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Recently, the Cincinnati Business Courier was nice enough to run a photo spread of our new law firm offices and we have had hundreds of clients drive by or visit our new City-home of Finney Law Firm.  The project was more than $2 million invested in our offices and two apartments in the core of downtown Cincinnati, taking about three years to complete.

We undertook this project to invest in the City that has given so much to us, but also to deeply learn things our investor clients already know about real estate investing, financing and development, so we can share those lessons with other clients.  Here are a few things we learned:

1. Patience is a virtue.  Things (plans, regulatory approvals, material orders and contractor work) are not going to happen overnight.
2. Further, every project is a trade-off of three things: a) time, b) money and c) quality.  You can get two out of three, but it’s hard to get all three.
3. You have to trust and respect your designers, architect, construction manager, contractors, materialmen, and laborers.  They know more about this business than you do.  And although I help clients address failed contractor relationships, I found the vast majority of the people I dealt with to be honest, qualified and quality-minded and very hard-working.  Indeed, they had to repeatedly push back on me (on time or money) to insist on high quality in the project execution.
4. A lender pulled me aside as I was planning the financing of the project, and told me to avoid construction financing if at all possible.  Do it with cash.  Otherwise, the bank will be looking over your shoulder and slowing you down every step of the way.  He was right.  Avoiding that headache was key in the project’s success.  Obviously, this is not always possible, but great and unsolicited advice.
5. The City was great to work with.  The Building Department (especially), the Historic Conservation Department, the Water Works, the Police.  At every juncture, I was awed at the cooperation and enthusiasm I received from City officials.
6. Key incentives.  For this project, we employed key incentive packages which were incredibly valuable.

• • Cost segregation.  Again, an accountant friend told me to explore cost segregation on the project.  This is where an engineer’s study allows you to significantly accelerate deprecation on project components.  Over the years, I had heard of cost segregation studies, but I literally had no idea how incredibly valuable this approach can be, resulting in hundreds of thousands of additional early depreciation deductions.
  • Federal and State Historic tax credits.  Again, after I had purchased the building, a friend told me of state and federal historic tax credits (not deductions!).  These can pay for up to 45% of an historic project.  20% federal is more or less automatic, but the additional state credits (essentially a grant) are a competition and Cincinnati gets more than it’s fair share, so it is competitive.  We won both!
  •  City tax abatements, residential and commercial.  I had to jump thru a few hoops (cutting the building into condos and applying separately), but the City has generous (although slightly complicated) residential and commercial property tax abatement programs that every developer should get to know about.  They are readily attainable.
  • Port/Sales tax avoidance.  Our project was too small for the strategy to be effective, but another turn-key, money-saving program for County projects is to partner with the Port Authority to avoid sales taxes on all of your building components and materials.  For larger projects, it is a “must do.”

If you are embarking on a development project of your own, I am glad to share my contractor and materialmen list, the short-cuts and procedures I learned for each of project components.