Grafton, WV
While railroad jobs were key to Grafton’s early growth, the loss of hundreds of these jobs in the 1980s was devastating. The Station is a collaborative project that will transform the historic Cohen Building in downtown Grafton into a mixed-use facility with office, retail, co-working, and conference spaces. Unleash Tygart, Inc., a local nonprofit, is the driving force behind the project. When it’s completed, Unleash Tygart will manage the lease contracts and oversee all its operations. Currently 80% of The Station’s projected leasable space is pre-leased.
Stage of Investment: Pre-Development leverage financing
Population: 5,061 (2019)
Taylor County: 16,977 (2019)
Date Started: 2019
Estimated Completion: 2023
Key Players
Spotter, Framer, Engager, Project Manager: Unleash Tygart, Inc.
Owner, Cohen Building: Alex Reneman
Investor & TA: Appalachian Community Capital
Technical Assistance: People, Inc., The WV Community Development Hub, Partner Community Capital™, Downtown Appalachia Redevelopment Initiative, Thrasher Engineering, CohenReznick
The Spark
Alex Reneman, a Grafton native and successful tech entrepreneur, founded Unleash Tygart to address unmet community needs. In 2018, Reneman met Heather Hudson. She brought more than a decade of nonprofit administration and development experience to Unleash Tygart. Together they recognized the many possibilities The Station project could realize for Grafton.
The Challenge
Local businesses hoping to expand as well as other businesses seeking to relocate to Taylor County often have struggled to find suitable commercial space. Even so, as earlier community stakeholders have tried to complete their own redevelopment projects, a lack of investment has too often led to insurmountable challenges. Unleash Tygart hopes successfully completing The Station will inspire greater involvement in downtown revitalization and create a proven blueprint for success with renovating other at-risk historic structures in Grafton.
The Investment
In the pre-development stage of The Station project, Opportunity Appalachia (a program of Appalachian Community Capital), provided $60K for technical assistance and architectural drawings for the Cohen Building’s renovation. The goal was to develop a project prospectus which has been posted online as 1 of 16 such projects in Opportunity Zones across Central Appalachia.
According to Heather Hudson, Executive Director of Unleash Tygart, The Station’s prospectus has not yet garnered significant interest from its Opportunity Zone listing. Even so, the $60K investment has supported all of the architectural pre-work, a quarter of the architectural drawings, and financial structuring advice from CohenReznick. “It was pivotal to getting together the team we needed,” Heather observes, “and set us up to be ready for investment.”
Working closely together for more than a year, Heather, and Emma Wyatt, formerly the Community Development Specialist at People, Inc., a regionally based Community Development Entity (CDE), were able to obtain state and federal historic tax credits as well as federal new market tax credits that will be applied to the Cohen Building.
“Tax credit programs are not a flash-in-the-pan. They are long drawn-out projects with a lot of players and a lot of pieces. You have to stick it out for years until they come to fruition.”
In West Virginia, the Rehabilitation Tax Credit Program provides for a federal income tax credit and a state income tax credit for the rehabilitation of historic, income- producing properties. The credits are typically syndicated to create investor equity into the project, with the combination of the state and federal credits bringing 45% of the Qualified Rehab Expenses into the project financial structure as investor equity.
The pre-work architect supported Unleash Tygart’s application for historic tax credits by going through the architectural drawings and pointing out each element of architectural significance and how the project would restore it. Ordinarily, such an evaluation would be done by a separate consultant. Fortunately, the project’s architect has a background in historic preservation.
According to the U.S. Department of the Treasury, the New Market Tax Credit Program (NMTC) “attracts private capital into low-income communities by permitting individual and corporate investors to receive a tax credit against their federal income tax in exchange for making equity investments in specialized financial intermediaries called Community Development Entities (CDEs). The credit totals 39 percent of the original investment amount and is claimed over a period of seven years.”
The best strategic advice for someone who seeks New Market Tax Credits, Heather says, is to find a CDE who brings more than the expertise to wrangle their allocation. “Find a partner who really believes in your project and is willing to put their full weight behind it,” she advises. “We would be nowhere if we wouldn’t have found Emma Wyatt and People, Inc.”
The Return on Investment:
Over time, Unleash Tygart expects The Station; A Cohen Collaborative project will:
Provide offices for at least 4 local nonprofits, a tech company, a medical clinic, and a myriad other for-profit and non-profit service-based providers;
Much needed community collaboration space - from huddle and meeting rooms to digitally connected conference facilities;
Create and/or sustain 60 jobs in Taylor County;
Create and house a technology-focused co-working space; and
House a well-equipped “Transparency Production Studio” for multimedia messaging from local leaders to the community at large.
What’s Next?
Unleash Tygart is on track to start construction on The Station; Cohen Collaboration in the Second Quarter of 2022. Occupancy is expected in Spring 2023. The capital stack is forming with investors in available NMTC and HTC opportunities. Bridge funding and a low-interest loan are providing the leverage financing.
Key Takeaways
Work patiently to engage a skeptical community. Unleash Tygart has informally sought community ideas yet received only modest interest. It anticipates success with The Station will increase community involvement with future renovation projects.
Diversify the capital stack. Technical assistance to start a project is often accessible. Debt financing to fill a gap in the capital stack too often is not. Emma Wyatt at People Inc. says the biggest hurdle to debt financing may be a lack of hands-on experience among lenders about how to put together a complex capital stack.
Make sure a paid position manages all communications with the project. This is especially true when seeking historic and new market tax credits. They are very complicated.
Capital Stack
Total: $10.2M
Equity: $0
Senior Debt: $0
Low-interest loan (currently being sought)—$4,002,565
Subordinated debt: None
Grant or Subsidy:
Opportunity Appalachia grant for pre-development work—$60,000
New Market Tax Credits Equity—$2,993,640
Federal + State Historic Tax Credits Equity—$3,103,795