Bill MacRostie, Founder of MacRostie Historic Advisors

William “Bill” MacRostie, founder of MacRostie Historic Advisors and an expert in Historic Tax Credits (HTC), has advised clients working on historic rehabilitation projects regarding everything from homes to ballparks. His firm helps developers navigate tax application processes and historic rehabilitation projects.

MacRostie grew up in Sacramento, CA, before attending Lewis and Clarke College in Portland, OR where he majored in American history. After graduating in 1975, MacRostie worked in a small museum outside of Portland, where he got involved in the local historic preservation movement. He received his graduate degree in Historic Preservation from Boston University in 1980. After graduate school, MacRostie worked for the National Park Service (NPS) doing project review in the HTC program, which was then a relatively new program passed in the 1976 Tax Act.

It was during his three years at NPS where he became interested in the business development side of the HTC world. MacRostie left NPS and worked for an equity syndicator doing consulting work for its clients utilizing HTCs, which he credits as the impetus for his business.

In an interview with Tax Credit Advisor, MacRostie talks about his career, his favorite projects, how the industry has changed over the years and what comes next for the firm as he prepares to retire.

Tax Credit Advisor: You are an expert in HTCs and renovations. Is that something you were always interested in?

Bill MacRostie: Not really. In undergrad, my interest was in history. I discovered and nurtured [that]. One of my major advisors in college was always determined that all of his departmental grads would work somehow in the field of history. In my case, it worked out.

TCA: Tell me about your favorite project or projects.

BM: There are a few that are noteworthy over the years, as a firm, and that I’ve worked on personally in the firm. We’ve done a lot of affordable housing all over the country. Those are projects that have been developed both by for-profit affordable housing developers and managers, as well as not-for-profit sponsors. Those are, I would say, of all of the stuff that we’ve worked on, that’s probably the most gratifying work that I have done. It typically would be an existing portfolio of properties that’s owned and managed by a developer that is in kind of sad shape, rundown that’s being renovated using these credits as a financing source.

You’re really seeing the before and aftereffects of a family’s home kind of substandard and then you’ve really turned it into a very nice, clean, respectable home. That’s been very gratifying over the years.

More high-profile, we’ve been working on a multi-phase project renovating Wrigley Field, home of the Chicago Cubs. That project involved major renovation dealing with structural, as well as fan-based features at the ballpark. We worked on the TWA flight center at Kennedy Airport in New York a few years back. That’s an iconic Eero Saarinen-designed building that looks like a bird in flight or standing on the ground. It’s a very cool building, a very unusual building. Those are the standouts in terms of stuff that we’ve worked on, but we’ve done more affordable housing in terms of our portfolio of work over the years as a class of real estate than any other kind of kind of projects. So, that’s something that I really enjoy.

TCA: What are you most proud of?

BM: As you travel around the country—it’s probably most notable if you’re looking for it in large- and medium-sized cities, but it’s also true in smaller cities and main street downtowns and in smaller towns—there have been projects all over the country. Cities and towns that have used these incentives to renovate historic buildings. You see the footprint of the impact of that all over the country. That’s something that we played a role in the field in general. We’ve really tried to implement what Congress originally intended to do, which was to try to level the playing field between new construction and renovation.

These projects have tended to be in difficult to develop buildings and neighborhoods with the financial and proforma challenges that come along with that. The additional equity that can be brought into a project through these incentives that really helped make projects feasible and allowed them to perform financially. That’s kind of a big picture around the country and it has changed the historic preservation field from one of ‘lie down in front of the bulldozer’ sort of picture when buildings are being threatened. It’s really transformed a good portion of the movement in the field into one where it makes financial sense. That’s something that Congress was able to identify and then act on by putting these incentives in place, and it’s really worked.

TCA: How have things changed in the industry over the course of your career?

BM: That’s a good question. I would divide our industry into developers and owners who have utilized these incentives both in terms of financial and development deal structure and the process that our work is focused on, which is the designation and design review approval. It’s a fairly involved process with emphasis on process. There’s a fair bit that goes on there. Over the years, we’ve looked at developers who have done it once or twice and gotten the hang of it and have gotten comfortable with the process and continued using the credits on their ongoing development.

On the other hand are developers who mostly do new construction but come across an opportunity with a historic building. It might be a downtown office building or an old bank building that might be converted into residential or hotel use.

I would say that there’s been an increase in the number of regular users of the program as the program has matured. One of the other features of the program on our side of the process, dealing with historic designation of buildings and then getting the design for a rehab project approved, is the role of the federal and state governments.

Those processes sort of ebbed and flowed over the years. It’s been a more conservative review if you want to phrase it that way at times, and more developer oriented at times. At the moment, we’re in a phase of the program where the federal government and its leadership, in terms of design review especially, is trending more conservative. So, it’s a little more difficult to get projects approved thanit has been over the many years. I would expect that trend will evolve and change as time goes on. But, at the moment, that’s one of the things that we’re dealing with in our field.

TCA: One of the trends is the focus on energy efficiency. How has that played into this market?

BM: In general, one of the taglines, and it’s true of the historic rehab field and industry, is that the most efficient building in terms of “looking” the green movement today, is the one that already exists. You’re not using new steel, new concrete and so forth to build a building. It’s already there. That’s a greening trend to begin with in terms of the building that you’re dealing with and not having to build new.

Having said that, making an existing building energy efficient, especially in very modern terms now, is a challenge. There is an element of the historic preservation field, issues, like window retention versus replacement, building insulation, passive energy generation and forms of wind or solar, all of those things impact both the detail and sort of overall character of these buildings. I would say that the main underlying principle in this, in terms of the design review for the historic credit, is maintaining the character of a historic building. So, there’s a natural tension between energy conservation and maintaining a historic character. That’s something that the field has struggled with and will continue to struggle with in terms of sort of the regulatory umbrella surrounding the program. It’s difficult, it’s a challenge.

TCA: What are your thoughts on what changes you see in the pipeline, for example, in the Build Back Better bill?

BM: Over the years, the historic credit industry has lobbied for and had federal legislation introduced in Congress that would improve in various ways the use of the HTC. Overlapping the last and the current sessions of Congress, there is a bill that’s been introduced in both the House and the Senate that would provide some improvements to the program, mostly to make it a little bit easier to develop smaller projects. It provides some additional incentives for smaller deals. It would also put a couple of provisions in place that would improve the overall use of the credit. In one case, it directly addresses some changes that were made to the rehab credit in the 2017 Tax Bill in the Trump administration.

So those provisions have been introduced in the House and the Senate, and they have made their way into a draft of the house bill that has come out of the House Ways and Means Committee. Those provisions, right as we speak, are not in either the infrastructure bill, the bipartisan bill or the reconciliation bill.

We’re in a final effort to try to get those provisions included in the Senate bill and I would say it’s a pretty decent challenge at this point that they will survive, but those efforts will continue.

TCA: I understand that you are now in the process of retiring?

BM: I will be stepping back at the end of this year, in all likelihood. I expect to be working for the firm part-time for some period of time that’s yet to be determined. We have been very intentional in putting together a leadership team that really has taken over for me; running the company. Albert Rex, who is my other partner in the business is our CEO, and has been for the last two or three years. We have a CFO who is heavily involved in the business as well, Brian Monbouquette, and they’re really running the company at this point, which gives me the opportunity to step back. I’m involved in the day-to-day operation of the company on a fairly limited basis at this point. So that part of our planning is working out. So, it looks as though I’ll be able to step back. I would expect full retirement and leaving the firm in one or two or maybe three years.

TCA: What are your post-retirement plans?

BM: I enjoy fly fishing, so I expect I’ll be doing a little bit more of that. I’ve got adult children and my wife and I have one grandchild at this point. So, we’re enjoying that. In fact, I’m in Denver as we speak for the month of November, where our daughter, son-in-law and newborn grandson live. He’s our first grandchild and we’re enjoying that immensely.