Diverse Approaches to Partnership in Historic Property Redevelopment

By Melissa Jest posted 04-06-2016 10:22


Partnerships are as varied as the challenges and opportunities they seek to address, and preservation-focused partnerships are no different. Because the revitalization of the built environment touches nearly every facet of modern life—political, economic, social, and environmental—the possibilities for partnership are endless.

Sixty preservation leaders recently convened in Washington, DC, to contemplate the intricate but essential aspect of historic property redevelopment that is partnership. In their effort to figure out what partnering with a preservation-based property program looks like, the group examined some notable historic redevelopment projects that, like most development projects, were carried out through partnership but that also hinged on the contributions of the preservation partner.

 Mercantile Block in Providence, Rhode Island | Credit: Jef Nickerson via Flickr and Creative Commons

Good Team Cements Project-Focused Partnership

“The core is the deal—the money for the project,” explained Lucie Searle of AS220, a nonprofit art cooperative in Providence that seeks to “provid[e]a local forum and home for the arts, through the maintenance ofresidential and work studios, galleries, performance and educational spaces.” Most of the audience nodded in agreement.

Lucie heads real estate development for AS220, and her presentation concerned the organization’s Mercantile Block project, an adaptive re-use and historic restoration of a four-story commercial structure built in 1901 that stands in the heart of downtown Providence. Since Mercantile Block’s re-opening in 2010, AS220 had provided a vibrant mix of live-and-work studios, arts-related offices, and one-of-a kind local retail and commercial spaces. Two longtime business tenants, Clark the Locksmith and The Stable (formerly Wheels Bar), continue to operate in new, improved spaces at ground level.

Lucie’s handouts at the convening used a pro forma analysis to illustrate the financial implications of a historic real estate project by listing the annual income and operating expenses projected based on market assumptions of rents, vacancy rates, and debt service. (Pro forma analyses help determine net operating income generated by the property once in service.)

Lucie and her partners also calculated general development costs as well as the financial sources available to cover those costs. The Providence Revolving Fund (PRF), a local preservation organization, offered three financing options at various stages of the project and was therefore central to the project.  PRF provided AS220 with a $500,000 predevelopment loan at the beginning, a bridge loan pending approval of state tax credits and other long-term financing, and a $40,000 grant to support storefront improvements. Clark Schoettle of PRF explained, “Flexibility is key” on the part of the preservation partner.

PRF also advised on federal and state tax credit applications and on the storefront design, a role it shared with the project’s architect, Virginia Branch of Durkee, Brown, Viveiros & Werenfels Architects. Clark described Virginia as effective in “communicating compromise” when evaluating the building with both the owner and state historic preservation officials. Clark’s team member, project consultant Barbara Sokoloff, reiterated the importance of relationships and communication. “Understand what the client wants,” Barbara said. “Remember, you’re fitting their program into the building.”

Shared Purpose Inspires Partnership

It was the growing blight in the West Capitol Hill neighborhood that brought together the Redevelopment Agency of Salt Lake City (RDA) and the Utah Heritage Foundation (UHF). West Capitol Hill is one of nine active RDA project areas in the city and is both on the National Register and a local historic district, designated in 1982 and 1984, respectively. In 2011, the RDA sought to use repair and renovation as the primary “urban renewal” strategy in the 88-acre downtown neighborhood, setting the scene for a partnership with UHF.

“A board member was the conduit,” explained Elizabeth Wilson-Bradley, assistant director of UHF. “…[The] RDA was interested in partnering with a local [nonprofit] organization and [interested] in an educational component.” At the time, UHF’s educational program, Rehab It Right, had been teaching sensitive rehabilitation techniques to homeowners and landlords for about 10 years. These offsite workshops were very popular and helped engage local tradespeople, but this budding partnership with the RDA would allow UHF to hold its series on site at a current rehabilitation for the first time. “We would use [the RDA house] as a laboratory,” Elizabeth said.

But, with its knowledge of the historic and vernacular architecture of the city and its connections to a cadre of skilled local artisans and tradespeople, UHF was best suited for the role of general/rehabilitation contractor. And while UHF does have a revolving fund available to purchase historic properties for stabilization and resale, Elizabeth explained that RDA was well suited to act as the buyer of the house, given its quick access to public funds. “RDA was able to pay the utilities, insurance, and other holding cost,” she added.

After the necessary introduction, joint area visits, and respective planning processes, UHF and RDA selected the first pilot property at 571 Pugsley Street and signed a Memorandum of Agreement (MOA) to launch the Preservation At Work partnership. MOAs, which many nonprofits require to move forward with partnerships, allow partners to formalize a new business collaboration by documenting the results and findings from initial discussions and listing specific objectives, milestones, or final outcomes.

 Utah Heritage Foundation's first Preservation at Work Project House in partnership with the Redevelopment Agency of Salt Lake City. | Credit: Utah Heritage Foundation

The MOA between UHF and RDA outlined a project budget of $50,000 for 12 months of rehabilitation work. UHF also committed to securing at least $10,000 of in-kind donations towards the pilot project—a goal that the organization exceeded while also completing the work on time. The rehabilitation included revising the floor plan to allow common access to the rear bedroom as well as much-needed structural work and mechanical systems upgrades. UHF’s related educational workshops and volunteer projects included new flooring, new wood windows, installation of two custom-built leaded glass transom windows, chimney repair, eaves repair, and interior and exterior paint.

UHF marketed the house, and when it sold in early 2015, the two partners split the $15,000 of profit. “Revenue was not the driving factor here,” Elizabeth said. The Preservation At Work partnership is currently planning its next rehab project in West Capitol Hill.

The Value of Community Development Corporation Designation

Like many preservation organizations, the Waterfront Historic Area League (WHALE) of New Bedford, Massachusetts, was formed in 1962 to fight urban renewal. Today, it is among 44 Massachusetts nonprofits awarded Community Investment Tax Credits (CITC) allocations to support community improvement and economic development efforts. Last year, WHALE received $100,000 in CITCs designed to attract financial support for high-impact, market-based economic initiatives, and in turn, donors to WHALE have received a 50 percent state tax credit for their contributions.

WHALE became a certified Community Development Corporation (CDC) under Massachusetts General Law Chapter 40H, which qualifies the organization to receive CITCs as well as other state and federal support. The Democracy Collaborative defines CDCs as “nonprofit, community-based organizations focused on revitalizing the areas in which they are located, typically low-income, underserved neighborhoods that have experienced significant disinvestment.” Being both community-based and development-focused, approximately 4,600 CDCs across the country direct federal, state, and local funding toward those modern necessities that remain hard to reach for many working class and poor citizens. Certification criteria vary by state and/or local municipality and are usually informed by the funding sources available. Several other preservation organizations and preservation revolving funds, like the Galveston Historical Foundation in Texas, are also certified CDCs within their respective cities and states.

“The question of whether CDCs are doing rehab projects is an existential one,” said Joe Kriesberg of Massachusetts Association of CDC (MACDC). “The real question is what resources exist to support [those projects].” Many aspects of MACDC’s community work—increasing attainable housing, creating access to jobs, incubating local small businesses, and securing municipal and social services for residents— directly involve CDCs working with the built environment. Here, the community’s older and historic building stock and the resources dedicated to their reuse come into focus.

With preplanning costs and initial due diligence work identified as the first obstacles to redevelopment by both small for-profit and nonprofit developers, Preservation Massachusetts (PM) responded to the need for funding with its Predevelopment Loan Fund (PLF), launched in 2014. The PLF program allows PM to play an active role in fortifying working class neighborhoods replete with historic and older properties. To ensure wider use of the PLF program, PM is committed to reaching MACDC and its members.

“[PM] is very much driven … to market our program to different audiences who are actively doing projects but don't know of our program and how it can help,” said Erin Kelly, assistant director of PM. Through this emerging partnership, these two state-level organizations stand to design a prorehabilitation program built to meet the needs of the Massachusetts development community.

While there is no recipe for the perfect partnership, early engagement of potential partners, trust-building through transparency, and flexibility are key elements to achieving mutually beneficial outcomes. Whether a partnership connects organizations across public and private sectors or brings together entities within the same field, it presents unique opportunities. Each organization brings distinct expertise, perspectives, and networks that can be combined in powerful ways—making partnerships a best practice for effecting positive change in our organizations and the communities they serve.

Melissa Jest is the manager of the Historic Properties Redevelopment Program. For more information about the program or to share leads on historic property redevelopment in your community, please contact Melissa at hprp@savingplaces.org.

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