Winter 2008 Update: MacRostie Historic Advisors

Condo Slump Makes Historic Tax Credits an Attractive Option

With the softening of condominium sales nationwide, many developers of historic buildings are switching to residential rental projects, with federal historic rehabilitation tax credits used as an equity financing source. Condos generally can’t use historic tax credits, but apartment developments have always been a strong segment of the historic credit market. While the use of the credit requires holding a property for five years, rental projects can be converted back to condo sales after that period when the condo market presumably will have regained strength. This rental-to-condo strategy provides a source of up-front equity while also presenting an attractive exit strategy for the developer.

This trend is widespread, says Yanni Tsipis, Senior Vice-President of Meredith & Grew’s Development & Advisory Services Group in Boston, Massachusetts. “Many condominium projects have stalled due to the decline in the housing market combined with the current credit crunch", says Tsipis. “We are seeing developers use the historic credits as a way to keep their projects going as multifamily rental properties while preserving the asset’s value. The credits have a proven track record and are a great way to provide gap financing in this challenging environment.”

If you have questions about how to qualify for and utilize the 20% federal historic rehabilitation tax credit for a project, please contact us.

What We’re Working On:

From our Washington, DC office, we are servicing:

Rehabilitation of the former R.J. Reynolds Tobacco Factory complex in Winston-Salem, North Carolina by Struever Bros. Eccles & Rouse.
Reuse of the 1954 Pontchartrain Motor Company building in New Orleans, Louisiana for mixed use.
Conversion of the former Municipal Library in Jackson, Mississippi for mixed use; the building is significant as the location of a 1961 watershed event in the Civil Rights movement in Mississippi.

In Boston, we are consulting on:

Conversion of the former Charlestown Chew Candy Factory in Everett, Massachusetts to 90 units of market-rate apartments.
Utilizing state and federal historic tax credits for the rehabilitation of a nearly one million square foot former warehouse and shipping terminal constructed in 1918 as part of the Boston Army Supply Base.
Reuse of the Harmony Mill complex in Cohoes, New York for over 136 units of housing.

Our Chicago office is providing historic tax credit consulting services for:

The Inland Steel Building, a 1957 Chicago Landmark by Skidmore Owings & Merrill, which is being updated for continued office use.
Rehabilitation of the 1912 William McCormick Blair house on Chicago’s Gold Coast using the Illinois Property Tax Assessment Freeze Program.
Conversion of the 1927 Chatelaine Tower apartments to a boutique hotel.

Recent and Upcoming Speaking Engagements:

In November, Bill MacRostie participated in a training course in New Orleans for Rockefeller Foundation Redevelopment Fellows on the use of historic tax credits as a tool for community revitalization. Sponsored by the Center for Urban Redevelopment Excellence at the University of Pennsylvania, the program seeks to foster community development projects that have direct benefits for low-income residents and distressed communities in the New Orleans region. The fellowship is made possible by a grant from the The Rockefeller Foundation.
In January, Bill will be a featured speaker at the Tax Credit Finance Course sponsored by the Council of Development Finance Agencies in Washington, D.C.
In February, at the Historic Tax Credit Developer’s Conference in St. Petersburg, Florida sponsored by Nixon Peabody LLP and Reznick Group, Albert will moderate a panel including staff of the National Park Service and the Florida State Historic Preservation Office to discuss new federal guidance on historic rehabilitation issues such as new construction, energy efficiency, historic complexes, and window sash.
In March, Bill will speak on historic tax credits for military housing privatization and garden apartment development at the annual meeting of the National Housing and Rehabilitation Association in Bonita Springs, Florida.