The Right Ingredients While experience is one of the most important factors in rehabbing a historic building, persistence is one of the keys to success. “To be successful, you have to be willing to go through brick walls,” says Dranoff. “The projects are complex, and there are regulatory hurdles to go through.” It’s not only the historic aspect that is challenging, but often times the buildings aren’t zoned for residential use.
In addition, because financing these projects can be challenging, it’s critical that the buildings qualify for the Historic Tax Credit. “The buildings we purchase are usually not on the National Register of Historic Places,” explains Dranoff. In order to qualify for the tax credit, buildings need to be nominated and placed on the National Register. The National Park Service (NPS) administers the nomination program and maintains the registry.
All this has to be done before construction because the company’s investors want to be certain that the project will qualify for the tax credit. “This can’t be done on a wing and a prayer,” explains Dranoff. “This has to be accomplished during the pre-development period – which can take 18 to 24 months.”
Before the company approaches a lender for financing, it has to have the project completely designed, fully bid out, and its contracts in the final stages with contractors. “It’s not always easy convincing the lender that this is a good investment,” he says. “I was turned down by 25 lenders before I finally got my financing for The Left Bank (the company’s recently completed 282-unit luxury loft apartment project with office and retail space in Philadelphia). In the early 1990s, West Philadelphia was considered the “wrong side” of the river. No one wanted to live there. But next door was the University of Pennsylvania with 27,000 employees who had virtually no housing choices.”
The company’s relationship with the NPS is not over once the project qualifies for the National Register. “You have to be cognizant of the fact that state and federal governments have to review your plans,” he says. “So, if you complete all of your planning and then submit those plans, you can end up getting suggestions or changes and have to go back and modify it.”
To prevent this, Dranoff Properties submits its plans to the NPS at each critical stage of design process. This way the company can get feedback and make the necessary changes. For example, when the company wanted to cut a giant hole in the middle of The Left Bank – creating interior windows – it needed to prove that the integrity and character of the building would not change. “So at the end of the process, we actually have an approved product that we can build,” explains Dranoff. “We try to prevent any surprises from the regulatory authorities. And that has worked extremely well.”
But once all the plans are approved and the building is placed on the historic registry, there are many rules to follow to preserve the historic integrity of the building. For example, in order to comply with historic regulations, Dranoff Properties had to replicate The Victor’s original windows. The building was originally constructed in four stages over a seven-year period (1909-1916) and different materials were used. The original windows in the first stage were made of wood, while the later stages of the building had metal windows. And just like the original, the rehabbed building will feature both wood windows and metal windows.