By: Justin Laub

I know, that’s a stupid question- of course, you would! And what if I told you that I actually wanted to give you $10 million dollars? You’re probably already sending me your bank account information and a thank you note! What if I now throw in another $4 million on top of that? Tell you what, I’ll waive a good portion of your property taxes for the next 10 years too. Now your eyebrows are raised and you’re wondering “what’s the catch?” right? The catch is that you need to renovate a historic building in the downtown of a major city, to an exacting level of detail, and the cost to do so is more than what the property would be worth on a market value basis. Further, the process of getting the free money will slow your project down significantly. Do you still want this money? Is it still worth it? This is the conundrum many developers face with restoring historic buildings in the U.S.

One of my clients recently had to figure out the answer to this question, having jumped into a historic renovation project three years ago that had already been in the works for over a year. At the time, there appeared to be a clear path to finalizing the budget, securing various tax credits and incentives, and delivering a desirable mixed-use project into a white-hot market…all within a year’s timeframe. Fast-forward three years and my client just closed on the construction loan and is now targeting to finish the project within the next 12 months. In other words, the project experienced approximately a two-year delay. During that time, the budget increased significantly and the equity partners got reshuffled. Fortunately for the developer, the market strengthened even further and they figured out a less complicated way to monetize the tax credits. All of which begs the question, “is the free money worth it?”

The answer, in this case, is clearly, “YES”. This particular developer is both well-capitalized and is a long-term owner with long-term vision. The project couldn’t have a better location – if it doesn’t generate a large profit in the near term, it will grow in value over time due to its prime downtown location. In the case of many other developers, however, the answer to this same question would probably be “NO”. Given the delays and the steep learning curve, a smaller developer would have either abandoned the deal or been foreclosed upon.

The prospect of free money is always enticing. In the case of my client’s project, there was a substantial amount of free money in the form of state and federal historic tax credits, a TIF, and property tax abatements. However, the caveats to getting this ‘free money’ are not inconsequential. Ultimately, it took a seasoned developer, a team of experts, and the financial wherewithal to suffer through a steep learning curve to get the project across the goal line. You would not want to approach one of these deals without a well-thought-out game plan and a good team around you!

To discuss your next development project involving “free money”, you can reach Justin Laub, Senior Director, at Or visit the Metropolitan Capital Advisors website at

The author, Justin Laub, is a Senior Director in the Dallas office of Metropolitan Capital Advisors.