Functionally-Related Complexes and the NPS

Harmony Mills | Cohoes, New York (Photo credit: The Lofts at Harmony Mills)

Harmony Mills | Cohoes, New York (Photo credit: The Lofts at Harmony Mills)

A developer taking on a project involving a group of buildings that served together historically is likely to visit an arcane corner of NPS world called the functionally-related complex policy. Military bases, hospital complexes, industrial complexes, and many other groups of buildings all come under the umbrella of what NPS regulations define as a single resource AND if a single developer or related developers takes on a phased project involving two or more buildings in the group, then the project will be required to file a single Part 1, 2 and 3 application, and will not receive a Part 3 approval until all phases are complete.  

Clearly, where a phased project can be completed within a 24-month construction period, the issue of a single application and receipt of a Part 3 approval at overall project completion is manageable. Where our clients run into trouble—in addition to the design-related issue like the demolition of seemingly unimportant buildings—is when a multi-building project stretches over several years with early phases completed and placed in service, but not receiving a Part 3 approval to close the phase out.

Having early phases hanging out with no Part 3 approval creates at least two issues for developers and investor:

  • First, to the extent there’s an equity hold-back awaiting receipt of Part 3 approval, that hold-back will continue in place until later phases are complete, which in some cases could be years.
  • Second, if there are different lenders or investors for separate phases of work, those parties’ risk increases with time passing and development activities occurring that they may not have control over.

MHA has been successful over the years finding some limited solutions to the NPS’s functionally-related policy, but they have been one-off answers that have not necessarily led to written policies. We are currently leading an effort on behalf of the Historic Tax Credit Coalition to come up with some broad, permanent solutions that NPS will be willing to apply as overall policy guidance.

Stay tuned in the coming months for more news about that industry initiative.