance, parking, landscaping and lighting of $1.10 per square foot, or $42,600. The contractor's share at 51.1 percent is $14,100 of tax, $4,600 of insurance and $21,800 of common area cost, which with rent of $227,700 makes a Year 1 occupancy cost of $268,200, or $13.55 per square foot.

The real estate entity covers from the first year at 1.26 times, reaches 1.34 times in Year 3 and 1.42 times in Year 5. With the contractor in 51 percent at the in-place rent, at the $2,900,000 price and 10 percent equity, the same park produces coverage of 0.79 times in Year 1, 0.81 times in Year 2, 0.83 times in Year 3, 0.86 times in Year 4 and 0.88 times in Year 5 against annual debt service of $242,000, with a Year 1 shortfall of $51,900; the proposal does not reach 1.0 times within the projection period, and with the contractor in six units it is not an eligible project at all. Those are the determination.

At Year 3 rents, with the contractor's rent fixed by its lease, the real estate entity's coverage depends on the eight third-party units.

The real estate entity covers its debt from the contractor's rent and a quarter of the third-party space, and reaches the lender's floor with eighteen points of third-party occupancy to spare, which is the credit's strength: the contractor carries the building and the eight small tenants are a cushion rather than a requirement. Three dark units out of eight, close to 40 percent vacancy, take coverage to about 1.20 times, and 40 percent to 1.19 times.

The restructured park holds above 1.0 times in every case and above 1.25 times in all but the rate, dark-unit and reduced-rent cases, which is the shape of a multi-tenant building bought at a market price by a tenant that pays market rent for half of it. The controlling sensitivity is the contractor's rent: at $10.00 the park falls to 1.21 times, and the lender's underwriting of the contractor's statements, not of the submarket, decides whether $11.50 is sustainable. The price is a secondary lever; $150,000 off the ask adds seven points of coverage.

The determination of not feasible as proposed and feasible as restructured is subject to the following conditions precedent on the restructured program:

The following items could not be verified from a primary source at the study date and are disclosed: the parcel number, lot size, year built, construction detail, clear heights, doors and parking count; the rent roll, unit sizes, in-place rents by unit, expirations and tenant uses, which the listing states are available on request; the brokerage's own listing page, which was read through a listing platform's copy; the assessed value, current tax bill, taxing district and millage, in place of which the study carries the county mean; the parcel's district on the official zoning map, the definition of Construction Sales and Services, and the district's parking and screening standards; the FEMA panel; the interstate interchange distance; OG&E's general service schedules; the property's prior uses; and the year built and clear height of several comparables.

This model study applies the methodology described on MMCG's flex space feasibility study and SBA warehouse feasibility study pages. MMCG prepares industrial feasibility studies for SBA 7(a) and 504, USDA Business and Industry and conventional lenders nationwide, with engagements from $4,900 and delivery in 9 to 16 business days.