Real Estate Advisor Law Blog

Real Estate Advisor Law Blog

Field Notes from the 2015 Novogradac Historic Tax Credit Conference: Section 50(d) Income

Posted in Tax Credit Issues

Boose_039C3523_background_RGBI recently returned from Novogradac’s 2015 Historic Tax Credit Conference held last week in San Antonio, Texas. This national conference draws a wide range of professionals, investors, and developers who share a love of historic properties and work in the historic tax credit space. While a wide range of topics were discussed, the “hot topic” on the minds of many attendees was the IRC Section 50(d) income acceleration issue. In a nutshell, there is uncertainty in the industry as to the tax accounting treatment for IRC Section 50(d) income that arises from use of the popular Master Tenant pass-through structure in historic tax credit deals. Unfortunately, no one at the conference brought their crystal ball – the issue remains in the hands of the Internal Revenue Service which is anticipated to provide clarification on this issue in the coming months. In the meantime, the panelists provided the following input on how they are seeing current deals addressing the 50(d) issue, as well as some planning thoughts:

  • One obvious solution is to employ a direct investment structure. A direct structure avoids the 50(d) issues. Easier said than done, however, as a direct structure creates its own issues for the investor and developer. That’s a topic for another blog article.
  • Some investors may decrease their pricing on Master Lease structures in order to compensate for the possibility of being liable on 50(d) income.
  • For deals that have reached the end of the compliance period, we may see investors waiting to exercise their put options until the IRS issues guidance on the issue. This will enable the investors to understand the tax implications of their exit. One practitioner noted it will be important for investors and developers to review their put option agreements to understand when the option expires, and, if appropriate, to negotiate an extension of the put option.
  • Developers, be prepared – as you may be asked to indemnify investors against the 50(d) income realization risk.
  • For deals that have already closed, pull out your closing documents and take a look at how the 50(d) issue was handled in your transaction. Whether you are a developer or investor, it is important to understand how this issue could affect your position. This will be especially important after the IRS issues guidance on the topic. Your review should consider whether there is a way to fairly allocate the risk, depending, of course, on your interest in the property.

While the 50(d) issue has not cooled the historic tax credit market too dramatically (as it did, for example, when the Boardwalk Hall case and associated Revenue Procedure 2014-12 were pending), the ideal resolution to the issue by the IRS would be one that preserves the incentives to developers to restore our nation’s historic properties, reduces speculation, and restores efficiency in the HTC market for both investors and developers.

Leases R Us

Posted in Uncategorized

In anticipation of the October Grand Opening of Liberty Center, we recorded a video recognizing the creative genius and forward thinking of Yaromir Steiner and Steiner + Associates. It is posted at our website –

They have already announced a great roster of tenants who have signed leases: Dillard’s, Dick’s Sporting Goods, Kona Grill, The Cheesecake Factory, Funny Bone, Kendra Scott, Marbles: the Brain Store, Brio Tuscan Grille, Victoria’s Secret, Graeter’s, among others. We are proud to have done all of these leases for Steiner + Associates.

I am working on a donut store lease (I can’t give away who yet), because whoever invented donuts deserves a Nobel Prize (how does that joke go – I would kill for a Nobel Peace Prize). I am worried that Kevin Dawson of Barnes, Dennig will buy out the store before I have a chance to stop in. If you know Kevin and want to be able to buy donuts at Liberty Center, you would be very worried too. I am thinking about drafting a provision that limits the number of donuts you can buy if your name is Kevin. I like Kevin, but…

Check out our website to get a feel for the new Center and for how we and Steiner + Associates work –


Interest Rate Hike?

Posted in Uncategorized

We have been hearing a lot for a long time that interest rates are going to be on the rise.  In fact, in early summer, we did see a jump in the prime rate.  However, the Federal Reserve has not moved yet to increase the rate that it charges to banks.  It is anticipated that this will happen soon, perhaps as early as next month.  The Federal Reserve has kept its interest rate near zero since 2008 to keep lenders lending and borrowers borrowing.  In the early years of the recession, this did not seem to work on real estate loans which were, for the most part, not being made.  However, loan activity has been building in recent years.

We saw a lot of real estate loan activity so far this year.  Many borrowers looked to close new acquisitions or refinancings before the interest rate increase.  A small increase in the interest rate can have a large impact on the bottom line for an income generating property.  Some loans provide for an interest rate lock at the time the loan commitment is signed.  Clients ask whether or not they should rate lock right away or wait another few days or a week.  Short term swings in interest rates (that is, swings between today, tomorrow, and next week) are difficult if not impossible to predict.  In general, interest rates are expected to rise and the Federal Reserve is expected to increase its rates, leading to an increase in the rate that banks charge borrowers.  However, it is possible for rates to have some short term fluctuations making yesterday’s rate higher than tomorrow’s rate.

So, if rates jump a half a point or more, will the real estate market contract as a result?  Some clients have refinanced their loans well in advance of their original loan maturity date.  I expect that option to become less attractive this fall and to see some fall off of refinancings.  A property owner has to factor in the cost of refinancing, including any prepayment penalty, and compare that to the interest payment savings of refinancing.  However, for new property purchases, we have seen cap rates being compressed.  This is especially true for triple net properties with tenants with high credit ratings.  The increase in the interest rates could be balanced by rising cap rates.

Great Ideas

Posted in Retail Industry Issues


I just attended the ICSC Idea Exchange in Columbus, Ohio where several great ideas were exchanged.

Robert Myers, Chief Operating Officer of Philips Edison & Company, said it was a seller’s market with cap rates of 4 to 5.

I learned that fast casual pizza (think Chipotle does pizza) is the fastest growing segment of the restaurant business. I heard a presentation by Sean Brauser, founder and CEO of Pizzafire, which was tremendously appetizing and impressive. Pizzafire prides itself on freshness (it has basil growing fresh in its stores to use on the pizza), the dough and the sauce. I am anxiously looking forward to eating at a Pizzafire.

I heard a very interesting presentation from AVAIL Vapor. They have an upscale vaping store with a layout and buildout like an Apple store. They have a compelling presentation and an aggressive growth plan. I am very interested to see if their concept works.

The guys from Fusian were there offering a free sushi roll at their Easton location to all attendees. I have said many times that these guys are smart and have a great thing going.

I was introduced at social hour to the Location Wines by Orin Swift. Winemaker David Phinney produces and bottles wine from different locations in the manner of the location. There is F, for France, which resembles a French Bordeaux; E, for Spain, which is a Grenache Tempranillo blend similar to a Rioja; I, for Italy, which is kind of a new world Italian using grapes from all over Italy; and AR, for Argentina, which of course is a Malbec blend. They have CA, for California, which is supposedly a blend of many different California regions, but I have been unable to “locate” a bottle to try. These wines are reasonably priced and very drinkable (I would say the E may be “E”specially good), in addition to being a super interesting idea.

So all in all I was exposed to several great ideas, and learned (again) that the ICSC Idea Exchange is a great conference to learn about and meet the exciting retailers driving shopping center growth.

Try It, You’ll Like It.

Posted in Real Estate Tools, Uncategorized

A beta version of Cuyahoga County’s property information website called MyPlace is now up and running.

There is no need to separately search the webpages of the county recorder and county auditor (two divisions of the County Fiscal Office) in order to obtain property information in Cuyahoga County.  Now, all information is available in one location including:

An aerial map which zooms in on the property when you enter its parcel number.

  • The name and address of the owner.
  • Information regarding zoning and land use.
  • The number of units for apartment buildings.
  • A transfer history going back at least 40 years with information on sales price (when reported).
  • Links to the actual images of recorded documents.
  • Information on Board of Revision cases challenging the tax value of the property.
  • Square footage and use information for each floor of the building.
  • Information regarding permits issued.
  • The ability to view and print the current tax bill.

You can search by the owner’s name, parcel number or address.  This one stop shop for Cuyahoga County property records is a great improvement over the former multi-site method of gathering real estate records.   As the classic 1972 Alka Seltzer commercial said, “Try it, you’ll like it.”

A Mortgage Loan Bloodline

Posted in Uncategorized

Gagliano PostIt is a parking lot.  In fact, it has been a parking lot for 25 years now.

In 1990, the building located at 33 Public Square, then officially yet non-descriptively known as the “Public Square Building,” was demolished to make way for what was to be the new, high rise headquarters for Ameritrust, successor to the venerable Cleveland Trust Company. The Ameritrust tower was to be the signature development on the northwest side of Cleveland’s Public Square.

However, by 1991 Ameritrust merged with Society National Bank and the combined bank, now known as KeyBank, became the namesake tenant of what is now officially Key Tower. Ironically, Key Tower was under construction on the north side of Public Square at the same time the Public Square Building was coming down on its west side.

Ameritrust Tower was not built. Nor has anything else been built along the northwest quadrant of Public Square.   The site remains vacant.

The former 13-story fireproof brick building at 33 Public Square was constructed in 1895 and initially called the Mohawk Building, a name it retained for only a short period.  By 1900, the American Trust Company moved into the building and it was renamed the American Trust Building, a remarkably coincidental name given the site’s intended use in 1990.   That name, however, would change again two decades later.

In 1920, an investment house in the business of buying and selling real estate mortgages and bonds acquired the building and gave it its name.  The business was S. Ulmer and Sons, Incorporated and the building became known as the Ulmer Building. Prominently displayed on the top of the building was the company’s stock in trade, “Ulmer Mortgages.”  A vintage Cleveland postcard depicting the building and its signage accompanies this blog post.

Ulmer was Solomon Ulmer. He began his mortgage business in January 1895 in the Harrington Block on the southwest corner of Public Square. His son, W. L. Ulmer joined him in business the following year. In about 1905, his other son, J. M. Ulmer, joined the business.

By 1920, when the American Trust Building was renamed the Ulmer Building, S. Ulmer and Sons had been incorporated and J. M. Ulmer and his brother-in-law, J. M. Berne, were the treasurer and secretary, respectively, of the company. The firm footing of the company was evident by its $5 million capitalization consisting of 7% cumulative preferred stock and 50,000 shares of common stock.

Of course, J. M. “Yank” Ulmer and J. M. “Joe” Berne had another business interest which consumed their time, namely their law firm founded in 1908 which today, as then, remains known as Ulmer & Berne.

Weakest Link in the Chain

Posted in Development, Development Issues, Leasing Issues, Retail Industry Issues

Weakest LinkLeasing space to a restaurant chain is very desirable for a shopping center landlord. Name recognition attracts people to the center and a chain typically has better financial resources. So, the landlord starts out saying “I want a Cheesecake Factory, Cooper’s Hawk, Tom & Chee…fill in the blank, at my center.” Then during lease negotiations, the tenant wants the landlord to pre-approve the tenant’s prototypical design and signage, to allow the tenant to modify its menu as the chain does, and to execute a franchise addendum required by the franchisor. And the landlord says no.

Huh? Is this not an oxymoron? The landlord wants the chain but doesn’t want it to be like the rest of the chain? I think the landlord should decide up front whether it wants the chain or it doesn’t.

If a landlord wants to do a lease with a franchise, the landlord has to recognize that the franchisor will require an addendum to protect its franchise. I am not even kidding when I say that more than one landlord has recently said it will not execute an addendum as an exhibit to the lease, but will consider putting the relevant provisions into the body of the lease. Having it as a stand- alone exhibit makes review significantly easier for the franchisor, especially if an issue arises several years later.

I honestly cannot understand the harm in that to the landlord. I will give a hot fudge sundae to anyone who can rationally explain how it changes the rights or obligations of the landlord in any way to include the franchisor clauses in an exhibit, as opposed to being included in the body of the lease.

I’d like to think the landlords are not simply trying to confuse the franchisor.

Eat to Live – Live to Eat

Posted in Uncategorized

I eat out a lot, and I enjoy it. In fact I prefer it. Being able to enjoy different ambiences and different tastes, and having someone else wait on me and clean up after me, makes eating out fun. Apparently, I am not alone. Even when the economy suffers, the restaurant industry remains strong. I have commented on how restaurants are becoming the new “anchors” in today’s shopping centers. So some random thoughts on food and restaurants:

• Ethnic cuisines just have more taste.

• First there’s Asian food. I think I could eat Asian every day. A staple is Pad Thai. Just my personal preference, but the best Pad Thai in Cincinnati is Bangkok Bistro, Wild Ginger or Uncle Yip’s. But step out of the box and eat Kim Chee – try Sung Korean Bistro in downtown Cincinnati. They have really good Bibimbab too, as does Suzie Wong’s.

• Mexican food is tricky. I love fajitas (everything tastes better in a tortilla) and done well Mexican food is great. Done poorly it ends up all tasting like beans. Try Mazunte for authentic Mexican. Also, try Nada which I heard the Owner say is a Mexican restaurant not trying to be a Mexican restaurant.

• Of course I like Italian, but it all depends on the sauce. I have to say I was just at Ciao Italia in Longboat Key, Florida. They may have the best Lasagna I have ever had – in part because their sauce is so good.

• Is Yelp reliable? I am never sure whether the reviews are real, or by employees or competitors. Or are you better off relying on food shows like Diners, Drive-Ins and Dives when travelling?

• One word – Goetta?

• Another rule of mine: Add sour cream to anything and it tastes better. Really. Try it.

• Is it me or have wait people been trained wrong? I thought correct service was to not clear someone’s plate until everyone was done. Otherwise you are rushing those who haven’t finished their meal, and that is rude, and is BAD service. It seems like restaurants today have trained their wait people to believe the opposite: that it is GOOD service to remove someone’s plate as soon as they are done even if everyone else is still eating.

• I used to think the banana might possibly be the world’s most perfect food. But I might have to give it to the avocado.

• Donuts are my big weakness. Have you had a deep fried donut from Wyoming Bakery? What about a grilled cheese donut from Tom + Chee? These are bucket list items.

• Seafood is interesting because of the different textures. Raw oysters are definitely an acquired taste. While I love raw oysters, I still remember the first time I ate a raw oyster and the gagging sensation it brought on. Calamari can be weird for some, at least the tentacle part. Steamers (steamed soft shell clams) are my absolute favorite (c’mon, more than lobster?). But the combination softness of the belly and hardness of the neck do cause problems for some. I have never been able to figure out why you can’t get steamers anywhere but the northeast.

• What is the real life cycle of a chain? TGI Friday’s has defied all odds by managing to stick around for 35 years – amazing. For any chain, it is extremely hard to maintain a high level of excitement. Besides keeping the concept fresh, they have a management issue. The local restaurant has the owner on-site, involved in all aspects of operations. A chain has layers of management, none of whom are “owners”. I have often thought that a chain should eliminate middle management and have high priced GMs with incentive bonuses tied to profits so they are incentivized like an owner.

• I understand the need for a restaurant to charge a mandatory tip for large parties. But when I see a tip automatically charged, I am less inclined to add more even where the service is good. I would usually give MORE if there is no tip automatically included.

• I do think everyone should be required to work in a restaurant before they are allowed to eat in one. Conversely, just because you have eaten in a restaurant does not make you qualified to own one.

• Thai Tuesday in Wyoming is a great thing. The wife of the slain owner of Cosmic Pizza cooks wonderful Thai dishes available for take out on Tuesday nights. The death of her husband was tragic and the community came together to help her, including setting up her dinner business. The folks who came together and helped her have done so much without publicity and their selfless work is so admirable. It is worth ordering just to help her – but the food is really good too (have I mentioned how much I love Asian food). You can order at and you pick up at DiStasi’s Restaurant and Banquet Center, 400 Wyoming Avenue in Wyoming, Ohio. You need to include the dish you want (it changes weekly) and the time of pick up.

• On a related note, I normally pick a restaurant because of the food, atmosphere and service. But personally knowing and liking the owner helps too. Dino DiStasio owns Gabby’s in Wyoming. Dino is a great guy who does so much to help the community (including making his Banquet Center available for Thai Tuesday) that you want to go to his restaurant just to support him. Valuable business lesson here – it actually pays to be nice because people will prefer to do business with people they like.

In Search of Restaurant Lease Knowledge and the World’s Greatest Fish Taco

Posted in Leasing Issues

IMG_2384I just got back from San Diego where I spoke at the National Restaurant Association Financial Officers and Tax Executives Conference. I was on a panel with Ron Dee of Cooper’s Hawk Winery & Restaurants and George Galloway of Next Realty Mid-Atlantic. Although I was a speaker there, I always try to take advantage of learning a thing or two for myself at these kind of seminars, as well as develop relationships with clients and potential clients. By that measure, it was a successful trip.

  1. I learned from George Galloway that savvy tenants have gotten real smart at how to reject delivery of possession and thereby obtain penalty payments, and that savvy landlords have gotten real smart at how to avoid paying allowance installments.
  2. I enjoyed an amazing dinner at Eddie V’s in LaJolla overlooking the ocean with Harvey Metro of Matchbox Food Group and Ron Dee and RD Ahlers of Cooper’s Hawk.
  3. I met Suzie Pfeiffer, Vice President of Finance of LaRosa’s. I had to go all the way to San Diego to meet her. I’m an east coast pizza guy, but have to say I love LaRosa’s.
  4. I learned from Ron Dee that landlords are highly motivated to provide an allowance in every deal, but at the same time highly motivated to not actually pay it.
  5. I learned that Steiner + Associates is a great landlord. Steiner’s lease is, relatively speaking, extremely reasonable and easy to read, and they are much more willing to agree to reasonable changes requested by a tenant.
  6. I had maybe the best fish taco in the world. And I got it from a food truck. Marisco’s German Beyer. I have no idea what that means or what is German about it, but I have now ended my search for the world’s greatest fish taco. They have a shrimp taco called the Gobernator which was pretty damn good too.
  7. We discussed that restaurants may be the new anchors in today’s lifestyle centers. A center has to provide an “experience” to motivate consumers to visit the center as opposed to sitting home and buying over the internet. Restaurants help create that experience.

What Happens in Vegas…May End Up in a Blog

Posted in Uncategorized

Kadish_CMYKThe ICSC Walapalooza starts this weekend in Vegas. The sheer number of people converging in one place and the talent level of them is staggering. And of course it is all hard work! I’m hoping to get a couple free minutes to meet with some of my favorite clients:

Steiner + Associates – and their new Liberty Center. Anne Mastin has done an amazing job for this Center scheduled to open October 8. She is always a couple steps ahead of me. Steve Hardy is a very entertaining leasing agent and he does great work. Add Scott Fox and Jody House to the mix and work ends up being fun.

Metropica – and their new center in Sunrise, Florida. Just got a flurry of leases signed on the eve of Vegas. Sandie Witmer worked overtime. Sandie may be one of the nicest people I have ever met. And under the stress of getting the leases done in time, she was able to remain nice (a nice counterbalance to me).

Cooper’s Hawk Restaurants – several new locations. They have pretty good wine, and I admit I am a wine snob. And Ron Dee will fool you – he is quietly very funny.

Jo-Ann Stores – long-time client. Kevin Beegle has done a boat load of leases for them. Tony Carosello will break your legs if you don’t cave on lease issues. Not sure if Matt Senra will come with them, but get this – I saw Matt Senra eat blood marrow. Not even kidding.

Core Resources – my oldest, very first, client. Paul Kitzmiller has been a client and friend since 1987 – unbelievably talented guy. David Kitzmiller may be the most solid guy I know. (They bought me a filet mignon dinner at the Bellagio last year just so I would say nice things about them.)

Tilted Kilt – Sean Cahill. Fun concept with explosive growth. This should be a fun engagement.

Matchbox – a relatively new client. Just met Harvey Metro and Peter D’Amelio at their first location in Washington D.C. Great concept- great guys.

New City – new urban center in Chicago. Very cool project. Great line up of tenants in a great location. It has been fun to work with Marci Carl and grand opening in Chi town will be a blast.

I am looking forward to seeing all of these folks, plus numerous other friends.