NewsFeb 20, 2015
"Making history profitable"
Our latest adaptive reuse project, the Livingston School, was featured in the Albany Business Review
The below article was authored by Michael DeMasi and can be found online here, in the Albany Business Journal
Wearing a white hard hat, green rain coat and black rubber boots, Tim Langhan was doing the back-breaking labor of historic restoration.
Langhan, who works for subcontractor Brisk Construction, was bent at the waist on a recent Wednesday afternoon, using a sander to smooth the gouges of slate treads on a staircase inside the formerPhilip Livingston Junior High School in Albany.
Water spraying from a hose kept the sander cool as Langhan removed the pockmarks and scuffs caused by thousands of shoes scurrying up and down the stairs during the 75 years the school was open on the city's north side
The resurfacing is part of a $30 million project that will convert Philip Livingstoninto 103 affordable apartments for senior citizens, a renovation that wouldn't have been financially possible without state and federal historic tax credits.
Developers in upstate cities are increasingly relying on the credits to lure outside investors, provide equity, and offset the high cost of preserving and converting landmark properties into new uses.
Besides the Philip Livingston project, recent examples include The Adelphi Hoteland The Algonquin retail/office building in Saratoga Springs; Harmony Mills in Cohoes; Proctor's Theatre and the Keenan Building in downtown Troy; and Sixty State Place and the Dewitt Clinton hotel in downtown Albany.
The fate of the Dewitt Clinton, which is being converted into a 204-room luxury hotel across from the Capitol, could have been the same as scores of private and public buildings upstate that have badly deteriorated or were demolished because their size or use were considered obsolete.
According to Columbia Development Cos., the Albany firm that's rehabbing the Dewitt Clinton, historic tax credits provided gap financing that allowed the project to move forward in the first place; and the credits are important to such projects because of the higher costs tied to meeting historic standards. Columbia Development also notes that the credits offset the higher real estate taxes found in urban settings.
Cindy Hamilton, vice president at Heritage Consulting Group, a Philadelphia firm that advises owners and developers, said those interested in pursuing tax credits on large projects must assemble architects, accountants and tax attorneys who specialize in historic properties.
"It's really important to have all those people on the team early so they're identifying those issues to avoid delays that will cost time and money," Hamilton said.
In New York, where the 20 percent federal credit is matched by the state, up to 40 percent of qualified renovation costs on a project can result in dollar-for-dollar savings in federal and state tax liabilities.
It's a complex process, one that requires structuring deals in a way that the credits are not directly sold or transferred, but are integral to an ownership partnership between the developer and the financial institution, said Marshall Phillips, principal of CohnReznick LLP, a New York City accounting firm that has advised clients on historic projects.
At its most basic, if an institution invests in historic tax credits, that institution can lower its own tax bills. Credits are secured for less than their full value. For instance, a $1 credit could cost investors 92 cents. The credits can offset federal and state taxes after the renovations are finished and the work certified by state and federal officials.
KeyBank and Citizens Bank are investing $8.4 million at Philip Livingston in exchange for historic tax credits, said Rob Charest, senior vice president at Boston Financial Investment Management, a syndicator for the credits. Separately, $17.1 million will be invested for low-income housing tax credits.
"There is strong demand for historic credits," Charest said. "When paired with low-income home credits, they are a lot more desirable. There's a much bigger market for that."
Nationally, there were $3.4 billion in certified historic rehabilitation costs in fiscal year 2013, according to the National Park Service, compared to $3.15 billion the previous year.
The federal historic tax credit was established in 1976; New York enacted its first in 2006.
Much of the activity in the early years of the program was centered on big projects in Manhattan and Buffalo, state officials say, but changes in the law in recent years have broadened interest to include historic buildings in Albany, Schenectady, Troy and other upstate cities.
Last year there were 89 historic tax-credit proposals approved in the state, a record number, totaling $468.1 million. That was a decline from $1.1 billion the previous year, but officials said the drop was due to the smaller size and scope of the individual projects.
"The combination of the federal and state rehabilitation tax credits is making projects viable in smaller communities that may have never used the credit before," said Dan Keefe, spokesman at the state Office of Parks, Recreation and Historic Preservation.
In downtown Troy alone, there are 14 pending applications totaling nearly $23 million in historic renovation credits, compared to slightly less than $10 million in 2011. The total in Albany County is now nearly $67 million, including at Philip Livingston.
Built in 1932, when Albany's population was growing, the large, sprawling school at 315 Northern Blvd. is one of the city's most architecturally significant structures, combining Colonial Revival and Art Deco styles. Last summer, it was nominated to the State and National Register of Historic Places.
"That [school] has been shuttered since 2007," said Adam Stein, vice president of development at WinnCompanies in Boston, which bought Philip Livingston for $2.5 million after the city school district closed it because of declining enrollment and poor student performance. "That's telling."
The wide hallways, classrooms, high ceilings and other features simplified the process for converting the former school into modern apartments spread across three floors. The studios, one- and two-bedroom units will lease for $620 to $940, depending on income. Occupancy is tentatively set to begin in April.
The original classroom windows were all replaced with energy-efficient glass, but the heights are the same, letting in plenty of natural light. The apartments have sections of the original blackboards hanging on a wall.
The two-story library, with wrought-iron balcony railings, brass light fixtures and green radiators underneath soaring windows, will become a gathering place for residents. The school's red-brick and limestone exterior have been cleaned and re-pointed.
"We didn't have to do a lot of major reconstruction to change the building's use," Stein said. "The building laid out very well for conversion to residential housing."
Two areas won't be renovated because of their large size and the cost: The auditorium, with its stage and many rows of fold-up wooden seats (some with graffiti scrawled on the back); and the gymnasium, with its pull-out bleachers and "Livingston" encircling the center of the basketball court.
Both will remain, as if frozen in time.