Knox Heritage’s Real Estate Program: From Modest Start to Powerful Preservation Tool

In our profession, life frequently serves up lemons. Devastating losses of one-of-a-kind places after hard-fought battles or time-intensive negotiations. But at times like that, it’s empowering to remember an old cliché and find a way to mix up some lemonade. That is how Knox Heritage’s J. Allen Smith Endangered Properties Fund was created in 2004.

Knox Heritage’s initial foray into real estate began in 1999 with the help of the National Trust for Historic Preservation’s Inner City Ventures Program. We knew we wanted to make a difference in the historic low- to moderate-income neighborhoods surrounding downtown Knoxville and needed to put our money where our mouth was to have a meaningful impact. Even though we had no staff at the time, we gathered together a group of volunteers with the skills we needed—real estate agents, contractors, city community development staffers, architects and neighborhood residents—to craft a business plan and apply for funding. At the time, the National Trust required that we raise local dollars to match a portion of the line of credit it committed to provide. We had no track record in real estate and little credibility with most funders, so the Trust’s endorsement of our efforts enabled us to approach a local community foundation and obtain a $100,000 line of credit as well as a small grant to create our business plan. We launched our Vintage Properties program with $350,000 in lines of credit and $35,000 in reserves to absorb any losses.

But now what? Knox Heritage had never managed a construction project before and we had no staff to do it. Our solution was to contract with a local nonprofit affordable housing provider, Knox Housing Partnership, to manage the general contractor we hired for the job. That partnership worked well for both organizations. We learned the ropes of construction management and our partner organization earned a reasonable fee while learning how to do a preservation-based rehabilitation project. Knox Heritage went on to manage its own construction projects and Knox Housing Partnership went on to do preservation rehabs in the historic neighborhoods where it works.

1300 Kenyon was vacant for 13 years before Knox Heritage stepped in to restore the house in 2005 using its preservation revolving fund.

PHOTOS COURTESY KNOX HERITAGE

FIRST FORAY

The little house we started with was seen as a lost cause by many neighborhood residents after it was abandoned, suffered a fire, and became the site of criminal activity. Plus the economics made no sense for a private developer since there would be no margin in the budget for a profit, and there was more structural deterioration than the average homebuyer would want to tackle. That’s where our nonprofit organization came in—we only needed to break even and were able to purchase the house for $1 through the City of Knoxville’s blighted properties program. Our goals were to save an endangered historic structure, prime the pump of the real estate market in the neighborhood by eliminating a drag on redevelopment efforts, and help revitalize a historic neighborhood. At the end of the day, we achieved all three goals and walked away with a profit of $125 after the house sold almost immediately.

In spite of a major setback (a contractor mistakenly stripped the original wood siding from the wrong property) Knox Heritage regrouped and restored 321 Oklahoma in the Old North Knoxville Historic District in 2005.

PHOTOS COURTESY HISTORIC KNOX

NOT FOR THE FAINT OF HEART

That initial win gave us the confidence to move forward, but then we began to realize that this type of work is not for the faint of heart or the impatient. We next bought two foreclosed houses in a neighborhood that was still in the beginning stages of being revitalized. That is where we learned the impact that carrying costs can have on any project. It took longer than expected to...