Thank historic tax credits for restoring Buffalo buildings - The Buffalo News

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Thank historic tax credits for restoring Buffalo buildings

The former Mentholatum Company building on Niagara Street made the list.

So did school buildings at two Catholic churches: St. Rose of Lima in North Buffalo and St. Thomas Aquinas Parish in South Buffalo.

Each was recommended last week for the State and National Registers of Historic Places.

While not the first places most people think of as historic, the buildings have something in common:

The Mentholatum and the church school buildings are being redeveloped as housing projects, and the historic designations will make them eligible for historic tax credits.

“We wouldn’t have even considered the Mentholatum project if we hadn’t been able to get the tax credits,” said Dennis Penman, executive vice president of Ciminelli Real Estate Corp.

“A rehabilitation of historic structures is exponentially more expensive than new construction, anywhere from 25 to 100 percent more,” he said.

Ciminelli Real Estate Corp. is redeveloping the onetime Mentholatum Co. headquarters on Buffalo’s West Side, at 1360 Niagara St., into housing.

The Mentholatum project is expected to cost $19.4 million, he said. But $2.7 million in tax credits from the federal government and $1.7 million in state tax credits will pay nearly a quarter of the total cost.

The historic designations provide an incentive for developers to take on financially risky projects. And that is especially true in Buffalo. Historic tax credits totaling $130 million were used to revitalize old buildings in Buffalo last year. That was more than anywhere else in the state and nearly one-quarter of all tax credits statewide.

Virtually every historic redevelopment project downtown over nearly two decades has taken advantage of the tax credits.

“Since the creation of the New York State tax credit program in 2007, Buffalo has and continues to lead in the number of projects completed, under construction and in development,” said Randy Simons, spokesman for the State Office of Parks, Recreation and Historic Preservation. “In addition to leading the state, Buffalo has emerged as a leader nationally, and has been influencing other communities to invest in their legacy stock of buildings.”

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'Fabulous tool'

Developers across the state, used credits to invest $550 million in older structures. Homeowners invested more than $12 million on home improvements in historic districts.

In September, the former Buffalo Milk Company Building, 885 Niagara St., was recommended for inclusion on the State and National Registers.

Larry Regan purchased the empty building three months earlier, and the design by HHL Architects calls for converting the Medina sandstone and Roman brick structure into 53 affordable housing units, eight residential units for homeless refugees and two commercial units on the first floor.

The deal would not have come about without the historic tax credits, Regan said. The project is tricky, in part because all of the original beams rotted and need to be replaced. Redeveloping the 1905 building was expensive.

“We’re basically putting everything back the way it was when it was a dairy,” Regan said.

He expects the Buffalo Milk Co. Building to open in late 2017.

A rendering by HHL Architects shows the residential redevelopment of the Buffalo Milk Company Building at 885 Niagara St.

Regan also redeveloped the Packard Building, 1325 Main St., several years ago using historic tax credits after the building was put on the historic registers. He converted the former car showroom and garage into apartments, with commercial space on the lower floor.

“The historic tax credits are a fabulous tool for preservation,” Regan said. “It’s also a positive tool for economic development by making sure the funding is available to rehabilitate a building back to its original grandeur and status.”

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Key to revival

Architect and developer Karl Frizlen, who is designing projects at the school buildings in St. Rose of Lima, St. Thomas Aquinas Parish and St. Teresa’s Church, called historic tax credits essential to historic preservation projects because they fill a critical gap in financing.

“The tax credits basically create 25 percent of equity in a total project, and a lender normally loans you about 75 percent, so that fills the equity gap,” Frizlen explained.

“The tax credits come at the very end, so when you roll over the construction loan into a permanent loan, you have to show about a 90 percent occupancy. It’s only when those milestones are achieved that the historic tax credit equity comes in. So you have to bridge that loan for the construction period and lease period,” he said.

“It has helped Buffalo tremendously, and literally revived dozens of old buildings that wouldn’t have been otherwise revitalized. I can guarantee you that, because they are complicated, expensive and not easy to do,” Frizlen said.

The state credits currently run through 2019.

Local historian Martin Wachadlo, who has teamed with Francis Kowsky to write many of the nominations for the historic registers, said the practice by the state has been a win-win for preservationists and developers.

“By equaling the playing field with new construction, it shows the potential for further use of these older buildings,” Wachadlo said.

He said he thinks sometimes about all of the downtown buildings knocked down decades ago that might have benefited from the government program.

“Almost all of those buildings would have been turned into loft housing with the use of historic tax credits if they had still stood,” Wachadlo said.

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