Historic Tax Credits

There are several reasons this project is in progress, but it would not make any financial sense (and consequently likely not be in progress) if the development entity was not receiving Federal and State tax credits for their effort. How does this process work?

First….on the amount. All capitalized costs are subject to credit…so, all costs of construction/design/reasonable development fees/legal fees/construction interest are all subject to a state credit of 10 percent and this building received a 20 percent federal credit. Do the math…..this is worth the effort!

The first step is to prepare and submit a Part 1-Evaluation of Significance. Because this building is located within a national register district (Charleston Downtown Historic District), this first application is pretty easy and likely to be determined by the State and Federal Historian as a contributing structure. The application describes in words and pictures the history of the building, the neighborhood and relevant building details. This application was prepared by John Harris.

The next step, the Part 2 application, describes much more specifically your intention with this building. Here is how we managed that process. John Harris had specific experience in this process as he and I had worked together on two other projects both of which had received a historic designation and the applicable credits. So, I had good confidence in his abilities. John began the process by meeting with Chris Knorr with the State Historic Preservation Office. John described our anticipated alterations/improvements to the building and together they reached what they felt would be a design that likely would be approved. Next, GBBN put pencil to paper and began the process of describing the alterations in plans. In schematic and development stage, these drawings bounced back and forth between John, me, Bailey and Glasser and Chris Knorr. We submitted to Chris and he reviewed and sent this along to the Department of the Interior (National Park Service). It was reviewed and returned with comments….sort of a conditional approval.

A conditional approval was not what I felt we needed so GBBN incorporated these comments into a revised submission and we sent this through the process again…State and Federal….and it was returned approved..period. Exactly what we wanted/needed.

These tax credits are a bit more complicated than other forms of tax credits. The development entity can only use the credit against passive income. Now..the most common type of passive income is rental income and you’d need a pretty good annual tax liability to be able to use the credit. (This can not be applied against portfolio income….income from stocks or earned income.). So, there is market for these credits that you can “sell” and receive about 90 cents on the dollar. This is a specialized piece of legal work because the investment tax credit investors actually need to own the subject property.

Anyway…we are in that stage right now.

More on this process later….but it is been a very positive experience and is the primary reason this building is being restored.

Tuesday's Demoliton Update

So…..demolition is proceeding very nicely. The structural engineer that is employed by GBBN is a local firm (Ham Engineering). Jud Ham and 2 of his engineers walked the building this morning with super Dave Osborne and me. We have one column that needs to be replaced that was not anticipated and a few other areas that need to be reinforced, but all things considered, we are in pretty good shape. We are saving a few bucks as the demoltion is moving faster than anticipated and so some budget has been "created" for this unanticipated work...right Erich??? (Erich is PCC's project manager).

The demolition on the lower level (OK..Some of you call it the basement but from now on it is referred to as the lower level) and floors one and two will be complete by the end of this week, more or less. Ham Engineering will completely review the building in detail next week, literally joist by joist, so we don’t have any structural oversights.

A Thousand Barrels of Oil a Second

GBBN and I have had casual conversations about certifying this building under the LEED process.

I think it worth noting that from an elevation of 30,000 feet looking down on this project, it is a very carbon positive event to have not destroyed this building and thus driven the demand for new space to be satisfied by a new structure. What we are fundamentally doing is recycling a lot of the building products and we are consequently not buying steel/concrete/bricks/wood to start afresh. While we have take tons of product to the solid waste facility, a whole lot still remains in place and is being recycled and put into use.

So, whether we LEED certify or not, I think credit should be given to Bailey and Glasser for the drive to restore this building and not only save a part of Charleston’s history but be fundamentally carbon friendly in the process.

Now…along the way…it is clearly our intent to be as green as we can be within time and economic constraints. There is no question in my mind that we are at or near Peak Oil and we will be paying substantially more for the energy projected to operate this building in the not to distant future. If you are interested in a good read on this topic, I point you in the direction of a book entitled A Thousand Barrel of Oil a Second which I started reading this weekend.

Fascinating!

No e-mail today...good deal!

So, today I (rather my tech guy Scott) moved my server to a new (read less expensive) location and I had no e-mail. I decided I’d take the day to trade out my files from my last major project (Soaring Eagle Lodge) and make way for convenient reference filing for the 209 project. You might think the above is simply a commercial radiator cover (located in my office)…and it is. Before today, it was the home of all of the Bailey and Glasser files. And now they are all tucked away.

Those of you that have spent any time around me will hear me refer to the “next action”. I have been a student of work flow management as presented by David Allen for about 5 years. Being in the construction/development business, I have always been about Getting Things Done and if you have never checked out this process, I think you might want to give it a shot.

Anyway, here is another photo of my tickler system. To learn more about this handy tool, checkout Getting Things Done.

The Pray Construction crew will have demoltion on floor one and two just about completed by the end of next week and a good bit of the basement as well. They have taken close to 70 tons "stuff" out of the building.

Some Early History

This property was once known as the Shrewsbury Block (that is what the building was called) and was constructed in 1892-93. It was owned by H.D. and Pidgie Q. Shrewsbury. In the above picture (which was taken on March 4, 1949 when Woolworths burned), one can see on frame left the northernmost part of the Shrewsbury Block that was originally the home of C.J. Rudesill & Son, queensware (which I'm guessing is some type of store that sells tableware china) and later housed Woolworths. Next comes the current building (only remaining portion of the Shrewsbury Block) which then house H.H. Kresge (one of two Capitol Street locations) and the remaining portion which was sold to the Butts family. In the early years, this building was occupied by Hanna Grocery; Markell Hardware; Morris Grocery; Howell, Shanklin & Dowman, Plumbing; Davis Grocerie and our building which was home to Diamond Shoes and Garment Company. Right...the first home of the Diamond Department Store. More on all of this in future posts...but if any readers can share any tidbits of history or point me in the direction of photographs, I'd be most appreciative.

Soon we will discuss W.B. Geary, the long time owner of this building and real estate entrepreneur extraordinaire!

Process verses Content

A real estate development project, at least one that involves a construction project, is marked by two separate but related threads or silos of work that I refer to as process and content. An example I discussed with managers at Pray Construction (when I was still at Pray) was the residential experience of say installing a new door in a house. You…as a friend of the homeowner that just had a new door installed in their house…come in and remark “What a great door!” Your homeowner friend rolls his eyes and accepts the compliment and tries to take you onto another topic. You resist and drill in. "Why are you rolling your eyes?”….and then you listen about how long the installation took, how much is cost, what a mess was made every day…..fill in the blanks…you have heard it. I call this process and for your homeowner friend, it is all but impossible to unlink the process involved with the door installation from the content…what the door looks like and how it works.

Above are two employees of Pray Construction Company…J.C. Starcher and Dave Osborne. Both of these men add a lot of positive “stuff” to the process which is now demolition, referred to in the industry as selective demolition. (They are removing lath and plaster from walls and ceilings, in addition to gypsum board, concrete overlay on some floors, and quite a bit of other, non relevant…from a historical perspective…building products). They are highly productive workers and add a lot to the process. I think Dave Osborne has worked for Pray Construction over 20 years. Dave and I have been involved in a lot of projects over the years and the project is benefiting in a big way from his involvement. J.C. has the type of work ethic that used to be a lot easier to find and now is getting increasingly rare as our kids learn how to make web pages instead of fixing the fence. Anyway, J.C. like David will leave his mark on the process. As far as the content goes, Pray Construction is performing the demolition work on a time and material basis, so the client is about to feel the benefit from their hard work reflected in lower costs I think…all while not hurting anyone.

Good deal.

By the way…J.C. has another career as a model..checkout http://www.rockinleather.com/ and see if you can find him.

Media Reports

Here is a links to a media report on the project from early February.

Charleston Gazette

Charleston Daily Mail

I'm not sure how long these links will be up.

The Development Team...to date

209 Capitol Street will be occupied on the first and second floor by Bailey and Glasser who now occupy the building known locally as The Scott Drug Building at 227 Capitol and lease space in another nearby building. I was contacted shortly after they had made an offer on this building to Charleston Urban Renewal who had purchased the building from the W. B. Geary Trust several years ago I believe so it would not be demolished and become a parking lot. Good job by CURA.

I think I was initially hired to help B&G determine how much it would cost them to renovate the building (based on my experience in my former life as the founder of a major WV construction company Pray Construction Company. Too, I knew Ben Bailey fairly well as Pray Construction designed and built the Bowles/Rice building in Charleston in 1996 where both Brian Glasser and Ben and their partner Chuck Little worked) and that engagement pretty quickly morphed into the preparation of a proforma for the development projects. Once the first run of the proforma was completed, it became clear that the financial success of the project depended on the project being awarded tax credits by the State and Federal government, so that led to the engagement of Bastian and Harris Architects to assist with many of the technical aspects of the preparation of the submission to the State historian and the Department of the Interior.

As the design emerged in response to the firm’s program of requirements as well as the requirements of the Department of the Interior, I decided to engage the architectural firm of GBBN from Cincinnati that I was familiar with due to our shared experience at Soaring Eagle Lodge at Snowshoe Resort.

Of course, one wants to be reasonably well assured that the design is not going down a path that is not responsive to our construction budget, so I negotiated a pre-construction services agreement with Pray Construction which more or less completed the initial team.

So….to date the team includes Bailey and Glasser (owners), PrayWorks (development manager), GBBN and Bastian and Harris (architects), Pray Construction (contractors).

Many more team members to follow....it takes a village…right?

Welcome to 209 Capitol BLOG!!

Somehow you found your way to this BLOG which is intended, at this point, as a test. My hope is to provide some illumination for interested parties about the process of developing 209-213 Capitol Street, a historical building located in Charleston West Virginia. The name of my company is PrayWorks. On the 209 Capitol project,I am what is known in the development world as a “fee based developer”, which means that I am paid a fee to manage the development process and do not have any of my own $$ in the deal as an equity participant. The last project I developed is at Snowshoe Mountain resort and is known as Soaring Eagle Lodge. On that project, PrayWorks was the fee based developer and also an equity investor.

So…what does that mean…what are the key deliverables? Well….more of that to follow in days/months ahead…..but basically working with my clients I created a financial template for the life of the building asset and then went to work helping to make the cells on that template or proforma come to life. Items such as hard construction costs, interest rates, income from a lease and so forth all came into my view shed.

I’ll be taking a look at all of these areas in more detail and you will hopefully be able to follow along. Time will tell of course. I’ve never published a BLOG before, so I’m not sure if I have the time available to keep it current.