TUPELO – More developers and businesses in Northeast Mississippi are restoring historic properties for commercial use, turning old structures into money makers.
Historic preservation is a growing trend among Mississippi developers. In the initial years of historic tax credits in the mid-2000s, the highest amount spent statewide on historic renovation projects was $6.7 million. Those numbers have grown since 2010, when $78.4 million was spent. Over the past eight years, at least $10 million has be spent annually on these projects statewide.
Farmhouse owner Bev Crossen recently purchased two vacant buildings on the 500 block of Tupelo's Main Street, one of which will be a historic renovation project.
“It’s been a dream to extend our downtown area and create experience for locals and visitors alike," Crossen said. "I love my new location at the Farmhouse and hope these new additions will offer more opportunity for retail shopping and more cool places to live. Downtown is where to be."
In north Mississippi, the stalwart Federal Building which currently houses the downtown U.S. Post Office in Tupelo will soon have apartments on its upper floors.
Developer Chris Chain has renovated 150 buildings across Mississippi over the last 30 years, and is a pioneer for creating downtown living space in Columbus, which has been a leader for restoring downtown buildings into apartment living utilizing historic tax credits.
When Chain first considered taking on historic renovation projects in Columbus, he discovered an abundance of underutilized space above ground floor retail businesses.
“You are always going to have people interested in living downtown, so it kind of gives you a niche in the market for living space,” Chain said.
“It’s hard work but it gives you a lot of pride when you can rebuild something and recapture that heritage, when you walk into these apartments they are going to have high ceilings, skylights, hard flooring; beautiful features that you just cannot get anymore,” Chain said.
“You can’t rebuild these back the way they were, it’s just too expensive, so restoration is the way to do it,” Chain added.
At The Fed, the 6,000-square-foot portion of the west side of the building will feature 23 apartments in the upper two floors.
Crossen, who recently renovated the historic Rankin House earlier this year to expand Farmhouse, will create more retail space in her other building at 522 W. Main St., which will be called the Shops at 522.
Leslie Mart, senior project manager with Tupelo-based McCarty King Construction, said work has already begun on the building, which is being gutted to eventually feature several micro-retail spaces for businesses.
Crossen said the unique character of old structures encouraged her to purchase the old buildings.
“I think it’s very important to devote time, money and resources to the restoration and renovation of historic buildings and structures rather than tear them down for something new," Crossen said. "The Federal Building has a lot of history – built in 1962 – and is in great condition structurally; I recently purchased these buildings and believe we can create something great with them, it was time they came to life again."
According to data supplied by the Mississippi Department of Archives and History, which administers the historic tax credit program, 94 percent of state historic tax credit funding from 2006 to present was used for commercial projects.
In Northeast Mississippi, there are currently three active historic tax credit applications at the Mississippi Department of Archives and History for Starkville, and one in Tupelo.
“That means they are actively in the process of completing a project and they have put in what is known as their ‘part two’ which says what they want to do with the building and that they want to utilize historic tax credits,” Mississippi Heritage Trust Executive Director Lolly Rash said.
But a variety of incentives may be under-utilized by developers looking to open their businesses, preserve Mississippi’s historic buildings and eliminate the need to build new structures.
Historic tax credits may have offered some relief to developers who renovate historic buildings for commercial use in Mississippi.
Most commercial-use properties in the region are renovated for apartments and housing, offices, banks, retail space, conference centers and restaurants. Of the 329 state historic tax credit projects in Mississippi since 2006, 179 of those structures were renovated for commercial purposes.
“There are certainly communities in Northeast Mississippi that are taking advantage of this incentive to bring historic places back to life and put them into service,” Rash said.
West Point has spent the second most dollars on commercial historic renovations in Northeast Mississippi, converting an old movie theater into The Ritz conference center in 2011 for approximately $2 million.
Starkville has invested the most dollars into historic tax credit projects in the region and ranks third in the state. Most of those dollars have been put into just one commercial project.
The third largest historic tax credit project in Mississippi to date is The Mill, which was renovated last year for $18.8 million. The Mill was originally built in 1902, was purchased by Mississippi State University in 1965 and reopened as a conference center last year.
Both state and historic tax credits were used to renovate The Mill, as well as new market tax credits, which are allocated by the U.S. Department of the Treasury to stimulate economic growth in low-to- moderate income areas. In February, $3.5 billion in new market tax credits was awarded nationwide.
“Mississippi State was the only SEC university that did not have a meeting facility that could house 1,000 people so it limited them from bringing programs to this area; we provided some of these enhancements to the community and that is part of the reason we qualified for the new market tax credits,” said Mark Castleberry, a developer on The Mill project.
Castleberry is in the early stages of another historic commercial project in Starkville for office and retail space. According to the most recent National Parks Service annual report, federal historic tax credit related investments generated approximately 107,000 jobs with a strong showing in construction and manufacturing, as well as $6.2 billion in gross domestic product in the U.S. in fiscal year 2017.
With continued commercial development, particularly in the nearby apartment space and retail venue The Cotton District, Starkville looks poised for further growth.
Looking to other states
Innovative historic renovation projects in other states may be able to generate a few new ideas for Mississippi developers.
In Memphis, Tupelo-native art history professor Todd Richardson helped dream up a “vertical urban village” in a historic Sears building that opened last August and is now 98 percent leased.
“There are ten of these buildings across the country that are former Sears distribution centers and at the time of our feasibility study, five had been redeveloped, so based on our research and everything related to Memphis and what we wanted to do, at the time we just said beyond mixed use; we wanted to create a whole new neighborhood,” Richardson said.
“Good residential rental, access to quality education, health care, arts, entertainment and food; instead of spreading those things out horizontally like you would in a traditional neighborhood, we just stacked all of those things on top of each other in the 14 floors of the Sears building,” Richardson added.
The building now features restaurants and retailers, offices, a new high school that started in August, a YMCA, an arts center and 265 apartments on the top floors of the store.
“There’s about 3,000 people that come and go every day, there’s 1,500 people that work here, there are 400 people that live here, there’s 150 students, there will be over 500 students and just people coming and going,” Richardson said.
A local Greenville man also dreamed of rehabilitating a historic downtown Sears building and created what is now a boutique hotel and apartment space called The Lofts at 517 which also houses a restaurant and brewery and a butcher and grocery shop.
The LowerTown Arts District artists’ colony in Paduka, Kentucky, showed low-income housing could intersect with bringing new character to neighborhoods, and some Mississippi historic property developers are taking advantage of low-income housing tax credits to provide unique affordable housing.
HRI Properties Senior Vice President Josh Collen said the company acquired the King Edward Hotel in downtown Jackson following Hurricane Katrina to renovate for housing and used the tax credit to create the Capitol Art Lofts in Jackson.
The company renovated the hotel for low-income housing while also targeting artists for renters and providing gallery space for shows.
“We have developed very successful affordable artist communities in other locations and have seen them add vibrancy and creative energy to neighborhoods that spurred subsequent investment,” Collen said.
Traveler’s Hotel in Clarksdale is taking a similar tack, a developer is currently renovating a historic hotel to be run by artists who will use studio and living space in exchange for working at the establishment.
Historic tax credits and other incentives
Historic tax credits in Mississippi have roots following Hurricane Katrina in 2006, when it began as an incentive for rebuilding properties along the Gulf Coast. The state allocated $60 million initially and another $60 million in 2016.
“They did make some changes to the legislation at that point,” Rash said of the second funding allocation, noting residential eligibility was removed and an annual cap on the credit was implemented at that time.
The Mississippi Historic Preservation Tax Incentives Program offers a 25 percent tax credit for qualifying rehabilitations of historic properties, which can be paired with the 20 percent federal historic tax credit.
There is currently advocacy to have residential historic tax credits reinstated and for the removal of the annual cap on historic tax credits in the 2019 legislative session, which could mean more savings for historic renovation projects.
Chain said developers interested in historic renovation can use other incentives as well, such as those offered by energy companies.
Several Mississippi power companies also have energy efficiency incentives for building construction and revitalization, Chain said he saved 25 percent on energy costs by installing LED lighting.