Winter 2009 Update: MacRostie Historic Advisors

New Markets Tax Credit is Important Source of Historic Project Financing

Faced with one of the most severe credit crunches in generations, developers of historic tax credit projects are continuing to turn to a variety of government programs to attract additional sources of investment to their projects. While equity investment generated by historic credits provides an important piece of investment capital, the limited availability and increasingly difficult terms of debt financing mean that additional sources of financing are critical to making projects viable.

One tool being used to augment the historic tax credit is the federal New Markets Tax Credit. The NMTC program, established by Congress in 2000, is targeted at low-income communities and can be utilized by commercial and mixed-use real estate developments as long as less than 80% of gross rental income on a building-by-building basis is derived from residential dwelling units.

By design, the NMTC program has a great deal of flexibility, with investor capital ultimately funneled into projects in the form of either debt or equity. The program is particularly attractive to developers of historic buildings because the IRS has issued specific guidance allowing the combined use of the NMTC and the historic tax credit in the same project. Moreover, because the majority of historic tax credit projects are located in the low-income communities targeted by the NMTC program, there often is a natural overlap in eligibility for the two programs.

MacRostie Historic Advisors has provided consulting services to projects combining the historic and New Markets credits throughout the country, including Illinois, Louisiana, Massachusetts, and North Carolina. In Boston, the historic Mallory Building was rehabilitated as the Boston Healthcare for the Homeless Program’s headquarters and an outpatient clinic; the $36.2 million project utilized a combination of historic and New Markets tax credits. We continue to encourage our clients to combine these two valuable credit programs in their projects.

What We’re Working On:

From our Washington, DC office, we are servicing:

Rehabilitation of the landmark Art Deco-style Barclay-Vesey Building in Lower Manhattan following extensive damage in the September 2001 attacks. MHA also prepared an individual National Register nomination for the building;
Conversion of The Polaris, a 1952 hotel in downtown Fairbanks, Alaska, into 117 market-rate apartments; and
Mercy Housing’s Heritage Row and Heritage Corner projects in Savannah, Georgia which provided 70 units of affordable family housing using historic rehabilitation tax credits and affordable housing tax credits. For the project Mercy Housing was recently recognized with a National Preservation Honor Award from the National Trust for Historic Preservation.

Our Boston office is providing historic tax credit and National Register consulting services for:

Conversion of the historic Keith Paper Mill complex in Turners Falls, Massachusetts to a digital media production facility and film school. The 10-building complex will house a self-contained production facility for digital media, including stages, recording studios, and post-production suites available to outside filmmakers and for training students attending the Swift River Institute;
Utilizing state and federal historic tax credits for rehabilitation of the Linwood Cotton Mill complex in Whitinsville, Massachusetts for 75 units of affordable senior housing by E.A. Fish Associates; and
$17 million rehabilitation of the Copley Square Hotel in Boston, Massachusetts.

In Chicago we are consulting on:

Conversion of the former Johnston Emergency Hospital in Milwaukee, Wisconsin by Mercy Housing Lakefront for 46 units of permanent supportive housing for the homeless;
Rehabilitation of historic housing units at the Mid-South Naval Support Base in Millington, Tennessee under contract with Forest City Military Communities as part of a public/private initiative which seeks to improve the quality of housing and life for active military personnel and their families; and
Individual National Register listings for the Otis Elevator Company Factory and the Spiegel Office Building, both in Chicago, Illinois.