The Value of Preservation Consultants to Historic Hotel Developers

By John Tess President & CEO, Heritage Consulting Group | August 25, 2010

This affinity for "character" has led to the rise of boutique hotels, defined not only by size, but by design - typically historic in nature. One of the pioneers was Bill Kimpton, whose foresight created the Kimpton Group. Others leaders in the field include Ian Shrager and Andre Balazs. This affinity for character has also prompted larger projects, such as Sage Development's proposed Marriott Renaissance in a redeveloped Portland, Oregon department store which will have 330 rooms.

As a result of the success of these and other pioneers, hotel developers are often on the prowl of unique opportunities, thinking about the hotel potential of transforming warehouses, office buildings, Masonic temples, train stations and more.

In one very large way, government policy supports this practice. Tax laws allow 20% of the costs of a "certified" rehabilitation of a "certified" historic structure to be used in the form of a tax credit. Under the right circumstances, that credit can also be transferred and sold, thereby bringing money into the rehabilitation project itself. Complementing this federal program often are state and local incentives that use many of the same rules, guidelines and even reviews. All are designed to make the re-use of old buildings financially viable.

Before running out and buying the closest white elephant, however, developers need to temper their temptation to use these incentives. The rules and reviews governing the tax credit process are intricate and in some cases run contrary to what may seem like common sense. The key to success lies with due diligence and in hiring the right preservation professional.

Before we can understand the challenges, it is important to understand a bit more of the tax credit program. As I mentioned, the program requires a "certified rehabilitation" of a "certified structure". In general terms, a "certified structure" means the building is either listed on the National Register of Historic Places or listing as a contributing structure in a National Register historic district.

While there are some exceptions, the baseline for whether a building might be listed on the Register is that it must be at least 50 years old. The individual building itself does not need to be nationally important or even architecturally distinguished. It may be locally significant, and maybe significant for its association with an important person. It may even be important as an example of how a design has responded to development in the community - say a 1954 motor court reflecting the changing nature of hotel design in response to the automobile.

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