Frank Lloyd Wright, Louise Bethune and Louis Sullivan would be relieved, and proud. Historic renovation projects have become the rage in Buffalo. One local developer after another has jumped in to restore the city’s treasure trove of older structures – a radical shift after decades of focusing on sprawling business parks in the suburbs.
Area developers are snatching up older downtown commercial buildings and converting them into apartments and office space. They are getting a big assist from generous tax credits that pay for up to 40 percent of the costs. Developers say that is needed to make projects in Buffalo – where rents are relatively low – financially feasible.
The boom in reviving older buildings could have a short lifespan. The work is dependent on state and federal tax breaks that may not be extended, and some are capped, limiting the savings on large projects.
While it lasts, however, Buffalo is the state epicenter for historic reuse projects.
“It’s actually been astonishing,” said Ruth L. Pierpont, deputy commissioner for historic preservation at the Office of Parks, Recreation and Historic Preservation, which administers the state credit. “This is absolutely remarkable, not just in the context of New York state, but also nationally.”
In the past few years, dozens of aging Buffalo buildings have been renovated and converted under state historic preservation guidelines. Rocco Termini, widely credited as one of the pioneers in historic renovation projects in Buffalo, used $8 million in tax credits for the $42 million Hotel@The Lafayette project. Jake Schneider’s 136 Lofts in the former Ailing & Cory building at 136 N. Division St. used $3.24 million in tax credits for a $15 million job. Iskalo Development Co. relied on $4.7 million in credits to restore the Electric Tower for $28.3 million. And Karl Frizlen’s Horsefeathers on the West Side used $1 million for the $3.6 million project. Just last year, the state approved 30 more rehab projects in Buffalo.
Meanwhile, the buildings get returned to the property tax rolls.
“Being able to reuse the legacy buildings that we have in this community is critical,” said Buffalo Mayor Byron W. Brown, who has called for 1,300 new units of housing in downtown Buffalo by 2018. “We believe that if we can restore even more of these structures, not only can we make the economy of Buffalo more vibrant but we can also preserve our great architectural heritage, which people come from all over the world to see.”
Two incentives factored into this resurgence. One is desire, the second is financial help.
Developers saw a desire, from young people and empty-nesters, to live in cities and buildings with character.
“People want to live in an apartment that’s cool, and you can’t get a cool apartment in a drywall box,” Termini said. “There’s no charm.”
“It’s pretty neat to know what was going on here over 120 years ago,” added Timothy Vaeth, president of TM Montante Development.
But restoring century-old buildings, even if they are architectural gems, takes money. That’s where financial help came in the form of tax credits, both state and federal.
“The projects don’t pencil without the tax incentives,” said Nick Sinatra, head of Sinatra & Company Realty. “The rents that an investor or developer can get on the finished product won’t justify the cost.”
Developers use a pair of equal tax credits of up to 20 percent each for “qualified expenses” on commercial renovations for “certified historic structures,” as determined by the National Park Service. A separate 10 percent federal credit is available for nonhistoric buildings that opened before 1936.
The state credit, which piggybacks off approval from the National Parks Service, will be refundable to developers on buildings placed into service after Jan. 1, 2015.
The primary federal credit has existed for almost 40 years but wasn’t actively used upstate until 2006, when the state credit was introduced. That doubled the value of the program for New York projects, and placed a special focus on low- and moderate-income communities.
While the federal credit is unlimited, the state credit is capped at $5 million, so a project of more than $25 million – such as reuse of the AM&A’s building on Main Street – would still get the maximum from the state. That’s why Termini backed away from doing that conversion project. He and other advocates have been lobbying to maintain and enhance the credits.
Last year, amid heavy lobbying, lawmakers passed and Gov. Andrew M. Cuomo signed legislation extending the state credit through 2019. But it didn’t include a higher cap. Now preservationists are lobbying to maintain the federal credit, too.
“I worry if that were ever to lapse and they didn’t renew that credit, because it would have a really devastating effect on our area,” said Tom Yots, executive director of Preservation Buffalo Niagara.
Leading the way
With these incentives, Buffalo developers saw opportunity and possessed the wherewithal.
A few high-profile projects, like the Hotel@Lafayette and the neighboring AM&A’s Warehouse by Signature Development, got the ball rolling. Now, more than 100 Buffalo-area projects have been submitted for approval since the state credit began seven years ago.
The separate state tax credit for historic residential properties encouraged the rehab of 1,300 residential units statewide – 220 in Buffalo – with $36 million in private investment. Local developers also used New Markets Tax Credits, federal housing credits or other incentives from the federal or state governments.
“The incentives certainly make the developer think twice about the challenges, because there are significant challenges to renovating and adaptively reusing the building,” said Matthew W. Meier, partner at Hamilton Houston Lownie Architects.
The entire state is way ahead of the rest of the country in its use of the federal credits, with more than $1 billion in private investment in historic renovations in 2013. That’s one-fourth of the total private investment nationwide in a typical year for the National Parks Service, which approves 1,000 projects annually for $4 billion.
Overall, since 1976, the federal credit has supported more than $62 billion in private investment to preserve 38,000 historic properties, according to the National Park Service’s website.
And city officials hope that is just the beginning after a new survey identified more than 500 buildings as potentially historic sites.
“It took some of the big guys in town, the more prominent developers, to begin to use that money, to kind of really spur it,” said Gwen A. Howard, senior project manager at Foit-Albert Associates. “Now it’s becoming more palatable.”
As a result, there is now a land rush to get preservation projects approved, and Buffalo has an ample supply of potential candidates.
While many other cities demolished old buildings in the 1960s, 1970s and 1980s in favor of new construction, that didn’t happen to a large extent in Buffalo because of the economy and some preservation efforts.
And Buffalo, because of its industrial history and its heritage as one of the nation’s most prominent cities, is full of old – and oftentimes weatherworn – landmarks.
“We needed a game changer in Buffalo, and this certainly contributes to a faster rejuvenation of this area, particularly because we have so many older buildings,” said Frizlen, president of the Frizlen Group Architects who did the Horsefeathers project on the West Side, “You maintain the flair and the character of the community by keeping these buildings, and you’re going back to a proud history for Buffalo.”