Historic Redevelopment
We love historic redevelopment projects. There’s something remarkable about transforming an old, run down space into something brand new. However, the road to that point is long, winding and full of opportunities for error. That’s why we’ve put together these quick guidelines for rehabilitating historic buildings.
Things To Know Before Starting a Historic Redevelopment Project
1. Assemble the right historic redevelopment team.
This is the single biggest piece of advice we give anyone considering an historic real estate development. Although many owners believe they can do it with little to no outside help, the historic redevelopment process is very complex and nuanced. You need an experienced team to guide you through the process in order to get things done and done right. Professionals you should consult throughout the development include:
- Attorneys
- Accountants
- Architects
- Tax credit consultants
- Environmental experts
The list goes on and on. That’s why so many owners trust an historic real estate development consultant to manage the process and development team for them.
2. Add 15-20% to any estimates.
You can’t always predict the unexpected, but you can prepare for it. As you scope out your project costs, give yourself a little extra financial leeway. There are countless obstacles that could come up during development and each one carries a cost that adds up over time. We once worked on a project where we discovered historic artwork on the walls during construction. The artwork had to be protected and the unexpected change of plans ended up shifting the project’s bottom line.
3. Make sure you’re in it for the long haul.
Restoring a historic building is not only a significant financial investment, but also a time investment. If you’re using a historic rehabilitation tax credit at the federal or state level, you’re barred from selling the building for at least five years. That means you’re on the hook for the building’s upkeep long after completing its redevelopment. An historic project simply isn’t suitable for a developer or owner looking to get a quick return on investment.
Important Concepts & Programs for a Possible Project:
- Historic Redevelopment / Historic Renovation – Historic buildings are often a few steps below what you’d call a fixer upper. They take time and money to restore them the right way. Every day and every dollar counts. That’s why our team pursues every available Historic Tax Credit to stretch your dollars further. Our partners who are experts in Historic Tax Credits for projects across the Commonwealth of Virginia.
- Historic Tax Credits – The Historic Tax Credit (HTC) program is a federal program dedicated to preserving local landmarks and rehabbing them into modern places to live, work and play. Former schools, hotels, warehouses–all prime spots for your next commercial or residential development. Tax credits are critical to get any major real estate project off the ground, but finding and procuring them often buries developers under red tape. We can cut through the clutter and deliver better deals and peace of mind for our clients.
- Adaptive Reuse – Don’t tear down what you could build up. Look through the dirt and decay of many abandoned historic properties and you’ll see a strong foundation for your next project. Adaptive reuse and historic restoration projects work within a building’s existing footprint to equip it for a brand new purpose. Our team can find opportunity in the run down, worn out buildings you see every day. We look at old schools and see affordable apartments. We see a bustling entertainment district through an old industrial building. Most importantly, we see everything in between. Restoring a historic building is far from straightforward, but we can manage everything from finance to representation to management.
- Commercial Development – A community thrives on commerce. When people spend money in the places they live and work, that money finds a way back to them through taxes, new developments and so much more. From entertainment venues to restaurants to shopping centers to office parks, commercial real estate development projects generate real results for owners and ongoing value for residents.
- Affordable Housing Tax Credits – Affordable housing tax credits are the federal government’s incentives for developing affordable housing across the country. The credits are managed by individual states and awarded to developers whose rental communities attract lower-income families. Affordable housing doesn’t mean low cost. In most cases, affordable housing projects simply aren’t feasible without tax credits. That creates an infinitely competitive market for a finite number of credits.
- Brownfields Tax Credit – The Brownfields Tax Credit is earned following the remediation of an environmentally contaminated property that has “achieved” a permanent solution or ROS. The tax incentive encourages cleanup and redevelopment of brownfields by allowing taxpayers to reduce their taxable income by the cost of eligible cleanup expenses in the year they are incurred.
- Enterprise Zone Tax Credits – The Virginia Enterprise Zone (VEZ) program is a partnership between state and local government that encourages job creation and private investment. VEZ accomplishes this by designating Enterprise Zones throughout the state and providing two grant-based incentives, the Job Creation Grant (JCG) and the Real Property Investment Grant (RPIG), to qualified investors and job creators within those zones, while the locality provides local incentives. Eligibility for the Real Property Investment Grant (RPIG) is based on qualified investments made to commercial, industrial, and mixed-use buildings or facilities located within the boundaries of an enterprise zone. To be eligible for the RPIG, an individual or entity must invest at least $100,000 for rehabilitation or expansion projects and at least $500,000 for new construction projects. Solar-only improvements of at least $50,000 and up to $100,000 qualify with $0 threshold. Solar as part of a larger project lowers the overall threshold by $50,000.
- Opportunity Zones (OZ) – Opportunity Zones are a federal economic development and community development tax benefit established as part of the 2017 Tax Cuts and Jobs Act available to investors with capital gains designed to encourage long-term private investment in low-income urban, suburban and rural census tracts. The zones were nominated by each governor in the spring of 2018 and are comprised of low-income census tracts. Zones were eligible for nomination based on 2015 and 2016 American Community Survey data. Virginia had 901 eligible census tracts, and per the Tax and Jobs Act, each state was only able to nominate 25 percent or 212 tracts, and could have up to 5 percent or 11 as contiguous tracts. Virginia nominated the maximum number of census tracts allotted. The designations are permanent until Dec. 31, 2028.
NOTE: Don’t leave money on the table. From federal to state to local, there are countless types of tax credits and incentives available for your next real estate development. Trust Titan to evaluate your project and pursue every available option for a reduced development cost!
