Magazine article Journal of Property Management

Back to the Future

Magazine article Journal of Property Management

Back to the Future

Article excerpt

Historic properties offer unique and lucrative management opportunities

Everyone has heard it before: What's old is new again-fashion, pastimes and most important, real estate. Owning, restoring and managing historic properties is a niche market gaining momentum. Building owners and property managers reap the benefits with every stride.

Historic properties promise numerous economic rewards, including increased property values, federal and local tax breaks and competitive rents. They also act as catalysts for rejuvenating cities and towns nationwide. If restored properly, historic buildings can define a city, said Donovan Rypkema, principal of Place Economics of Washington, D.C. He is also the author of "The Economics of Historic Preservation: A Community Leader's Guide."

"One of the most critical things for cities is to be competitive, and they have to differentiate themselves," he said. "There are many components to that differentiation, but among them, historic buildings are critical. A sizable portion of a sophisticated market-in growth industries particularly-is recognizing that."

Demand for history

The value of historic properties is not only recognized by real estate managers: Tenants and residents demand office and residential space in historic buildings despite generally higher rents and assessments.

Lorig Management Services in Seattle and Eugene, Ore., often converts old schools into office, residential and retail spaces-some of the company's hottest properties.

"We get better rent and stay fuller in historic properties than in anything else we have in the market," said Barry Blanton, CPM and president of Lorig. "There will always be those who have a thing for historic if it is done well."

Historic done well requires preserving the original characteristics of a property as much as possible while also providing high-quality finishes and technology equal to those in new construction, said Eric Blumenfeld, president of EB Realty Management in Philadelphia. The company converts historic manufacturing buildings into lofts. He said people want to live in spaces with character.

"The buildings differentiate themselves," he said. "You're not looking at a drywall box: They have architectural interest."

As a result, Blumenfeld said he is able to collect higher rent from such units, but a historic designation alone cannot justify increased rents.

"The average loft conversion appeals to a huge range of buyers," he said. "If a wonderful historic conversion is in the same location as a new construction you can command higher rents. But it does cost you as much-if not more-to build because it is just not as easy to do a historic conversion."

Landmark limits

Part of the challenge involved with managing or converting a historic building is following the restrictions set by landmark commissions.

When a historic building is designated a local or national landmark or when it is within a historic district, changes or improvements require an extensive approval process. A landmark board must approve any change or modification, whether for aesthetic appeal or necessary maintenance. The Secretary of the Interior's rehabilitation standards suggest owners restore rather than rebuild deteriorated historic features.

SL Green Realty in New York City owns and manages a number of local landmark buildings, including the News Building, and has worked with the New York City Landmarks Preservation Commission on building modifications, including façade, storefronts, signage, louvers and brick repair.

"There is very little you can do in a landmark building without getting approval first," said Edward V. Piccinich, SL Green Realty's executive vice president and director of property management and construction. "You can't just decide to screw something into the wall in a landmark lobby. It is different from a regular building because you have to submit a sample of what you're doing and get approvals on the best match to what was originally there. …

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