This morning, I was in a meeting with a customer where we discussed the adaptive reuse of a 100-year-old machine shop into 40,000 sf of Class-A offices. It’s in the right place and now is the right time. Our architect friend asked about historic tax credits, and my customer quickly said, “No way.” He was responding to the pain and suffering they had walked through a few years ago on a major CBD redevelopment. He was more responsive to opportunity zone funding, whether it be friends and family equity or something more institutional.

The conversation reminded me how far we’ve come understanding historic tax credits. A few years ago, I would’ve replied just like our customer. I wrote a post around that time remembering a mentor of mine named Ron Richey, a Fortune 500 CEO who always said, “If it is too complicated to explain on the back of the napkin, it’s too complicated.” I joked that an explanation of historic tax credits wouldn’t fit on the back of a tablecloth, and it was true at the time.

Now having completed a number of historic tax credit projects, they are coming into better focus. One just needs to know the rules and pick the right players. The other thing we have learned is that historic tax credits are no substitute for equity and they will not make a not a bad deal become a good one. They are sweeteners. In other words, historic tax credits can be the catalyst needed, but one still needs the basics on the back of the napkin.