Funding Multi-Building Projects

6 min read

It just got easier  

The rules have changed a little on getting historic preservation tax credits on multi-building projects. But it will still be possible to do such large-scale renovations. In fact, the new guidance should make some big deals easier to do.

“The guidance makes it easier to do them relative to the investment side of it,” according to Albert Rex, a partner at MacRostie Historic Advisors LLC. That’s because the phases can be considered separate projects, rather than one project with only one National Parks Service number as before.

“Investors see it as risky” if multi-building projects are considered to be one project rather than several, he says. That’s because “it’s difficult to get final certification until all the buildings are completed,” according to Rex.

The new guidance could help the Southbridge Innovation Center in Southbridge, MA, where multiple buildings formerly belonging to American Optical are candidates for renovation over time. Two are in the works now.

A hotel and conference center was built on the site 15 years ago and in the planning stages now are two more buildings, one a cogeneration project to provide power for the complex and the other to be converted from a mill building into 48 housing units. Both Federal and State Historic Credits have been applied for this phase by the developer, Franklin Realty Advisors of Wellesley Hills, MA. The cogeneration project will cost $5.5 million, and the housing $19.5 million, according to developer Charles “Chip” Norton Jr. of Franklin Realty Advisors.

Historic credits did not play into the development of the 203-room hotel, which contains 24,000 square feet of meeting space. It was restored from one of the main American Optical buildings and opened in 2002 with the Department of Defense an early client.

The piecemeal approach makes for “a more manageable process,” Rex feels. “Bite off one piece. Be successful at that. Go on to the next piece.”

The buildings have to be functionally related and with one owner, he says, as with the many buildings on the American Optical site.

“There are still a number of them out there,” he says of these kinds of multi-building projects, naming as examples an auto manufacturing facility and a project at a former state hospital.

“A lot of them could benefit from subdividing,” he says.

The Southbridge project will be up against dozens of other projects for the tax credits but is hopeful about getting them. “They are capped at $50 million a year, and there’s a fair amount of competition,” says Rex.

Workplace and Homes
Southbridge Innovation Center comprises 150 acres (20 to 30 acres developable) with 1.2 million square feet of space and a dozen buildings adjacent to the Quinebaug River. A little less than half of that space has been leased to companies, such as Quinsigamond/Workforce Central, Karl Storz/Stonebridge Press and SBC Energy.

The cogen plant is “well along” and should be completed by the end of this year, says Norton. The rental project at 5-15 Case Street “is in its infancy,” he says. It is intended to be “high-quality living space, affordable to median-income earners in the area.”

He says it is possible some of the current 400 workers in the Innovation Center might lease apartments.

The brick/masonry buildings envisioned to be renovated for housing at 5-15 and 25 Case Street are more than a century old, with 270,000 square feet of interior space (70,000 of that at 5-15, the one being developed now). “With their expansive ceiling heights (in some areas over 16 feet), window size/spacing, and mature feel, these buildings are ideally suited for alternative uses, such as housing,” according to the center.

The development touts the potential for conversions. According to its website, “The center’s numerous single- and multi-story buildings are primed for conversion to office, industrial, warehouse, manufacturing and classroom space. Two of the existing buildings are readily adaptable for residential use, which could provide housing for the full-time training, technical support or other operational staff.”

A total of three or four buildings are still available to be developed, according to Norton, suitable to high-tech, light manufacturing, or office uses.

There is still some undeveloped land at the site, Norton says, that was a landfill for American Optical. A platform for solar energy is envisioned there.

Old Guidance vs. New
Rex, in a presentation on multi-building preservation projects made to the National Housing & Rehabilitation Association, sketched out the differences between old and new based on the NPS guidance.

The key points were that phases could be treated as separate projects and receive separate NPS numbers. Determinations will be made on a case-by-case basis. The phases would have to be determined at the beginning of the project, and there is no “cumulative effect:” each project must meet standards.

The separate projects will be allowed if there is a gap of at least one year between phases, Rex told the NH&RA.

The guidance allows developers to separate complexes into multiple projects by use or other groupings, he briefed the group. This “typically would take place with large campuses that service different and diverse uses. For example, a mill would probably not fit this guidance but a former state hospital or college might.”

Other uses might be “large housing complexes consisting of many separate or semi-attached houses or buildings, multiple streets and shared land area under common ownership, or a phased project that stalls.”

…and a Museum
An interesting sidebar to the Southbridge Innovation Center project is that American Optical’s Southbridge complex is old enough and historic enough to rate its own museum. The Optical Heritage Museum at 12 Crane Street has more than 3,000 items from the company’s long history, including microscopes, Lensometers, multifocal and antique spectacles.

According to the museum’s website, which touts the benefits of optics, “every day our lives are improved by the inventions, many of which were created by American Optical… These include anti-reflective coating on our mobile phones, clock faces, iPad, computer and television screens. Other inventions in the medical field include powerful microscopes for diagnosis and research, world safety standards and specialized glass used in car windshields, to the first blood pumping machine.”

An article in an old company newsletter traces American Optical’s history in Southbridge to its incorporation on Feb. 26, 1869. It was a big operation. By the 1930s there were 36 connected buildings sprawling over 17 acres. The AO plant was closed about 40 years ago. The museum was opened on June 18, 1983 to help mark American Optical’s 150th anniversary.

Story Contacts:
Charles Norton Jr.
President, Franklin Realty Advisors,

Albert Rex
Partner, MacRostie Historic Advisors LLC,

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.