Recently, we wrapped up the first round of an exciting, new initiative for Marks, Thomas Architects: a series of educational webinars featuring experts sharing stories and lessons learned about new and evolving trends in architecture. Our first run of webinars focused on sustainably-designed adaptive use projects, an area of great interest to me personally and a specialty of our firm.
Adaptive use projects, you may know, are often complex and challenging to bring to fruition. Approaching these projects in silos doesn’t work due to the broad range of variables they entail. To shed light on some of the complexities and offer practical solutions, our webinars paint a more comprehensive view of adaptive use, with each webcast exploring one of four key aspects of successful projects: design, legal, finance, and construction.
If you missed the series, I encourage you to browse the takeaways and watch the replays — all below.
Designing adaptive use projects
I kicked off the series with a broad discussion of the key issues and concepts related to sustainable adaptive use, including an overview of the specific tasks with which a design team must wrestle. Throughout the talk, I walked participants through these critical takeaways, explaining how to:
- Deliver projects that are economically competitive with conventional “greenfield” developments.
- Provide quantifiable environmental and economic benefits to owners and tenants.
- Design for a long and productive life of projects through lifecycle analysis.
- Preserve the unique history of a site.
- Integrate modern design elements while preserving unique and or underutilized urban sites.
- Develop and build intelligently to generate an appropriate return on investment (ROI).
The legal side of adaptive use
In part two of the series, Dave Raderman, a partner and attorney at Gallagher, Evelius and Jones, delved into the legal mechanisms and structures required to pursue government funding for adaptive use projects. Specifically, he discussed historic tax credits and new market tax credits, with an emphasis of the impact these credits can have on structuring of a development team. The talk covered:
- Basic rules for a project to qualify to use the Federal New Markets Tax Credit.
- Basic structures used with Federal New Markets Tax Credits.
- Basic qualifications for a project to utilize Federal Historic Tax Credits.
- Basic structures used with Federal Historic Tax Credits.
Financing adaptive use projects
Joel Cohn, a partner with CohnReznick, broadened the discussion by exploring some of the obstacles and opportunities of adaptive use projects from an accounting perspective, including prohibitions and limitations that specific team members and investors may face. Joel walked the audience through non-traditional, government-based funding options that anyone embarking on adaptive use projects needs to understand. These include:
- What costs qualify for the Federal Historic Tax Credit.
- Common deal terms for the monetization of tax credits, along with an indicative net benefit of this effort to the developer.
- Cash flow considerations of structuring a Federal Historic Tax Credit monetization, including an example of how a sample building’s operating cash flow is typically shared with the tax equity investor.
- State income tax credits that present additional opportunities and new challenges, and how each one can potentially affect a developer.
Construction challenges of adaptive use
In this final segment of the series, Willy Moore and John Diehl of Southway Builders addressed concerns faced by contractors as part of the project team. Their talk emphasized the role of pre-construction services in setting a project up for success, along with the value contractors and construction managers can bring to the table. Critical elements of the discussion included how to:
- Identify key aspects of existing buildings when pursuing potential redevelopment.
- Minimize risks by reducing the potential for unknown conditions.
- Define a process that ensures early conceptual budgets hold through final guaranteed maximum price (GMP).
- Ensure compliance with historic tax credit requirements.
For those of you who attended the live webinars, I hope you found them educational and entertaining, and walked away with practical tips for making these projects successful. But if you couldn’t make the events, I urge you to take advantage of the recorded copies and share them with your colleagues. Together, the webinars reveal the collaborative, cross-disciplinary nature of adaptive use projects — and the potential for these projects to transform and greatly benefit our communities.
If you’re considering an adaptive use or historic renovation project, please reach out so we can chat.