Talking Heads; Larry Curtis, WinnDevelopment

12 min read

Larry Curtis aspired to be a successful businessman from the time he was 10 years old. Walking through a large shopping mall, Curtis told his parents that “one day, I am going to own this place.”

It was a “preposterous” thing for a child to say, said Curtis, but the idea of thinking big, exploring new opportunities and succeeding, stayed with him. When he was 18, Curtis bought his first house with money he had earned from odd jobs throughout high school.

He fixed it up, and sold it using the proceeds to support himself through college.

Forty years later, Curtis is President and Managing Partner of Boston-based WinnDevelopment, one of the oldest and largest developers in the country. Since joining the company in 1987, WinnCompanies’ portfolio has grown from 3,000 units to more than 98,000 units under management in 22 states and the District of Columbia.

It is the largest manager of affordable housing in the United States.

Living and working in one of the oldest regions of the country, Curtis has become an avid supporter of using Historic Rehabilitation Tax Credits to turn dilapidated mills, schools and other commercial structures into affordable housing and retail space. Tax Credit Advisor sat down with him to discuss lessons learned using HTC as a funding source.

Tax Credit Advisor: Let’s discuss your early life. Where did you go to college? What was your major? How did you end up as an affordable housing developer?

Larry Curtis: I grew up in Massapequa, New York, which is famous for being the hometown of comedian and actor Jerry Seinfeld. Jerry was a few years older than me, but I knew his dad because he had a sign-painting business two doors down from my father’s law practice. I majored in Architecture at Cooper Union for the Advancement of Science and Art in New York City. Up until a year ago it was the only tuition-free, private college in America. You could study architecture, fine arts or engineering. Like many things in life, my career as a developer started somewhat fortuitously. I found a piece of land that I wanted to develop for affordable housing and I approached the WinnCompanies. I then began working for WinnDevelopment and built my career around the company.

TCA: What is your main motivation for utilizing Historic Rehabilitation Tax Credits? Is it purely for their economic value or do you have a preservationist streak?

Curtis: Some people view historic preservation as an obstacle to development. I don’t view it as an obstacle, but as a catalyst for economic activity. A significant portion of the Back to the City movement has resulted from historic preservation. There is clearly economic value in preservation through the use of historic credits, but I look at it more for its social impact and community benefit of rebuilding neighborhoods.

TCA: What percentage of your portfolio is historic? Do you routinely combine LIHTC with Historic Tax Credits? Are there cases where you only use HTC? 

Curtis: The number of historic projects we do varies from year to year. It’s no coincidence that after more states enacted Historic Tax Credit programs, like Massachusetts in 2003-2004, more properties in more communities got rehabilitated. When only the federal credit existed, development activity was focused in economically vibrant, large-scale cities. The addition of State Historic Credits spurred economic activity in smaller cities, like Richmond, Virginia and Lowell, Massachusetts. We often use Low-Income Housing Tax Credits because older properties are located in areas where, if only Federal and State Historic Credits are used, the effective net cost to rehab the property cannot be supported by the economic rents. For example, in Danville, Virginia, the average rent, even with the capital investment that comes with historic credits, can’t support the resultant capital structure. So the affordable credits are critical to making it happen. We have done some developments that used only Federal Historic Credits, but solely in communities where the economic rent is sufficiently high enough so that the Federal and State Historic Credits are sufficient to support the net cost of the capital structure.

TCA: What regions of the country do you look for potential deals? Do you look only in places that have the best state historic credits? What other factors come into play when choosing a property? 

Curtis: We operate in 22 states and the District of Columbia, but not exclusively in areas with Historic Tax Credit programs. We look for buildings which are important in communities, or parts of communities, or that may be architecturally significant, that could become, and should become a “magnet” for subsidy. I am not talking about background buildings, which may be historic, but are located in strategically less important areas—what I call “building on the side of the road.” It may be a good building to do, but it’s not the most important building to do in a given city. The ideal building creates an economic spin-off effect that leads to subsequent development. It’s a building that the Mayor, the City Council President, and the Planning Director – and the community – all are desperate to see saved and rehabilitated.

TCA: How does your background as an architect impact the work you do? What building types do you find most appealing? Which building types do you find the most challenging and why?

Curtis: My architectural background is very important to me, but that wasn’t always the case. Earlier in my career, I downplayed the fact that I was an architect. Most developers have backgrounds in marketing or business. In the world of finance, you were not perceived as a serious developer if you were a designer. That shifted when people began to see the value of the “green” movement and energy efficient design. When I promote a project today, I lead with the architecture. People understand the importance of design and planning.  Finance is important, but it needs to have the inherent design. As an architect, I love all historic building types. They are unique places with interesting details and fascinating stories. They are one of a kind. People love historic buildings and even more so when they are fully rehabilitated. We are best known for developing old textile mills, but we have also worked on public schools and other commercial building types. Unfortunately, many mills sit vacant because they are too big for the marketplace they are in. In Maine and Massachusetts, mill properties can encompass 700,000 square feet in a town of 20,000, because at one time everybody in town worked at the mill.  Then the world changed, the mill shut down, and has sat vacant for 40 years.

TCA: What important trends are you seeing in the Historic Tax Credit market?

Curtis: The ongoing revitalization of downtown Lowell, Massachusetts, where, to date, we have developed five million square feet of historic mill space, has attracted the attention of other communities. In the past week, I met with people in Maine, New Hampshire and Connecticut and they say, ‘hey, that city did that, we want to do the same.’ What they want is a structure which has been sitting vacant, or is largely underutilized, turned into something more vibrant. The trend is not unique to Winn, but to many developers who specialize in historic rehabilitation.

TCA: How has your participation on the Board of Directors for the National Trust for Historic Preservation impacted your work? What federal policy changes would you like to see enacted to improve the HTC? 

Curtis: Other than my long-term involvement in NH&RA, nothing has been more meaningful than my work with the National Trust. It’s a diverse Board of Directors both geographically, as well as by background, comprising real estate people, finance people, historians and politicians who have varying perspectives on historic preservation. My focus has been making sure the Historic Tax Credit isn’t looked at in a negative way, but as an essential tool for community revitalization. Some in Congress think that lowering tax rates solves everything, but we need subsidies, like the Historic Tax Credit, if we are going to continue rebuilding mills in Lawrence, Massachusetts, or old high schools in Cincinnati. The Trust is working diligently to make the credit more user-friendly for smaller properties located in Main Street USA. I take pride in these advocacy efforts, because if we don’t have Historic Tax Credits, much of the urban revitalization taking place today will cease.

TCA: How do historic rehabs compare with new construction from a cost standpoint? Has better technology helped make historic rehabs more economically feasible? 

Curtis: This question raises two false perceptions, that historic buildings cost more than new construction, and they are less energy efficient. Both are generally wrong. There is the occasional historic building that costs more, but if you think about it, the building is already there, and it’s built to last. The rehabilitation per square foot is far lower, and acquisition costs are relatively nominal. Roughly half of the energy for new construction is spent producing, acquiring and transporting materials whereas the historic building is already there. It creates energy efficiency in itself. Window replacement is an issue, but only one element of how to do these projects effectively. Some developers don’t want to bother dealing with the National Park Service and State Historic Preservation Offices, but often their guidance makes sense. There is a reason for the rules being consistent and it results in a better building and a better outcome, both economically and physically.

TCA: What one piece of advice would you give to a developer who is considering his/her first historic rehabilitation deal? 

Curtis: Without credits or subsidies these buildings are not assets, they are liabilities. You can hand out building permits and the math won’t work in most communities. Don’t buy the building and hope you’ll get the credits. Put it under agreement for a sufficient amount of time and with sufficient economic risk. Make it something that will serve the community, help the community, so that the community will support you in your efforts to get funded. Keep in mind that many State Historic Tax Credits are competitive and not automatic, like the Federal Historic Credit. Most states have a cap and a mechanism for allocation. As with anything in the affordable housing business, it’s all about time, effort and hard work. My business partner, Arthur Winn, has a saying: ‘you know that closing is going to occur, when every last bit of fun has been wrung out of the deal.’ There is an element of that in any development, but especially with historic projects, which can get enormously complex.

TCA: What makes a city or town attractive to you? Do you look for some level of local support? What form does that typically come in?

Curtis: I like all cities and towns. I am agnostic to where we go. But I want to find a building that becomes a magnet for the types of funding programs we utilize and a community that is realistic in its plan. For example, a moderate to low income community that wants luxury housing in a historic mill. They envision themselves transforming overnight, when in reality it can take years or decades for a community to turn around.

There also needs to be some level of local support: model municipal tax relief, HOME funds, or local officials saying this is an important project for the city. We begin with community input as community support is essential. If there is true resistance or the community asks for a program that is not financially feasible then we do not pursue the project.

TCA: You have said that money is made in the buying of a building, as much as the development. You must buy right. What does that mean?

Curtis: This not only applies to historic development, it applies to business in general. For example, a historic developer buys a building at the asking price, has done poor due diligence and concludes, ‘this building is in worse shape than I thought. It’s going to cost more.’ He hires architects who have never worked with historic buildings. He hires contractors who may have done one or two historic projects, but generally build new construction. He adds up the costs and says, “look at all these costs, then goes to the state and says we need all this subsidy, please provide it.’ The state comes back and says, ‘We notice that other qualified developers deliver the same product at a lower cost, what are they doing that you are not doing?’ It’s not just about buying the right building, it’s buying the right architectural services or the right construction company. It’s buying all the right services along the way at lower effective costs. I call it the assembly line process. It means doing things as efficiently as possible, from construction, timing, and process. We have largely eliminated the risk of the transaction by assembling a knowledgeable team which has done this dozens of times. That doesn’t mean we won’t make a mistake along the way, but we try to insure that we have the best possible project.

Darryl Hicks is vice president, communications for the National Reverse Mortgage Lenders Association and a 24-year veteran of associations managed by Dworbell, Inc., the management company of NH&RA.