Learn about Real Estate: Don't Become the Butt of Preservation Jokes

Beautiful downtown Lynchburg, Va.

Have you heard this one? An owner of a historic building walks into a bank…

You know the punch line – the lender says, “no.” There are many reasons why a preservation project might not move forward. Some of the reasons might have to do with the market, some may have to do with the business plan, some might have to do with the lender, others might have to do with Mercury in retrograde.

I’ve been learning a lot about financing rehabilitation projects lately. I’ve learned lenders can be a bit linear, too often showing preference single-use projects because they don’t “get” mixed-use or they will only fund the residential portion of the project. But my biggest lesson overall is that the bottom line when when dealing with financiers is that they always like to see signed tenants for your project. Before you even lift a hammer, signed leases from business owners or residents light up a banker’s eyes.

In the beautiful riverside town of Lynchburg, Va., the owner of a turn-of-the-century shoe factory was trying to fuel the momentum of the downtown revitalization by bringing a gorgeous rehab project to the table with a couple of businesses of which he was going to be the owner and manager. He approached lenders and tax credit investors for more than a year with his project that he pitched as a hotel, two restaurants, and a microbrewery. It seemed like a great project and it had the complete support of the city – the municipality even provided land for a parking lot and property tax abatement incentives.

Giant shoe paying homage to the building's heritage.

The developer finally sought help from Tetrault & Associations. (Full disclosure: Al Tetrault was a professor of mine and the first person who made real estate and tax credits make sense for me.) The team had an “Ah-ha!” moment and suggested that the project be repackaged to tax credit syndicators and lenders as a real estate deal – not as a series of businesses including a hotel, restaurants, and microbrewery. The owner of this 55,875 square-foot diamond-in-the-rough pitched his project as a rehabilitation of two historic warehouses that was pre-leased with four businesses. Even though he was still the owner of the businesses, he hired four managers for each business and pitched his project as a real estate deal.

It worked. This real estate deal raised almost $17,000,000 in debt and equity in less than 90 days. The $21-million project also took advantage of federal preservation tax credits, new market tax credits, a HUD 108 loan, and $3 million from local private investors.

No joke.

Street Trees

Trees lining Main Street districts provide an inviting atmosphere for pedestrians, provide shade, add character, clean the air, and nest twinkly lights during events and holidays. According to Dan Burden, "a planting cost of $250-600 (includes first 3 years of maintenance) a single street tree returns over $90,000 of direct benefits (not including aesthetic, social and natural) in the lifetime of the tree."*

Can you believe there are street tree adversaries? Some business owners fear the tree canopy will block their facades, causing them to lose customers, or perceive falling leaves as messy or a potential slipping hazard. (Honestly, anyone who blames a tree for a business failure has problems that run deeper than vegetation.)

But, the positives prevail! Plenty of studies show that street trees have economic benefits, slow traffic, encourage people to spend money, reduce crime, enhance driver safety, raise home prices, have health benefits, and make positive first impressions among visitors/customers.

Your planning department as well as local arborists and horticulturalists can be a huge help in selecting the right street trees; and the latter can talk about proper care, appropriate grates, and maintenance. Design professionals or SketchUp whizzes can create design schemes so you can visualize how a certain tree species will look on your street. Your favorite Main Street community can help show how the right kind of tree can make the district look awfully attractive and not block the facades. My favorite example of street trees done well is in Lewisburg, Penn. The photos in this blog showcase how the height and spacing of the right tree can accentuate, not detract from facades and store signage.


* If you need quantified data on the benefits of street trees, Burden's 22 Benefits of Urban Street Trees is truly your best source. 

** And, Leda Marritz just blogged for Next City about how to help keep our urban trees healthy. Why is that important? She points out that the USDA Forest Service recently determined that U.S. cities are losing around 4 million trees annually!  

Life is like a Yearbook: What are your downtown superlatives?

I really like the idea of selling your commercial district with specifics. You know your community inside and out. But everyone else does not. You can tell people that Main Street Wherever is a "great place to live, work, and play," but what does that really mean? It means nothing. It doesn't motivate anyone to act. They need details and you have to paint the picture for them.

The Downtown Frederick Partnership (Md.) worked with Frederick Tourism to put a nice ad in the Washington Post magazine promoting holiday shopping in downtown Frederick. Most of the readership is probably within an hour drive. It called out five items for sale and where you can get them downtown, with three food options (two restaurants and one bakery), and one salon. (I might advise against promoting service businesses when doing your regional ad only because you'll get more bank for your buck telling people in December how you will meet their holiday shopping needs. They probably already get their haircut at the salon down the street.) The ad tells the reader: we have 150+ shops and 45+ restaurants, so you can have a great day enjoying our town while crossing some names off the shopping list.

What are the really cool things that people can buy in your district - does anyone sell hard to find items handmade/one-of-a-kind stuff? What is the most outrageous dessert in your town? Does your coffee shop have a cool latte flavor? Best sandwich? Sit down with some friends, volunteers, colleagues, and think of a few superlatives for your local business. Pretend like you need superlatives for a downtown yearbook. Think about what really sets your town apart and think in specifics.

With those specifics in hand, sell it. Sell the idea that your district is a "great place to live, work, and play," or in this case, eat, drink, shop, and play.

This can help capture the attention of people living near downtown for years but who never walked over to see how things have changed. It also works to attract regional visitors. If you tell me, a prospective visitor, five cool specifics that appeal to me, I immediately have five reasons to make the trip to your district.

You can do this through an ad with a regional newspaper or tailor your list to meet the needs of target groups (for example, parents looking for children-oriented outings) and look for bloggers and writers who might be interested in this information. Using this information for your enewsletter and social media is nice, but it is preaching to the choir and going to lead to converting new customers.

Cross Promotion in Main Street Districts

To break up a 12-hour drive back from Nashville last week, instead of hitting the fast food joints at a crummy rest stop, we stopped for dinner at The Bistro on Main in historic Lexington, Virginia. (This isn't a food blog, but the food is worth mentioning. We started with a baked brie appetizer that had a delicious Asian pear compote and all three of us were immensely pleased with our entree selections, which included a flavorful meatloaf, tasty rigatoni, and a fresh arugula and beet salad. I was particularly pleased to see that it had a great beer list, with several of the options coming from local mircrobreweries like Lone Wolf and Star Hill.)

The real reason for this post is to talk about the bathroom.

Seriously.

They created a great opportunity to showcase another business in the downtown. Next to the sink was a bottle of aromatherapy hand soap and companion hand lotion made by another shop in the Main Street district. They also had an aromatherapy infuser instead of those awful Glade air fresheners. Above these products was a little sign posted on the mirror talking about the business that makes these items and where to find them downtown (and on Facebook and Twitter). I didn't ask if they worked out a deal where the shop supplied the toiletry items for free or at a discount in exchange for posting a sign about the business. It is possible that out of the goodness of restauranteur's heart that she buys the items and posts the sign, as well. Regardless, it is a great example of cross promoting businesses in the downtown, and is something that can, and should, be repeated in Main Street districts everywhere.

Oh, and the other thing that really got me, too, was the inclusion of a framed photo that shows the condition of the place before its rehab (parts of the ceiling and wall had fallen down and come to rest on the booths). Clearly, this was a labor of love. You can tell how much someone loved this building, seeing beyond its state of disrepair and envisioning what it could become. It is a small detail that helps tell the story of the community. Another thing worth doing in Main Street districts everywhere.