When it comes to CRE investments, there’s a niche market filled with challenges and rewards that can be intimidating to some and thrilling to others: owning a landmark property.
Very often, historic landmark properties tend to be residential ones, typically a free-standing home. In recent years, perhaps as a pushback against development, multi-family, and commercial properties, as well as entire neighborhoods, are using national landmark status as a means of preserving the culture, appearance, and/or significance of a region.
In order to qualify for landmark status, a building must meet one of six criteria that recognize the site’s “exceptional value or quality in illustrating or interpreting the heritage of the United States in history, architecture, archaeology, engineering, and culture and that possess a high degree of integrity of location, design, setting, materials, workmanship, feeling, and association.”
The property owner – or, in the case of districts, the local government, local preservation board, or homeowner’s association – is responsible for filing the application, which can take anywhere from four months to a year to be approved. The property owner must give permission for his or her building to be listed as a historic property, so this process can never be done behind the owner’s back.
Needless to say, owning or investing in a landmark-listed property presents a unique set of challenges. At the top of the list is the ability – or freedom – to renovate the structure, particularly since there are certain Americans with Disabilities Act (ADA), energy-efficient, electrical, and structural standards that must be met. Landmark applications shouldn’t be made until after renovations are complete, and many owners worry that their hands will be tied.
Those worries can be eased, however, with the understanding that whatever it is about the building that makes it historic must be preserved. This is truly a labor of love. There may need to be negotiation with and approval from local historic boards or municipalities, but renovations can certainly receive a green light.
Consider, for example, the number of historic Art Deco and mid-century modern buildings that have had their outer shells preserved while the interiors were upgraded. It’s important to note, however, that some regions of the country also grant landmark status to interiors as well as exteriors – and that can make things a little tricky
For the investor who wants to own a piece of history, there are benefits to landmark property status. For starters, most structures are located in historic districts which are usually in the heart of cities. Very often, this location means massive foot traffic for tenants.
At the same time, there’s also the prospect of developing a reputation as an investor who cares about the community in which the building is located. That alone can help attract prospective commercial and residential tenants.
Then, there is a tax incentive. An income-producing property that is listed or is soon to be listed on the National Registry is eligible for a 20% federal rehabilitation income tax credit. The property must retain enough materials and historic characteristics for it to be eligible.
Morris Southeast Group has been serving the community since 1976. We know the neighborhood treasures and the hidden gems that not only hold potential, but also have a historic tale to tell – one that provides benefits to owners, tenants, and the public when this history is preserved.
For a free consultation or to learn more about our property investment opportunities and/or other services, call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at firstname.lastname@example.org.