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A New Lease on Life
Douglas McWhirter
02/02/2004
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The value of Gilmore’s properties has soared. "We bought
for $10 per square foot, and now the buildings are valued at $60 per square foot," says Gilmore. "When you do historic properties, you are betting on a 10-year plan. If you’re investing
money in a restoration project, you can’t just buy into the economics, you have to buy into the broader vision as well."
The successful investor in a historic restoration project will have a broad vision not just for the building being renovated, but for the economy of the surrounding area. If a pioneering restoration project can inspire others to return to a given area, property values will rise and commercial activity will increase. The trendsetter who is first to invest in the neighborhood, and hence the first to benefit from tax breaks and low initial capital layout, is likely to lead the pack when it comes to returns. But it takes sheer guts to put these financing packages together, and the actual restoration work can prove daunting. "It can go wrong in a thousand ways," says Gilmore. "Buildings built in 1903 are fundamentally different from those built today. Also, working with bureaucracies on zoning and planning is challenging, to say the least."
This is where passion and vision come into play. "Your upfront investment will probably be higher because the local bank will doubt your vision and will only give you half the money you need," says Leith-Tetrault, who, as a former banker, financed numerous restoration projects before joining the National Trust for Historic Preservation. "But in the end, you have the vision to see something that others don’t."
Reinterpreting a building’s purpose as Napoliello and Moskowitz did is crucial to the success of most historic restoration projects. Tom Gilmore’s buildings in the Old Bank District in downtown Los Angeles had outlived their usefulness as office space, so they were transformed into residential space. The cavernous Bijou will never be able to compete with multiplexes and VCRs, so it now hosts a business to which its unique glamour adds value.
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