- The Evolving Revolving Fund:Historic Charleston Foundation Revamps Its Pioneering Program
At the height of the real estate boom in 2008, a large c. 1824 Charleston single house was rumored to be going on the market because the longtime owner had passed away. The property was located in a highly desirable neighborhood in the historic district, was architecturally significant, and featured a large double lot. The long-neglected house was considered to be at risk by Historic Charleston Foundation (HCF), and its purchase perfectly fit the mission of HCF’s Edmunds Revolving Fund program. After all, this program, the first of its kind in the nation, had more than five decades of experience purchasing at-risk historic properties, stabilizing them, reselling them with protective covenants, then using the sale proceeds to purchase more such properties.
At the same time, this property came to the attention of ambitious developers who saw acquiring it as a potentially lucrative deal. Under the existing zoning, the main house could be subdivided into three condominium units, the rear dependency into two units, and an additional five or more new dwelling units could be constructed in the large garden to the side of the residence. Additionally, there was adequate space to provide for the extensive off-street parking that would be required by the City for that many residential units.
From the Foundation’s perspective, the developer’s plan would irreversibly destroy the historic character of the property and its open space, and it would diminish the quality of life for the neighborhood. HCF, in its determination to save this property and at the urging of the neighborhood, ultimately prevailed in an intense bidding war. After the main internal stair was restored, which had been removed in the 1930s to create rental units, the house was put on the market with restrictive covenants attached to the deed that prohibited subdivision and limited the number of rental units allowed on the property, among other conditions. [End Page 10]
HCF optimistically expected that an equally excited buyer would step up and purchase the now-protected house. With heavy demand for downtown real estate, it would have been easy to find a buyer. However, not long after taking title to the property, the Great Recession hit. HCF was caught holding the property for more than a year before eventually finding an appropriate preservation-minded buyer and selling the property at a significant loss. Furthermore, because this buyer could not sell her own house, HCF was forced to finance the purchase for an additional three-and-a-half years until the buyer was able to obtain her own financing.
Through that deal, HCF’s revolving fund took a financial hit that left the board of trustees and staff feeling frustrated and questioning the overall sustainability of the revolving fund program. Although purchasing this house fit within the mission of protecting a historically significant property, it was five years before the revolving fund committee approved acquiring another property, largely because of concerns over risk exposure and the fear of again losing money. It was obvious that HCF’s traditional approach wasn’t working as effectively as it once did because of Charleston’s robust real estate market and the expanded reach of the local preservation ordinance. The fact was that the private marketplace was taking care of most historic building rehabilitations and there were simply fewer threats to Charleston’s historic district—the preservation landscape had shifted. HCF knew it needed to develop a new direction for its revolving fund programs, so it sought the guidance of The 1772 Foundation, the leading private foundation in the country supporting revolving fund programs.
HCF’S GROUNDBREAKING MODEL
HCF established the nation’s first revolving fund in 1957, and it was hugely successful over its first couple of decades. The Foundation’s Ansonborough Rehabilitation Project, which truly revitalized an entire neighborhood, set an example for preservation organizations across the country, which adopted their own revolving fund programs based on HCF’s model.
With the Ansonborough Rehabilitation Project, HCF purchased properties threatened with demolition or neglect, did minimal rehab [End Page 11] and stabilization work, and then sold...