credit_worth_news_banner.jpg

Credit Worthy News

The Financial Benefits of Chicago's Class "L" Designation for Historic Properties

Posted by MacRostie Historic Advisors on Thursday, September 10, 2015
Wrigley Building | Photo Credit: Jon Miller of Hedrick Blessing Photographers
Wrigley Building | Photo Credit: Jon Miller of Hedrick Blessing Photographers


Chicago appreciates its architecture more than most cities. And it should. This city was the crucible for arguably the most influential American architectural events in the late 19th and early 20th centuries:  the 1893 World’s Columbian Exposition which sparked a renaissance of neoclassical architecture throughout the country, and birthplace of the skyscraper, a product of “Chicago School” engineering, innovation, and design.

Chicago is also a leader in creating developer incentives for the preservation and reuse of historic buildings. Acknowledging the positive impact of the City’s historic built environment on the local and regional economy, the Cook County Class “L” Property Tax Incentive Program was created in 1997 to offer specific financial incentives for rehabilitation of buildings designated as Chicago Landmarks. 

Under the Class “L” program, owners of qualifying commercial and industrial properties designated as “landmarks” and undergoing “substantial rehabilitation” can have their property tax assessment levels reduced for a twelve-year period.  Where commercial and industrial properties are typically assessed at 25% of market value, Class L buildings are assessed at only 10% for ten years, 15% in year 11 and 20% in year 12.

Old Republic Building To qualify, owners must invest at least 50% of the Assessor’s full market value of the landmark building in an approved rehabilitation project and must be determined a Class “L” property prior to the commencement of construction. The ordinance is intended to foster projects that contribute to long-term growth in the economy, employment opportunities, and property tax base of the city and Cook County.
The incentive applies to the assessment of the building only. The land continues to be assessed at the standard levels of assessment for commercial property and industrial property (i.e., 25% of market value), except where the entire building has been vacant for at least 24 continuous months prior to application for the incentive, in which case, the incentive assessment levels apply to the land as well as the building.

In Chicago, developers frequently utilize the Class “L” incentive in conjunction with the federal 20% historic rehabilitation tax credit as the two programs share many of the same requirements:

  • Both require that a building be designated as historic (that means Chicago Landmark status for the Class “L” program and National Register designation for the federal program).  
  • Both require a baseline investment in the rehabilitation work (that’s 50% of the Assessor’s opinion of the building’s full market value for the Cook County program and 100% of the building’s adjusted basis for the federal tax credits).  
  • And under both programs, the rehabilitation work is required to meet the Secretary of the Interior’s Standards for Rehabilitation.

 

Virgin HotelIn our experience and in that of our clients, these incentive programs generally complement each other and there is often an economy of scale in pursuing concurrent applications and coordinating project reviews with the applicable local, state, and federal agencies.
The programs are also complementary in how they deliver financial incentives for a rehabilitation project. The federal program provides a tax credit equal to 20% of total qualifying rehabilitation expenses (both hard and soft costs) that can be monetized to bring equity into a transaction while the project is under construction.  The Class “L” is a benefit that impacts annual operating expenses.

It is worth noting, that the proceeds of federal historic tax credits may not be used to satisfy the Cook County investment requirement.

Given these considerations, it is clear why developers are actively utilizing the Cook County Class “L” Property Tax Incentive, a powerful preservation tool for the City of Chicago that is much more carrot than stick.

Post by Allen F. Johnson, Partner | Director, MHA Midwest and special contributor Elizabeth L. Gracie, Partner in the law firm, O'Keefe Lyons & Hynes

Topics: policy, Chicago, O'Keefe Lyons & Hynes, HTC, MHA Midwest

Iconic Chicago Buildings Are Now the Hippest Hotels in Town

Posted by MacRostie Historic Advisors on Wednesday, June 24, 2015
Credit: Chicago Athletic Association
Credit: Chicago Athletic Association


In Chicago, everyone is invited to be part of the club.

The first half of 2015 has seen a rash of new boutique hotels open in iconic Chicago buildings that were purpose-built to be exclusive to members and account holders only. Today, you don’t have to be a member to book a room at the Chicago Athletic Club Hotel, the Hampton Inn in the Chicago Motor Club, or Virgin’s first hotel in the Old Dearborn Bank Building.

Accommodating the 21st Century Traveler in 19th and Early-20th Century Buildings

These historic building conversions are part of an international trend towards boutique hotels. As the industry heats up with the economic growth experienced over the last few years, hoteliers are focusing on a new strategy to accommodate a new type of traveler. These consumers prefer authenticity to consistency. They want to Instagram photos of architectural detail and eat among locals in hip and trendy restaurants. And what better marketing tool for hotels than historic buildings that provide a sense of place to their guest?

Chicago hotels are also benefiting from growth in the manufacturing and high-tech sectors and the business travelers attached to them. According to the “World Business Chicago” 2014 Annual Report, the last year saw 21,700 new jobs bolstered by companies like ADM, Braintree, Wanda Group and Yelp, and included $6.8 million in investment.

Tourism is, of course, a major factor in the success of the accommodations sector. According to some estimates, 60 percent of hotel developments have taken place in the north Loop/Michigan Avenue, where millions of tourists visit this area each year drawn by its proximity to Chicago’s Gold Coast and Magnificent Mile shopping area.

Financial Incentives for Hotel Conversions

According to a March 2014 New York Times article, the National Park Service estimates that 4.5 percent of all federal historic tax credits (HTCS) are used for hotel conversions in historic buildings. In Chicago, this 20 percent tax credit can be coupled with the Class “L” Property Tax Incentive that reduces assessment levels for 12 years. (In many other states, the federal HTC can be paired with state HTC programs.)

These financial incentives also provide inherent benefits to the community at-large. In most cases, historic tax credits make these hotel projects feasible for the developer and encourage sensitive preservation of historic landmarks in cities across the country. Hotels, in particular, also provide a mix of economic benefits that include generating substantial sales, room and property taxes and creating direct and indirect jobs.

The Value of Historic Consulting

MacRostie Historic Advisors (MHA) provided historic consulting to many of the most talked-about Chicago hotel conversions in 2015. Among the services provided were:

  • historic research that helped to provide the project teams with photos and documents that allowed for sensitive restorations of architectural detail,
  • federal historic rehabilitation certifications for these hotels that allows for the projects to obtain the federal HTC,
  • and Class “L” eligibility applications that allows for the reduction in property assessment values.

Our MHA Midwest team, based in Chicago, worked closely with our partners to ensure the success of these projects that relied heavily on historic tax credits. 

The Chicago Athletic Association Hotel
12 S. Michigan Ave.

Credit: Nick Fochtman / Curbed Chicago / Chicago Athletic Association Hotel
Credit: Nick Fochtman / Curbed Chicago / Chicago Athletic Association Hotel

This Venetian-Gothic 1893 Henry Ives Cobb creation was home to a private athletic club for men (and in the late 20th century, women) of the Chicago elite until 2007. AJ Capital Partners and Commune Hotels & Resorts took ownership in 2012 and transformed the intricately detailed structure into a 241-room hotel that opened in May. The rehabilitation restored bas-relief woodcarving elements, 19th century stained glass, ornate marble staircases and the terra cotta façade.

Virgin Hotel (OldDearborn Bank Building)
203 N. Wabash Ave.

Credit: Nick Fochtman / Curbed Chicago / Virgin Hotel
Credit: Nick Fochtman / Curbed Chicago / Virgin Hotel

Completed in 1928, architects Rapp and Rapp designed the neoclassical structure to be an office building for the Old Dearborn Bank. Despite the unfortunate timing of opening just before the Great Depression, the 27-story building has survived the greater part of a century and was acquired in 2011 Virgin Hotels (Virgin Group) as the company’s first hotel venture. This contemporary 250-room hotel retains the 1920s oak cigar bar, brass elevator doors in the lobby, and the original tiled ceiling. The crown jewel in the project is undoubtedly the reinstatement of the two-story lobby, the original banking hall that had been divided into two floors in the 1950s to accommodate more office space. Following rehabilitation guidelines that are intrinsic to the historic tax credit process, Virgin was able to creatively weave together modern touches with historic details to create a truly spectacular experience.

The Chicago Motor Club Hampton Inn
68 E. Wacker Place

Credit: chicagoarchitecture.org
Credit: chicagoarchitecture.org

Before the days of AAA, the Chicago Motor Club was a haven for early motorists. This 1928 Art Deco gem was designed by Holabird & Root, and the 17-story building now houses 143 rooms. A great deal of attention was paid the historic aspects of the building, including details in the three-story lobby such as the original John Warner Norton 29 foot wide road map. A 1928 Model A was even installed on a mezzanine as a nod to the year the building opened. Rehabilitation included careful restoration and repair of exterior terra cotta, stone, and limestone. The architecture team at Hartshorne Plunkard created an exquisite LEED certified design throughout that preserved the historic features of the building.

It’s a decidedly good time to be a traveler in Chicago. It is more about the destination than the journey for once, and that is because developers see the value in historic structures, made even more valuable by the generous incentives of historic rehabilitation tax credits. 

Topics: Chicago, MHA Midwest, adaptive use, hotels

Four Outstanding Chicago Rehabs Receive Awards

Posted by MacRostie Historic Advisors on Monday, June 22, 2015

We are pleased to announce that four of our projects from the MHA Midwest office were selected as recipients of prestigious Chicago preservation awards last week. All of these projects utilized the federal historic tax credit as well as city-offered programs to make their rehabilitations a reality.

Without further ado, the winners are...

___________________________________________________________________

Hampton Inn at the Chicago Motor Club

Chicago Art Deco Society | 2015 Joseph Loundy Preservation Award

CAC LobbyOn Thursday, June 18, we, along with other members of the project team, including owners MB Real Estate, were awarded Chicago Art Deco Society's first-ever Joseph Loundy Preservation Award. Named for the former president of the Society, this award commends the restoration work undertaken to preserve one of the finest examples of Art Deco architecture in Chicago.

The Chicago Motor Club was built in 1928 at 68 E. Wacker Place, and was an early automobile clubhouse for motorists in the Windy City who could find road maps and travel maps in this pre-AAA era. Standing 15 stories tall, notable exterior features of the building include it's slender footprint, limestone, terra-cotta bas relief panels, a steel frame awning with glass panels that allow you to see enjoy the fast moving lines of the automobile temple when standing at the base of the building, and the iconic Chicago Motor Club circular emblem of the letter "C" surrounding a red star. Inside, the lobby features an original 29 foot, two-story United States road map mural created by artist John Warner Norton, more bas relief detail, green and black terrazzo floors, and shimmering silver accents throughout.

The federal historic rehabilitation tax credit and the Chicago Class L Property Tax Reduction Incentive were used for this project.

___________________________________________________________________

The Old Dearborn Bank Building / Virgin Hotel

Commission of Chicago Landmarks | 2015 Chicago Landmark Award for Preservation Excellence

Virgin ElevatorsThe Chicago Landmark Award for Preservation Excellence is given to individual Chicago Landmarks or to buildings within Chicago Landmark Districts. The Old Dearborn Bank Building, now the first Virgin Hotel, is a distinguished recipient of this year's award class.

The John Buck Company and Virgin Hotels North America led a spectacular rehabilitation and adaptive reuse effort to convert this 1920s bank and office building into a modern hotel. Modern as it may be, the historic touches that were restored are the real show-stoppers. Terra cotta exterior features were repaired while the lobby harkens back to the original banking hall splendor that includes restored entry frame ornamentation, marble walls, terrazzo flooring, an original cigar bar and a mail chute in the first floor lobby. For all public spaces, coffered ornate ceilings and ornamental elevator elements were restored. In addition, sensitive treatments for new sprinkler and mechanical systems and the installation of a "green" roof exemplified how modern techniques fit in with preservation projects.

The federal historic rehabilitation tax credit and the Chicago Class L Property Tax Reduction Incentive were used for this project.


___________________________________________________________________

Steger Building

Commission of Chicago Landmarks | 2015 Chicago Landmark Award for Preservation Excellence


Steger BuildingAnother winner of a Chicago Landmark Award for Preservation Excellence is the Steger Building on East Jackson Boulevard, owned by CA Student Living. This 1909 Neoclassical Chicago skyscraper was originally built as the headquarters for Steger & Sons Piano Manufacturing Company and was part of the city's historic "Music Row." 

Under the new ownerships, the building was designated as a Chicago Landmark and has been adapted to house college students and also has retail space, but still retains many of its defining Classical features. The three-story base has intricate terra cotta details while the lobby is ornately embellished with decorative plaster and the walls feature terra cotta garlands, swags, medallions, rosettes, and foliated bands.

The federal historic rehabilitation tax credit and the Chicago permit fee waiver program were used for this project.

___________________________________________________________________

The Inland Steel Building

Commission of Chicago Landmarks | 2015 Chicago Landmark Award for Preservation Excellence

 

The Inland Steel BuildingThe only mid-century building on our list of award winners, the Inland Steel Building was built in 1958 with an innovative column-free high-rise design. It was the first skyscraper built in the Chicago Loop after the Great Depression.

Capital Properties received this award for the outstanding rehabilitation they undertook, primarily on the interior spaces and most notably the historic lobby. Energy efficiency upgrades and a new vegetative "green" roof also contributed to the success of the rehabilitation that led to a Class A rating for the building, an increase in tenant capacity, and energy reductions of about 65% on a typical floor.

The federal historic rehabilitation tax credit and the Chicago Class L Property Tax Reduction Incentive were used for this project.

Topics: Chicago, preservation awards, MHA Midwest