By James Fink, originally published in Buffalo Business First on Dec 15, 2017, 12:06pm EST .
Historic tax credit deadline spurs closing rush by developers
The deal by Rocco Termini to acquire two buildings on Chandler Street may be the tip of the iceberg for development interests looking to tap into federal historic tax credits.
With the fate of the program in the balance as part of federal budget negotiations, Termini and others are scrambling to close transactions for historic properties that would qualify for tax credits. The program is on legislative life support as Republican leaders want to eliminate or severely reduce the initiative.
“I call this deal a forced purchase because who knows whats going to happen with historic tax credits,” Termini said.
Termini paid $950,000 for the two buildings, located at 27 Chandler Street and 37 Chandler Street, respectively, buying them from Buffalo businessman Henry Sontag Sr., according to documents filed in the Erie County Clerk’s office.
The 27 Chandler Street building was constructed in 1901 for Jewett Refrigeration Co. The three-story, 24,260-square-foot building is vacant.
The neighboring 37 Chandler Street building, constructed in 1902 for the Double Brass Cornice Brake Co., is also vacant. The 12,760-square-foot building has two stories.
For now, both properties will be land-banked. The properties continue a series of Chandler Street transactions that Termini has undertaken in the last year as he plans to create a business incubator and light manufacturing corridor along the once overlooked Buffalo street.
Historic tax credits have played a critical role in those projects.
Under the current proposal in Washington, any potential historic tax credit project must be in a developer’s portfolio by Dec. 31 and certified by the National Parks Service as historic-eligible by June 30. The tax credits will remain in effect for two years for any grandfathered building.
Beyond, it looks bleak that the historic tax credits program will survive the budget showdown in Washington.
“No doubt, it is going to hurt Western New York,” said Adam Walters, a Phillips Lytle LLP partner and commercial development attorney.
In Erie and Niagara counties alone, some 70 projects tapped into the historic tax credit program that generated more than $486 million in private-sector investment. Among them: The Hotel Henry on Forest Avenue; Turner Brothers Lofts on Niagara Street and Parkside Candy Shoppe in Buffalo’s University District.
“It would be a travesty if these credits are taken away,” said Nick Sinatra, whose firm Sinatra & Co., used historic tax credits on six different projects. “I am very worried about what might happen.”
Local officials said the historic tax credits, which provides developers tax breaks and incentives for restoring buildings that are at least 50 years of age or older, played a critical role in virtually all of the adaptive reuse projects that have been part of the region’s economic development pipeline for the past decade. The federal program is often used in tandem with a similar program from New York state as well as incentives and tax breaks offered by regional industrial development agencies.
The National Trust for Historic Preservation estimates for every dollar in federal tax credits awarded to a given project, the U.S. Treasury sees a $1.26 return on that investment.
Walters predicts during the next two weeks, there will be a rush by developers to close deals on historic properties so that they can qualify under the grandfather provision.
“It is definitely going to add to the typical end-of-the-year rush,” Walters said. “And, to make the grandfather date, it will take a Herculean effort.”