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TAX CREDIT
CORNER
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Mississippi
Lofts
By Scott Hall
The State of Missouri has multiple tax credit programs to provide
incentives for investments and charitable contributions to approved
projects. This regular column features examples of how the various
Missouri state tax credit programs benefit the State, generally,
and St. Louis in particular.
Mississippi
Lofts sits on the site of the
Schnaider Brewing Co., whose beer gardens
in the late 1800s played host to many
popular bands, one of which eventually
became what is now Saint Louis
Symphony Orchestra. |
In the world of redevelopment in St. Louis, it is often easy to
focus exclusively downtown. However, while St. Louis' core is important,
it is also critical to make the city's other historic neighborhoods
vibrant. These neighborhoods provide support for the central business
district in the form of schools, homes and small businesses. One
such local neighborhood is Lafayette Square, which has become a
beacon for redevelopment on the city's near southside. The neighborhood's
historic quality caught the attention of Rao and Shashi Palamand
and their development partner Craig Heller. Using the Federal and
Missouri State Historic Rehabilitation Tax Credit programs, this
development team is turning a vacant old building into the Mississippi
Lofts, 40 loft-style apartments with street-level office and retail,
and aiding in the restoration of one of the city's most important
neighborhoods. "It's exciting and rewarding to be involved in renovating
this historic artifact into a modern product," says Zack Boyers,
vice president of Firstar CDC, which is financing the debt and tax
credit components of the development.
Sitting on Mississippi Ave. only a few blocks north of Lafayette
Park, the Mississippi Lofts site was originally home to the Schnaider
Brewery and Beer Gardens, one of the city's oldest breweries. After
enjoying its greatest success in the later part of the 19th century,
the Schnaider Brewery Building was demolished and in 1900 the existing
building, which housed a subsidiary of the International Shoe Co.,
was built. The building's brick facade and thick wooden infrastructure,
though hugely expensive by today's standards, not only help to form
its historical quality, but also explain its impressive structural
integrity.
The building's historic significance may not have been immediately
apparent to most, but it was obvious to Rao and Shashi Palamand,
a father and son development team with an unconventional background.
A Ph.D. in Food & Flavor Chemistry, Rao Palamand was a long-time
employee of Anheuser-Busch before opening several of his own microbreweries
in the Carolinas. After years of coaxing, Rao was able to convince
his son Shashi, who had equally impressive mechanical engineering
and business degrees from Washington University and the University
of London respectively, to join him. Since then, they have successfully
opened microbreweries in St. Louis and throughout the country. While
building their many microbreweries, the Palamands realized they
had become avid real estate developers. These passions, for brewing
and real estate, brought them to the site of the former Schnaider
Brewery and into residential development. "The tail is sort of wagging
the dog here," says Shashi Palamand, "the development is now what
has gotten us excited."
To complete a successful residential redevelopment project, Rao
and Shashi Palamand realized they could use the help of a developer
with more experience in that area. They teamed up with Craig Heller.
Heller and his company LoftWorks have developed apartment and condominium
units throughout St. Louis, completing such notable projects as
the 10th St. Lofts downtown. Acting as a partner in the Mississippi
Lofts project, Heller is putting his expertise to good use, helping
to make this project one of the city's most exciting.
Architectural
features original to the buildings
such as exposed brick and heavy timber beams
will give the residential units a warm, historic feel.
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The renovated Mississippi Lofts project will convert the site's
two buildings, a five-story factory and an adjacent one-story building,
into a mix of residential and retail uses. On the ground floor will
be space for retail tenants, while the upper floors will be converted
into first-class loft apartments. The building's dated characteristics,
large wood beams and rough brick exterior walls, will not be hidden,
but rather accentuated to give the units an industrial flavor. This
urban-chic style along with the building's panoramic views of St.
Louis will likely make these units among the hottest in the city.
It is important to note that this project, and indeed many others
like it, would be impossible if not for the help of outside financing
resources, most notably Missouri state and federal tax credits.
Enacted in 1997 by Governor Mel Carnahan, the Missouri Certified
Historic Rehabilitation Tax Credit offers credit against Missouri
income tax for 25 percent of the qualified costs for rehabilitation
of a certified historic building or any eligible building in a certified
historic district. Moreover, this credit is transferable. Thus,
to the extent that the developers could not use this historic credit
against their own tax liability, they can sell it to a third party.
In this case, the developers sold their excess credit to Firstar
Bank's Missouri Tax Credit Clearinghouse. The Clearinghouse will
in turn sell them to other qualified Missouri taxpayers. Such transferability
allowed the developers to close an otherwise imposing funding gap.
Additionally, the Missouri historic tax credit is rare in that it
allows an additional 20 percent of rehabilitation expenses in federal
credit. "It has been these tax credits that are key. If it wasn't
for the Missouri state and federal tax credits, this building would
be lost" Shashi Palamand notes.
The Mississippi Lofts building will not be lost though. With construction
to be completed in a little more than a year and leasing to begin
this summer, this project will soon be among the city's most attractive,
adding not only to St. Louis, but to Lafayette Square, one of its
most significant neighborhoods.
Scott Hall is an associate of DFC Group, Inc., tax credit consultants
to the Firstar Tax Credit Clearinghouse. |
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