Historic tax credit leveraged investment

[Will Bradshaw]

Investment Info:

Other other investment.

Purchase price: $749,000
Cash invested: $6,300,000

This building was a former industrial laundry along an old rail-line that was converted to a linear park. We were one of the first movers on this corridor, converting the laundry building into 5,000 square feet of retail (coffee shop, bagel shop, neighborhood brewery), 12 apartments, and an interior parking garage. The project was only possible because of state and federal historic tax credit equity, which provided nearly $2 million in subsidy to restore the asset.

What made you interested in investing in this type of deal?

The historic tax credits generate substantial equity which can offset the risk and return profile of reinvesting in old buildings in already developed areas. And historic buildings have such cool stories. I love the stories.

How did you find this deal and how did you negotiate it?

We found it through a potential tenant who ended up not participating in the deal. But we liked it even without that tenant and pursued it.

How did you finance this deal?

With conventional debt, conventional equity, state and federal historic tax credits.

Lessons learned? Challenges?

This deal took a long time to get to the finish line. We had some entitlements challenges in the beginning, then got hit by a tornado, then had to work through some cost overruns, then had our lender and federal tax credit investor get closed by the FDIC, then Covid, then Hurricane Ida. But we have managed to stay the course and get it leased up and completed.