Not even the richest of countries has sufficient public sector financial resources to own, rehabilitate, and maintain all the heritage buildings worthy of preservation. While in many countries the NGO sector has developed expertise in education and advocacy, rarely do these organizations possess the capital or the development expertise to undertake the rehabilitation of heritage buildings. By process of elimination, then, it will fall to the private sector to play the primary role in redevelopment and ongoing stewardship of historic buildings if they are to be kept in active use. At the same time, it is essential to provide protections so that the defining characteristics of the buildings are conserved and can be understood and enjoyed by future generations. New approaches to financing, developing, operating, and maintaining historic buildings are needed, and public-private partnerships (PPPs) are one promising approach.
In some ways, heritage PPPs are the same as the most common large-scale infrastructure projects: given their complexity and long-term nature, all partners need to be transparent about their goals, needs, and outcomes throughout the entire process. Needs may change within what can be a 10-year or longer project cycle, due to a change in governments or an economic downturn. However, transparent communication can help alleviate potential roadblocks—and this is especially important in heritage PPPs, in which the goals and measures of success of the public and private partners may be very different.
There have been enough heritage-building PPPs to begin to draw conclusions about their characteristics and common denominators. While not every success story in heritage-building PPPs has all of the characteristics described below, the majority include most of them.
For many (but not all) heritage PPPs, the public partner is local government. There are notable exceptions, however. In the U.S., for example, national government agencies including the Department of the Army, the General Services Administration, and the National Park Service have been public partners in PPPs. Multiple levels of government might provide incentives, but usually only one would be the “public partner.”
Many heritage PPPs are actually public-private-nonprofit or NGO partnerships, with the third sector playing a pivotal role in success. Often, several NGOs may be involved, but most only passively in a limited or advisory role.
Most heritage PPPs are “white elephant” buildings—those difficult to reuse properties for which the private sector, by itself, rarely takes the lead. In fully developed economies, PPPs most commonly address white elephant buildings. Heritage PPPs usually involve finding creative new uses for an existing structure; this is known as “adaptive reuse.”
Mind the Gap
Often the reason the private sector won’t take the lead in heritage redevelopment is the gap between cost and value. The major purpose of heritage PPPs is often to close the gap.
Unfortunately, the terms “cost” and “value” are often used as synonyms. They are not. Cost is the sum of the dollars that will be expended between the idea and the completed project. Value is what the marketplace is willing to pay for that property (to buy or to rent) after completion. When value exceeds costs, the private sector will usually act on its own without requiring incentives or a public sector partner. However, it is common with heritage buildings, particularly of the white elephant variety, that cost exceeds value. This difference is known as the gap. To recap: the existence of a substantial gap is often the catalyst for considering a heritage PPP.
Signs of success
The majority of successful heritage-building PPPs share a predictable set of common denominators. Chief among these is the recognition of the heritage building as a community asset (regardless of who actually holds the property title), involvement of various levels of the public sector, and multiple sources of financing from traditional and nontraditional private and public sector institutions. Other important denominators of success are:
The presence of a core group that initiates action. This core group often comes from the NGO sector. There is also broad-based support for the project within the local community that horizontally spans sector and political interests.
There is an imaginative catalyst to move the redevelopment idea forward. This may come from the business community, local government, an NGO, or elsewhere, but rarely comes from the current owner of the property (even if that owner is a part of government).
There is a commitment by all parties to be as flexible as possible in use, financing, timing, and particulars of the transaction until a mutually acceptable and feasible alternative scenario is developed. This requires compromise and patience from all partners. Even the most successful heritage PPPs tend to experience significant public skepticism during the planning process.
Ask the right questions
The cornerstone of a successful heritage PPP lies in asking, “What is the unmet or under-met demand in this market?” and “Could this building be developed to meet that demand or demands?” It is critical to remember that a heritage-building PPP project is rarely developed for a single use. Nearly always, heritage PPPs focus on a mix of uses for the building, thereby meeting market demands and mitigating the volatility of any particular use.