The historic Pratt Street Power Plant building hosts Barnes & Noble, Hard Rock Cafe, and Phillips Seafood as part of its community renaissance. Photo by G. Edward Johnson http://EdwardJohnson.com/
In the 1980s and 1990s, many U.S. businesses moved their manufacturing operations overseas. When they departed, they left a series of old industrial buildings in their wake. Now, however, many of these factories are in hot demand. The repurposing of these old industrial buildings often sparks a community renaissance, potentially driving up real estate prices and boosting economic activity. The following three examples show how reviving an older building stimulated the economic growth.
The Pratt Street Power Plant, Baltimore, MD
The Pratt Street Power Plant was built in the early 20th century. The plant was once a main source of power for the United Railways and Electric Company. However, during the 1980’s, the building was retired and left abandoned for many years. After two unsuccessful attempts at redevelopment, the power plant is now home to offices, stores, and restaurants. Situated right in the downtown of Baltimore, the refurbished building has provided much-needed economic stimulus to the city.
U.S. Steel South Works Building, Chicago, IL
The U.S. Steel South Works building first opened in 1882 as the North Chicago Railway Mill Company. U.S. Steel South Works later purchased it years later. The steel factory was a major source of jobs for residents of South Chicago. However, the mill began to shrink in the 1970s and eventually closed in 1992. Jobs were cut and the surrounding area became economically depressed. Today, the site is a recreational space that honors the area’s past while also meeting community needs. Repurposing the old factory has boosted property prices in the surrounding area.
The Long Island Power Station, Queens, NY
Built in the early 20th century, the Long Island Power Station provided power for the Long Island and New York City transportation networks. In the 1950s, different parties bought the power station’s buildings. By the early 2000s, much of the infrastructure was in disrepair. However, the buildings were in an excellent location, located on the edge of the Queens’ Historic District in the Hunters Point neighborhood. Developers decided to repurpose the power station into high-end condominiums, which provided a major boost to the surrounding area’s economy, significantly increasing property prices.
Using the IRS Section 170 Bargain Sale for a Community Renaissance
If you have a performing asset, an older industrial building or distressed property, the IRS Section 170 Bargain Sale may provide a means to stimulate the local economy’s growth. The Bargain Sale is an excellent way for a seller to give back to his or her community through helping a federally-recognized nonprofit. The Bargain Sale also allows the seller to receive cash at closing and receive the remainder of the property value as tax deductions for up to five additional years.
How it Works
The cash portion of the purchase consideration tends to significantly lower than the property price and/or valuation. This situation allows new owners a much-reduced basis. The redevelopment and repurposing buildings would otherwise be financially unfeasible to redevelop. It can be a win-win-win: Win for the Seller who receives significant value through cash and tax deduction, a win for the nonprofit who can use the proceeds from a subsequent sale to fund its mission, and a win for the community as the reduced basis allows for properties to be financially feasible for redevelopment and/or repurposing.
To learn more about the IRS Section 170 Bargain Sale and explore whether it may be a good option for you, be sure to visit Welfont.com for more information and resources.