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Two weeks ago, the National Trust for Historic Preservation
(NTHP) held a tax credit summit. The main topic? 50(d). Representatives from
the IRS attended the summit and the good news was that there was no bad news;
the bad news was that there was no good news.
So like planes over National in a thunderstorm, we remain in
a holding pattern relative to this issue.
The 50(d) issue has now been the focus of every major
historic tax credit conference since the revenue procedure was released at the
end of 2013, and the major focus of the Historic Tax Credit Coalition (HTCC),
as they work to try to get some guidance from the IRS on this issue.
Clearly, who foots the bill for 50(d) within a historic tax
credit transaction, the developer or the investor, is a significant issue since
the answer inherently impacts return on investment. Both parties should be
willing to take some risk, but understanding this part of the playing field
allows for a more predictable transaction.
Given all of the above, and the seemingly endless discussion
on the topic, an outsider may think that the industry is at a standstill, like
that plane over National.
Fortunately, from our vantage point, that does not appear to
be the case. It is probable that 50(d)
may have slowed some investor’s reentry into the market place and made it a
little more difficult to find new investors, but it has not impacted the use of
the tax credit across the country. Part of this is the return of a broader
range of real estate sectors.
MHA worked on many affordable housing projects through the
downturn – and we continue to add these types of projects to our portfolio –
but a look at our Midwest clients makes it clear the hotel market is back, and we
are consulting on a number of office and retail projects taking place around
the country. Some of this is based on
the market economics (Chicago, for instance) while a large part of it is driven
by the availability of the state tax credits. Wisconsin, Alabama, and Texas
markets are experiencing a rush on the purchase and rehab of historic buildings
after HTC programs were expanded in these states. And like all things Texas,
the projects there are big.
Here are a few of our projects that are moving forward and will benefit from HTCS in 2015:
A-Mill Artist Lofts (WH2)
Minneapolis, Minnesota
Client: Schafer Richardson, Inc.
Buffalo, NY
Client: DePaul Properties, Inc.
Somerset Place Apartments
Chicago, IL
Client: Zidan Management Group
Boston, MA
Client: Millennium Partners
The uncertainty over 50(d) may have made the recovery a
little slower in the HTC industry, but it is in full swing now. This may be
because of simple economics, or because developers just need to develop, but all
of it has a positive economic impact in the communities where the projects are
undertaken. What sometimes gets lost in
all of this, and making the “deal” work, is that a lot of historic buildings
are getting saved and repurposed into some of the most vibrant places to live,
work and stay.
Written by Albert Rex, Partner | Director, MHA Northeast
