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Credit Worthy News

Historic Tax Credits Along The Mississippi River

Posted by Katherine Ferguson on Friday, July 13, 2018

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St. Louis, Missouri

State legislatures along the Mighty Mississippi have been particularly busy tweaking and tinkering with their state historic tax credit programs. From Wisconsin to Tennessee, 2018 has seen wins and losses for these economic development tools. 

In the June 2018 issue of the Novogradac Journal of Tax Credits, we take a look at what some of those specific changes have been. 

Read the full story here | 
State Historic Tax Credits Along the Mighty Mississippi Ebb and Flow

 

Topics: State HTC, Novogradac Journal of Tax Credits

MHA Projects Win ULI Chicago 2018 Vision Awards

Posted by Katherine Ferguson on Friday, June 29, 2018

On June 13, the ULI Chicago celebrated the winners of their annual Vision Awards. This year's group included four MHA Midwest projects.

Here is a look at what makes these projects worthy of recognition:

Revel Motor Row | Chicago, IL
Developer: Property Adventures
Architect: Filoramo Talsma Architecture

5_Revel Motor Row_1st Floor East Public Space AFTER

Revel Motor Row is comprised of two adjacent landmarks along Chicago's South Loop Motor Row: the former Illinois Automobile Club (IAC) / Chicago Defender Building (completed 1936) and the former Cadillac Showroom (completed 1909). Developer Property Adventures transformed these two long-vacant buildings into a combined event venue with the help of Chicago-based Revel Group.

Using federal historic tax credits, the team restored and creatively reused both buildings for event use. The team replicated damaged windows and restored IAC/Defender’s ornate public rooms for event spaces. The skylit IAC swimming pool, later home to the Defender newspaper’s presses, is now a large event space. The Cadillac houses a downstairs event space with Revel Group offices upstairs.

The result has secured the continued life of two endangered Motor Row landmarks. Revel Motor Row creates an exciting new event production space that celebrates the history of these two landmarks and the historic Motor Row District, and adds an important new commercial anchor to new McCormick Square and the revitalized South Loop neighborhood.

Lofts on Arthington | Chicago, IL | Mercy Housing Lakefront
Developer: Mercy Housing Lakefront
Architect: Solomon Cordwell Buenz

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Lofts on Arthington is an adaptive reuse of the Catalogue Printing building on the former Sears, Roebuck & Co. Headquarters. Located in the Homan Square community of the North Lawndale neighborhood in Chicago, Lofts on Arthington meets the area's clear and ongoing need for affordable housing for individuals and working families.

Lofts on Arthington began construction in August 2015, with the building completed in March 2017 after an extensive rehabilitation. The project was financed using Low-Income Housing Tax Credits and Historic Tax Credits, along with funding from the Chicago Housing Authority, the Federal Home Loan Bank of Chicago, and the Illinois Department of Commerce and Economic Opportunity.

The restoration of the property was challenging and innovative. After years of vacancy and years of deterioration, the roof was decaying, historic materials had been stolen and vandalized, and mercury was tracked through the building. This necessitated extensive remediation to ensure the property would be safe for residents. Despite the level of damage, Mercy Housing Lakefront made it a priority to preserve as many historical elements of the original catalogue-printing facility as possible.

The Lofts on Arthington helps Mercy Housing Lakefront provide low-income families with safe, quality, affordable housing from which to pursue improved health, education, and financial security.

Aurora St. Charles Senior Living | Aurora, IL
Developer: Evergreen Real Estate Group
Architect: Weese Langley Weese, LTD

1_Exterio_After_2017LeslieSchwartz

Aurora St. Charles Senior Living, historically known as the St. Charles Hospital, in Aurora, Illinois, was built as the extension to a hospital founded by the Franciscan Sisters of the Sacred Heart. This six-story Art Deco style building was designed by architect Wybe J. Van der Meer and constructed in 1932. A two-year renovation closed the facility in the early 1970s. The building continued to operate as a hospital until the 1990s when it became the Fox River Pavilion Nursing Home. Fox River Pavilion closed in 2010, the same year that the building was listed on the National Register of Historic Places. The building was vacant for six years. In 2015, the building was added to the River Edge Redevelopment Zone (RERZ), spurring redevelopment efforts by the Evergreen Real Estate Group to create 60 affordable units for seniors in the Aurora St. Charles.

Great efforts were made to retain and protect the historic integrity of the building. On the exterior, the building's original massing, regular fenestration, and Art Deco-style exterior brick, limestone, and terra cotta ornament and metal railing work were cleaned, retained, and repaired. Character-defining windows were also retained, repaired, or replaced in-kind. On the interior, the historic Art Deco style two-story lobby and one-story waiting room were retained and reused as new residential entry and lobby spaces. The building’s primary public space - the Art Deco style second floor chapel with the third floor balcony - were restored and is now used a new community room for the building’s residents. Character-defining historic corridors and circulation patterns were also retained.

In addition to the RERZ credit, the project was funded by federal historic tax credits, low-income housing tax credits from the Illinois Housing Development Authority (IHDA) and private financing from entities including the National Equity Fund, BMO Harris Bank, and Chase Bank. IFF provided predevelopment funding. Evergreen worked closely with Invest Aurora, the Northern Lights Development Corporation, the City of Aurora, the Illinois Housing Development Authority, and the Illinois Department of Commerce and Economic Opportunity to make the complicated and fast-paced financing possible. A 25 percent historic preservation tax credit that was included in the RERZ program provided nearly $3 million for the $24 million rehabilitation.

 

HTC Watch | New bill introduced to enhance federal HTC

Posted by Katherine Ferguson on Tuesday, June 19, 2018

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Last week, we received welcome news that a bill was introduced in Congress by U.S. Senators Bill Cassidy, M.D. (R-LA), Ben Cardin (D-MD), and Susan Collins (R-ME), and U.S. Representatives Darin LaHood (R-IL) and Earl Blumenauer (D-OR) to address existing basis-adjustment requirements of theHistoric Rehabilitation Tax Credit (HTC). The newly introduced legislation eliminates this requirement, enhancing the credit after uncertainty about investment potential with the change of terms in last year's new tax reform law that required the credit be taken over five years. The Low-Income Housing Tax Credit (LIHTC) was the model for this provision as it too has a multi-year claiming structure.

You can help by encouraging your Members of Congress to co-sponsor the HTC Enhancement Act of 2018 (H.R. 6081 or S. 3058).

National Trust Community Investment Corporation (NTCIC) has created these helpful talking points:

  • The HTC provides owners of historic buildings with an incentive to invest in the difficult task of rehabilitating their properties according to the Secretary of Interior’s Standards for Rehabilitation.
  • While the 20 percent historic tax credit was maintained in the final tax reform bill, it was modified, and this is expected to reduce the amount of reinvestment flowing into our historic communities and neighborhoods.
  • Presently, the tax code requires that building owners subtract the amount of federal historic tax credits from a building’s basis (the amount a property is worth for tax purposes). Eliminating this requirement will increase the basis of rehabilitated historic buildings for building owners, providing a tax benefit, and attract more capital from tax credit investors. Rep. LaHood (R-IL) and Rep. Blumenauer (D-OR), and Sen. Cassidy (R-LA) and Sen. Cardin (D-MD), have introduced the Historic Tax Credit Enhancement Act (H.R. 6081 and S. 3058) to eliminate the basis adjustment for federal HTC transactions.
  • This legislative change still preserves the vast majority of the savings achieved by the Tax Cut and Jobs Act and eliminating the basis adjustment will also bring the HTC in line with the Low-Income Housing Tax Credit (LIHTC), which does not require a basis adjustment.
  • Enacting this legislation will strengthen the credit and improve the incentive for building owners who are revitalizing historic properties in communities nationwide. Please co-sponsor the Historic Tax Credit Enhancement Act, sponsored by Cassidy/Cardin in the Senate (S. 3058) and LaHood/Blumenauer in the House (H.R. 6081).

Topics: policy, federal HTC

Meet MHA Southwest Associate, Amanda Barry

Posted by Katherine Ferguson on Wednesday, June 6, 2018

In October 2017, MHA opened our Southwest office in Houston. In February, Amanda Barry joined director Anna Mod as our first MHA Southwest associate. Her long passion for and professional background in historic preservation brings important expertise to the fast-growing historic rehabilitation industry in Texas and beyond.

Here is a little bit about Amanda. We think you'll see why we are excited to have her on board.

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How did you become interested in historic preservation? It is an absolute cliché, but I first became interested in historic preservation in middle school when I visited Mt. Vernon. Although it did take some time to identify my career path, I knew at that young age that I had a love of history and a love of old buildings. I don’t know of many 6th graders who know they want to be preservationists!

What is your favorite type of architecture? That’s a toughie. I’m going to cheat and say “New Orleans style” architecture so I can include everything from Creole Cottages to Neoclassical. I grew up near New Orleans and have always loved the city’s architectural diversity.

Why do you believe that historic tax credits are important? Tax credits make it possible to breathe new life into historic buildings. They provide vital financial assistance for the rehabilitation of buildings that might otherwise be overlooked, neglected, or worse – demolished.

Tell us about one of your projects with MHA Southwest.

St. Elizabeth’s Hospital | Houston, Texas
Project client | Fifth Ward Community Redevelopment Corporation

stlizhospitalBuilding History |
St. Elizabeth’s is an Art Moderne style hospital building, constructed in several phases between 1945 and 1988. The hospital opened in 1947 in Houston’s Fifth Ward, a historically black neighborhood northeast of downtown Houston. The city was segregated and inadequate access to health care inspired local doctors, concerned civic leaders, and the Missionary Sisters of the Immaculate Conception of the Mother of God, a Catholic order of nuns, to raise funds, construct and then run the hospital. The Sisters of the Immaculate Conception operated the hospital until 1981 when it was sold or transferred to the Houston-based Sisters of Charity of the Incarnate Word who continued its operation until they closed the hospital in 1988. The next year, a group of local doctors purchased the hospital, and it reopened briefly as the Drew Medical Center, which closed in 1990. In 1992, the hospital was purchased and used as an inpatient drug rehabilitation facility, and then closed in 2014. To date, the hospital remains vacant. The property is slated for rehabilitation as an affordable housing complex.

Rehabilitation Challenges & Solutions |
Over time, there were several alterations made to the building, resulting in a hodge-podge of contributing and noncontributing resources that have all been subjected to neglect, extreme weather and vandalism – including arson. Extensive forensic investigation was used to determine which resources still contribute to the character of the property and which resources are viable for rehabilitation.

Community Impact |
Fifth Ward CRC is dedicated to the collaborative fostering of holistic community development. By using the federal HTC along with the Texas HTC, Fifth Ward CRC is able to provide affordable housing within the community while preserving a historic, community landmark.

Learn more about the federal HTC     Learn more about the Texas HTC

Stay tuned for more interviews with our expert team members.

Topics: Affordable Housing, MHA Southwest, Texas

Historic Preservation and Opportunity Zones

Posted by Katherine Ferguson on Friday, May 25, 2018

Sibley_Mill
Sibley Mill | Augusta, GA

Reviews of the new tax reform bill have been mixed. Historic tax credits were retained, but the terms of claiming the credit changed. Other tax incentive programs were modified or done away with entirely. Depending on whom you ask, these changes can be positive or negative.

One change of the tax reform of 2017 that has gotten a lot of attention is the addition of Opportunity Zones. This program was championed by Senators Tim Scott (R-SC) and Cory Booker (D-NJ) and advertises to inject economic incentives to combat geographical inequality. US Census Bureau statistics point to stagnation in primarily rural counties where jobs and businesses have dropped over the last decade. In the 1990s, more than 50 percent of all counties grew at the national rate. Now only 25 percent do.

What is an Opportunity Zone?

The Opportunity Zones program is set up to benefit investors who invest in new businesses and development in census tracts approved as an Opportunity Zone (OZ). The program is market-based and requires no public money. Up to 25 percent of a state’s low-income census tracts - determined by population, income, and local input - are designated by governors and approved by the U.S. Treasury and the IRS.

Any corporation or partnership may self-certify an opportunity fund as an investment vehicle for capital gains tax deferment on the sale of another investment. While IRS rules are still being written, there is not expected to be a minimum or a maximum on the funds. Time is the primary constraint as it is expected that the fund will have to invest 90 percent of its assets in OZ projects within six months. And currently these investments must be made by the end of 2019 to get the full benefit of a 15 percent reduction in deferred taxes for investments owned seven years as the program is due to sunset December 31, 2026. (Investments owned for five years are reduced by 10 percent.)

What does this mean for historic rehabilitation projects?

OZ funding will not be enough on its own to fund a project. Combined with incentives like historic tax credits, however, OZ funding can help fill the capital stack for projects in economically depressed areas. Because of this, we expect that there could be interest in historic rehabilitation in areas that previously may not have been fully feasible before.

It may not be possible to draw a straight line between OZ funding and HTCs, but there might be parallels. Many people in the industry have likened the program to New Markets Tax Credits (NMTC), a program that is occasionally twinned with HTCs to fund rehabilitation projects. They have been sibling programs, but do not directly correlate in terms of usage.

The new OZ approach may create opportunities for investments in historic assets that that NMTCs do not necessarily create. Theoretically, an individual, or small group of individuals, could form a corporation or partnership to make smaller investments in OZs. Because of the complexity of the NMTC structure, it isn’t often economically feasible for a small NMTC project, while smaller projects may dovetail nicely with a combination of HTCs and OZ investments.

In addition to new businesses, many states are focused on making funding available for workforce and affordable housing opportunities that can utilize the OZ program. Technical guidance from the IRS suggests that LIHTC, HTC, and NMTC projects will be qualified investments; however, there are expected to be exclusions for projects that include “sin businesses” like golf courses, country clubs, massage parlors, gambling venues, or stores where the principal business is sale of alcoholic beverages for consumption off premises.

We know that historic preservation is a function of community revitalization. If the program incentivizes investment in these communities as it is designed to do, it will make these projects all the more probable as new businesses are encouraged to move in. But the bottom line is that the potential impact of OZs is yet unknown. We must wait and see how guidance is structured and how investors will respond.

Stay tuned...

This article was written with help from George Morrison of McNair Law Firm, PA and information from the SC Dept. of Commerce.

Further resources:

IRS.gov Opportunity Zones FAQs

McNair Law Firm, PA Opportunity Zones FAQs

Topics: policy, Historic Tax Credits, Opportunity Zones