Hotel Financing Seminar

Please join us for this informative webinar today.  If you can not participate you can access the webinar through our sponsor. The link is the title to the webinar.


Hotel Financing Structures and Options in the Hospitality Industry Upswing

Leveraging CMBS Capital Market Financing, Preferred Equity, Tax Credit Funds and EB-5 Financing

The hotel industry is in an upswing as this cyclical industry continues to heat up and is one of the most active real estate segments in today's economy. How can counsel pave the way for hotel clients to identify and negotiate financing deals?

While financing from traditional lenders is relatively scarce, savvy industry insiders are finding additional sources of financing and are driving a new era of innovation in real estate finance. Preferred equity investments, tax credit funds and EB-5 financingare common.

Commercial mortgaged-back-securities loans, historically an important hotel financing source, came back into play in recent years. New CMBS loans are more complex and difficult to navigate than before, but can be a critical source of financing for certain deals.

Listen as our authoritative panel of real estate finance attorneys guides you through the various financing tools and sources of money available for hotel financing, including CMBS financing, tax credit funds, EB-5 financing and preferred equity investments. The panel will also address legal issues that can present financing challenges in this post-recession environment. 


  1. Pre-recession/recession
    1. Easy money
    2. Cleaning out the distressed properties and loans
  2. Current available sources of financing
    1. Private investor dollars (preferred equity)
    2. Tax credit funds (new market/historic tax credits)
    3. EB-5 financing
    4. CMBS capital market financing
  3. CMBS type loan structures and requirements
  4. Collateralizing the management and franchise agreements
    1. Comfort letters
    2. Subordinations
    3. Collateral assignments
  5. Bankruptcy remote organizational structures and covenants


Bradley KaplanPartner
Ulmer & Berne, Cincinnati

Mr. Kaplan assists owners, operators and receivers of hotel, office and industrial properties with their real estate, finance, leasing, construction and organizational challenges; specifically, negotiating and drafting hospitality, purchase, sale, financing, leasing, construction, franchise and management agreements.  He serves as general counsel and national real estate counsel to several domestic and internationally based public and privately held companies.  


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Two for the Price of One

If you do not know what "RevPar" is keep reading.  "RevPar" is defined as Revenue per Available Room or the total guest revenue divided by the total number of available rooms. ( STR Global  maintains a useful glossery of hospitality industry terms.)  RevPar is an important metric in the hospitality industry because it measures sold and unsold room revenue.  

So, why is this important to real estate developers and hoteliers ?  As the hotel industry rebounds and new properties are developed the competition for room revenue, especially in central business districts is heating up.  How do you help ensure that your RevPar is high while also bringing economies of scale to your development ?    

Develop a parcel which has two or three brands in or on the same property which share certain common facilities such as elevators, reservation systems, management and maintenance staff, kitchen facilities, parking facilities.  Take the old Cincinnati Enquirer building as an example.  This historic renovation in Cincinnati's central business district is being renovated by SREE Hotels into a dual branded Homewood Suites and Hampton Inn.  The project has been awarded Ohio Historic Tax Credits. When completed the development will operate two separate Hilton branded hotels which appeal to different types of consumers rather than one large hotel hoping that their target consumers fill all of their rooms every night.  

Just makes sense !




Re-Purposing for the Hospitality Industry

It seems that old is new again !  In cities throughout the U.S. buildings originally built for a specific purpose: banks, office buildings, schools and warehouses are being converted or "re-purposed" into other uses, but in particular into restaurants and hotels.  In Cincinnati alone there are three projects undergoing renovation for their new life as hotels (Old School for the Performing Arts, Enquirer Building and Bartlett Building). Recently, theNew York Times highlighted examples of re-purposing which are on-going throughout the country.  While this is not a new or novel idea, what is exciting and interesting is the focus on hospitality.  Could that signal that financing is flowing into hospitality uses in favor of other traditional uses ? Or, that central business districts where older buildings are generally situated are having a renaissance ? Or, both ?  These projects are ripe for historic and new market tax credit financing.  So, keep an eye out for the opportunity to save a piece of history and culture and bring life into your central business district.


Rehabilitation Historic Tax Credit

On December 30, 2013, the IRS issued Revenue Procedure 2014-12, setting forth a safe harbor for federal historic rehabilitation tax credit (HTC) transactions.  Investors have been skittish about HTC deals ever since the 2012 federal appellate court decision in the Historic Boardwalk Hall case, which disallowed the allocation of HTCs to an investor.  The IRS issued Revenue Procedure 2014-12 in order to provide more predictability regarding HTC transactions.  The IRS will not challenge allocations of HTCs if the provisions of the safe harbor are satisfied.  The safe harbor is generally effective for allocations of HTCs made on or after December 30, 2013. It is expected that HTC deals will now be structured to satisfy the provisions of the safe harbor. For more information on the safe harbor, please see Ulmer & Berne’s Client Alert.

Top 10 Things You Should Know About Historic Tax Credits

Earlier this fall, the National Park Service celebrated the 35th anniversary of the popular Federal Preservation Tax Incentives Program, which has helped in the preservation of historic structures across the U.S. and particularly in Ohio with its wealth of historic buildings. Because of the program’s numerous possible benefits and its important role in fueling economic growth in surrounding communities, property owners and developers should consider utilizing tax credits on applicable building projects.

But before making the leap, it’s helpful to better understand the requirements and limits of the program. Here are 10 key points to consider before you get started: 

1.    Your building needs to be historic.


First, you need the right kind of building. If it is on the National Register, or a contributing factor in a historic district, then you are all set. If it is not, you can get the building placed on the National Register or have the district expanded so as to include your building. In either case, this process will likely take a year. This is known as a Part 1 approval.


2.    Your plans need approval from the state historic preservation office (SHPO).


Some say this may be the biggest disadvantage of using historic tax credits. SHPO needs to approve your plans, both inside and out. This is known as the Part 2 approval.


3.    Your rehabilitation must be substantial.


In order to qualify for the federal historic tax credits, your rehabilitation plan must be substantial – in the eyes of the IRS, this means the rehabilitation costs must exceed your basis in the property.


4.    You typically need a third-party investor.


There are two factors necessitating the need for a third party investor. First, the credit must offset a tax liability. Most individuals do not have a large enough liability, therefore, most of the investors are C-corporations. The second issue is created by the passive activity loss rules. Basically, only a full time real estate professional can use the credits against active income. C-corporations are not subject to the passive activity loss rules.


5.    Historic Boardwalk has impacted how these deals are structured.


In the Historic Boardwalk case, the IRS successfully argued that the tax credit investor was not a real partner and therefore could not be allocated the credits. The IRS said that the investor must have real upside (not just from being allocated the credits) in the economics of the project (i.e., cash flow and appreciation) and real downside (i.e., the developer cannot completely indemnify the investor). The industry is waiting to hear from the IRS who has promised to issue a revenue procedure outlining a safe harbor for these investments.


6.    Your building cannot be transferred for five years.


The Internal Revenue Code provides that the taxes offset by the credits are subject to a pro rata recapture if the property or a controlling interest in the owner is sold in the five-year period after the property has been placed in service. This makes it difficult to condominium-ize a project and investors will want to make sure you have a truly viable project so that they are not faced with the prospect of foreclosure.


7.    Be careful when you work with a nonprofit.


Generally, the IRS does not allow a nonprofit to be involved either as a part owner or as a tenant of the building. Having the nonprofit form a subsidiary that elects to be taxed on its income can solve the issue. The use issue is trickier. Having the nonprofit use less than 50% of the space is the simplest way. If however, the nonprofit used the building before and will use more than 50% afterwards, you will need to contact a tax credit professional.


8.    There are both federal and state historic credits.


The federal credit is equal to 20% of the qualified rehabilitation expense (QRE). Provided you comply with the NPS standards, the credits are available to a project. The state of Ohio also has a historic tax credit program. That credit is equal to 25% of the same QREs but is currently capped at $5 million. The state credit is subject to a very competitive allocation process. There is a scoring sheet where job creation and economic development rank very high. Unlike the federal credit, a portion of the “credit” can be a refund, up to $3 million.


9.    What is included in a QRE?


A QRE is the base on which the credit is calculated. It includes all the hard costs of construction as well as soft costs, including developer fees, construction interest and professional fees. It does not include the acquisition price, enlargements, work outside the building or personal property expenditures.


10. You will need a bridge lender.


This is sometimes the most difficult part. Most of the investor’s equity comes in after construction and after the Part 3 has been obtained. The Part 3 is the final sign off by the SHPO that confirms that the project was completed in accordance with the approved Part 2. A bridge lender has to be comfortable assuming the risk that the project will be completed and the Part 3 will be obtained. Most lenders require either a guaranty from a deep pocket or outside collateral, in addition to a pledge of the capital contribution to be made.


 As previously published In the November 2013 issue of Properties Magazine

Ohio Historic Tax Credit Program Renewed in Budget Bill

  Ohio’s legislature recently approved, and Governor Kasich signed, a fiscal year 2012-2013 budget that includes a renewal of the Ohio Historic Preservation Tax Credit Program(the “Program”) for coming years in perpetuity. The new budget provides for annual credits to eligible projects worth up to $60 million, which matches prior years’ funding allowances. Several modifications to the Program promise to make it more appealing to eligible building owners. For the first time, foreign and domestic insurance companies can take advantage of the Program, and projects may now be completed in “phases.” Also, whereas ODOD was previously required to rescind approval to projects that fail to move forward within 18 months of approval, it now has discretion over whether to sustain the project despite such delays. 

Certain aspects of project approval and oversight are revamped under the new budget. Once rules are adopted by the Ohio Department of Development, applicant projects will be required to go through a cost-benefit analysis that will determine whether the project will result in a net revenue gain in state and local taxes once it is placed in service. Any project expenditure over $200,000 must also be certified by an accountant. 

The core Program details and benefits, however, remain unchanged. The Program provides a tax credit equal to 25 percent of “qualified rehabilitation expenditures,” up to a maximum of $5 million per project, to owners of certain historic buildings. The expenditures generally include construction for the building’s structure and interior that meets the U.S. Secretary of the Interior’s historic rehabilitation standards. To qualify as an eligible historic property, a building must either be (1) listed in the National Register of Historic Places; (2) a local landmark designated by a certified local government; or (3) located in a registered historic district.

Eligible owners interested in using the Ohio Historic Preservation Tax Credit should stay tuned for ODOD’s announcement of the next application period.  

First-Time Homebuyer Temporary Federal Tax Credit Extended and Expanded

On November 6, 2009, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009. The new law extends the first-time homebuyer temporary federal tax credit for qualifying home purchases to April 30, 2010 and expands the eligibility requirements for purchasers.

Under the new law an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. The new law also authorizes the credit for long-time homeowners buying a replacement principal residence and raises the income limitations for qualified homeowners claiming the credit.  

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

  • Applies only to homes used as a taxpayer's principal residence.
  • Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
  • Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

Under the new law, the maximum credit amount remains at $8,000 for a first-time homebuyer (single person or married filing jointly or $4,000 for married persons filing separate returns). A “first-time buyer” is a purchaser who has not owned a primary residence during the three years up to the date of purchase.

The new law also provides a “long-time resident” tax credit of up to $6,500 to others who do not qualify as “first-time homebuyers” (single person or married filing jointly or $3,250 for married persons filing separate returns). To qualify as a “long-time resident,” a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. To claim the credit, a taxpayer must file Form 5405 with the Internal Revenue Service, which you file with your original or amended individual federal income tax return.

Income Limits Increased under New Law

The new law raises the income limits for people who purchase homes after November 6, 2009. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

New Requirements under the New Law

The new law contains new restrictions on purchases after Nov. 6, 2009:

  • Dependents are not eligible to claim the credit.
  • The purchase price of the home cannot be more than $800,000.
  • A purchaser must be at least 18 years of age on the date of purchase.

For Members of the Military

Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and close on the purchase no later June 30, 2011.


Ohio Creates New Markets Tax Credit and Revises Historic Tax Credit

Ohio’s Budget Bill, signed by Governor Ted Strickland on July 17, contained provisions authorizing Ohio’s first state-run New Markets Tax Credit, as well as substantially revising the state’s Historic Preservation Tax Credit. Here is a breakdown of each:

New Markets Tax Credit


Modeled after the federal New Markets Tax Credit, the state program allows up to a nearly $1 million cumulative, nonrefundable tax credit for an entity that holds an investment in a “qualified community development entity” over the next seven years. Like the federal Credit, the Program is intended to aid development in low-income areas where new projects are typically more difficult to finance.


Only insurance companies and financial institutions are eligible to receive the credit, and they may do so by holding a “qualified equity investment.” A “qualified equity investment” is an investment in a “qualified community development entity” (i.e. an entity with an allocation agreement under the Federal Credit that does business in Ohio) that: (1) is acquired solely for cash after July 17, 2009; (2) has at least 85% of its purchase price used to invest in low-income communities; and (3) is designated by the issuer as a qualified equity investment. 


To receive the credit, the community development entity must invest in a “qualified active low income community business” (“QALICB”). The intention behind this provision is to ensure the credit is used for new projects that actively promote job creation in the state. The QALICB definition excludes from such businesses those that derive 15% of annual revenue from real estate, such as developers. The language may permit a developer to be a QALICB, however, if it is the end user of the property through a sale-leaseback transaction. The program permits investment in a special purpose entity (“SPE”), principally owned by the property user, if the SPE was formed solely to rent or sell the property back to the principal user. Therefore, a developer could form an SPE and lease the property to itself as the owner of a separate end user entity, so long as the user is not itself a real estate developer.


An eligible entity may receive the credit if it holds such an investment on the first day of January in 2010 through 2016. The Program credit is equal to the “applicable percentage” of the purchase price. In years 2010 and 2011, however, the applicable percentage is zero. In 2012, the credit is seven percent, and in 2013 through 2016 the credit is eight percent. At the end of seven years, the entity may receive a 39% credit on a statutorily capped maximum investment price of $2,564,000, for a total credit of up to $999,960. The total amount of credits allocated by the state under the Program each year may not exceed $10 million.


Ohio joins a number of states that offer a New Markets Tax Credit in conjunction with the federal Credit. The Program should be a useful tool, along with the Historic Preservation and Low Income Housing Tax Credits, for encouraging investment in underserviced areas.



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The Ohio Supreme Court Clarifies the Effect of Low-Income Housing Tax Credit Restrictions on the Tax Value of Real Property

 In Woda Ivy Glen Limited Partnership v. Fayette County Board of Revision (2009), 121 Ohio St.3d 175, the Supreme Court of Ohio considered whether restrictions on real property resulting from participation in the federal low-income housing tax credit program should be taken into account when appraising the property for real estate tax purposes.  The real property at issue consisted of 60 individual parcels, each of which contained a single-family residence.  As required by Section 42 of the Internal Revenue Code, the property was subject to certain rent restrictions designed to make the rental rates affordable for low-income families.  These restrictions are binding on successor owners and recorded in the chain of title of the property.  Utilizing a cost-based valuation for tax year 2004, the county auditor valued the parcels at an aggregate value of $4,854,970, or approximately $80,000 each. 

Ivy Glen filed a complaint against the auditor’s valuation, alleging the true total value to be $2,400,000.  Rather than using the cost approach, Ivy Glen’s appraiser deemed the 60 parcels to be one economic unit and based his valuation on a rent-income analysis and comparable sales of rental properties.  The Board of Tax Appeals (BTA) rejected that approach and instead adopted the county’s cost-based valuation, reasoning that the properties were only two years old and should be valued as though free of any use restrictions imposed under the federal low-income tax credit program.  The BTA, relying on the Ohio Supreme Court’s previous pronouncement in Alliance Towers, Ltd. v. Stark Cty. Bd. of Revision (1988), 37 Ohio St.3d 16, that property should be valued in its “unrestricted form of title,” questioned the validity of Ivy Glen’s appraiser taking into account the use restriction on the property imposed in connection with the low-income tax subsidy and affirmed the county’s cost-based valuation of the property. 

On appeal, the Court discussed its holding in Alliance Towers and found that, despite holding that “For real property tax purposes, the fee simple estate is to valued as if it were unencumbered,” the Court’s decisions have “broadly acknowledged that ‘all facts and circumstances which may affect the value of property must be taken into consideration.’”  The Court then distinguished between “private” encumbrances and those restrictions that are governmental “police power” limitations on use.  Under Appraisal Institute guidelines, the former are to be disregarded, while the latter should be considered.  Though the Court acknowledged that the federal government does not have a general “police power,” it nevertheless found that the low-income housing tax credit program were a means for Congress to implement public policy and improve the general welfare, and thus qualified as police power restrictions.  Since the BTA failed to consider the effect of the low-income tax credit restrictions in valuing the property, the Court vacated the BTA’s decision and remanded it for further proceedings consistent with Court’s decision.   

The Ohio Supreme Court’s decision provides an opportunity for owners of low-income housing tax credit property to review their tax valuation and determine if a complaint against the valuation is appropriate.  Although the tax complaint filing period for tax year 2008 has ended, tax payers will be able to contest 2009 taxes beginning in January 2010.

Potential Effect of Climate Change Regulation on Real Estate Development

Recent activity in Washington, D.C. suggests that the federal government is moving one step closer to regulating greenhouse gas emissions.  US EPA has determined that greenhouse gas emissions are pollutants that endanger the public’s health and welfare.  US EPA’s endangerment finding could lead to regulation of greenhouse gas emissions under the Clean Air Act.  Alternatively, a new cap-and-trade bill has been introduced, which would remove greenhouse gases from regulation under the Clean Air Act, but would require a reduction in greenhouse gas emissions of 85% from 2005 levels by 2050. 

What does the potential regulation of greenhouse gases mean for real estate development? 


Energy-utility companies will be greatly impacted by regulation of greenhouse gases.  Particularly, in Ohio and other Midwest states, where electricity production is almost entirely dependent upon coal-burning, reducing greenhouse gas emissions could be quite costly.  Moody’s has estimated that consumer electricity costs will rise between 15-30% as a result of any cap-and-trade regulation.

With the expectation of increased energy costs, real estate developers should look to energy-efficient building systems or alternative energy sources as ways to reduce these costs.  The Ohio Department of Development and the Ohio Air Quality Development Authority offer grants to help offset some of the initial costs for installing alternative energy sources.  Additionally, tax credits are available for certain projects.

If you would like to learn more about potential climate change regulation and Ohio funding for alternative energy projects, these topics will be presented at the CREW of Greater Cincinnati 2009 Midwest Regional Conference.  The conference will take place April 23-25, 2009 at the Cincinnati Hilton Netherland Plaza.  Other topics presented at the Conference include:  "Successful Urban Renaissance Developments"; "Diversity by Design: Successful Inclusion Projects"; "Case Studies in Brownfield Redevelopment"; and "Capital Markets -- Effects from Washington Decision Making".  

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Free Money in Cleveland !

"Every night before I rest my head; See those dollar bills go swirling ’round my bed."

So sang Patti Smith in the composition Free Money on her critically acclaimed 1975 debut album, Horses.

That’s a tune that cash-desperate real estate developers and project owners may have found themselves humming during the current credit crisis. But it may be more than just wishful thinking - - or wishful singing - - at least for certain projects in Cleveland.

In 2008, the City of Cleveland instituted its Vacant Property Initiative Fund which makes available up to $1,250,000 for acquisition, demolition, remediation, construction and some soft costs for non-residential projects. Big-box, mall projects and most tax-exempt uses are excluded from the program.

The money takes the form of a 6% one-year loan, but up to 40% of the loan amount is forgivable depending upon project size. A bonus 5% of loan forgiveness is available if certain green sustainability standards are met. Take out financing must be in place at the time the loan is made.

Certain vacancy or underutilization standards must be met to be eligible. Approval of the Mayor’s office and Cleveland City Council along with a recommendation of the City’s CDC is also required.

Like any program there are a host of requirements imposed on the borrower: prevailing wages, MBE/FBE and local hiring compliance, job creation and retention benchmarks and a shared first priority mortgage lien among them.

Despite the attached strings, the chance to get as much as $562,500 of free money for acquisition, construction and remediation should have project developers singing along with Patti Smith.

Tax Credit for Home Buyers: Will They Come Back to the Market ?

After much wrangling, the House and Senate came together in Conference Committee and each subsequently passed President Obama’s Stimulus Bill in record time. President Obama has now signed this historic legislation. The Stimulus Bill provides in part for a refundable tax credit for first time home buyers (who are defined as buyers who have not owned their primary residence for the past three years). Although previous versions of the bill included a credit of as much as $15,000, the final bill provides a credit equal to 10% of the purchase price of the home with a cap of $8,000The purchase must be made between January 1 and November 30, 2009 and the credit is phased out for individuals with incomes in excess of $75,000 and married couples filing jointly with incomes in excess of $150,000Purchasers must own the home for three years or the credit is subject to recapture. The previous law that the stimulus bill amends provided a “credit” of up to $7,500, however, the “credit” had to be re-paid with $500 per year payments. This requirement has been stricken in the new legislation.

The change will be an incentive for some home buyers to enter the market, particularly those who may have been sitting on the sidelines waiting for the market to reach bottom. Limiting the availability of the credit to prior to December 1, 2009 will help to force prospective buyers off the fence—if they wait for the market to further decline, they will miss the opportunity of the tax credit. 

Will the tax credit change the housing market? Some. It targets those most likely to buy (i.e. those who do not have to first sell their home) and it eases some of the fear that once purchased the home value will immediate fall. We do not expect to see a large swing in either the volume of home sales or the value of home sales, but a small swing is possible. Chief Economist for the National Association of Realtors, Lawrence Yun, was quoted on CNNMoney.Com estimating that the tax credit will bring approximately 300,000 new buyers to the market. Congress is hoping that this small group of buyers will provide momentum for the overall housing market and help to clean out the excess inventory of homes for sale on the open market due to foreclosures. 

Will home builders feel an immediate impact? Unlikely. Those selling “starter homes” will benefit the most. Luxury home builders will have to wait until the momentum is in full swing. 

What about lenders? Lenders should see a slight up tick in new home loans.  

So You Think Tax Credits Are Boring ?

If we want a healthier community we need to start with a healthy core city.    I am a social worker, turned tax attorney, turned real estate deal maker. I tell you this because those phases of my life have all brought me to this point in my career.   You know the theory about the donut. If there is a hole in the middle surrounded by wealthy suburbs, eventually the suburbs will crumble. Besides, urban areas are rich in character, more ethnically diverse and in general are more interesting places to hang out. Given the choice many people would prefer to live work and play in an urban landscape.

Tax credits, whether they be historic, low income or new market fuel urban development deals. Without these tax incentives restoring old buildings in the urban core makes little economic sense. The costs to rehabilitate are more then the fair market value of the buildings upon completion considering the low rents and sales price per square foot. Especially in these economic times when every bank is looking for a reason not to lend money, tax credits are even more important. Yes, tax credit deals take more time, are more complicated and result in higher professional fees. However you can raise almost 50% of the project cost in tax credit equity/ subordinate debt through tax credit programs.


Just recently I read an article in the Sandusky Register Online about the Ohio Preservation Tax Credit and the resultant loss of a deal in the Sandusky area because the program makes it difficult for it to be used with the New Market Tax Credits program. While the article oversimplified the problem, the problem still exists and I and other professionals are having a hard time convincing the Ohio Department of Development and the Ohio Department of Taxation that it needs to be fixed. Basically the program requires the credit to be allocated in proportion to a member’s ownership interest. In other words it does not allow the credit to be “specially allocated” to a member. This is important because urban development deals usually involve federal historic tax credits, state historic tax credit and either low income housing tax credits or new market tax credits. Different tax investors have different appetites depending on their presence in Ohio and their tax liabilities. If the credits could be specially allocated then investors would pay more for them rather then trying to find one investor for all credits. 

Who Knew Being Green Could Be So Easy !

Recently at the January monthly Real Estate Roundtable breakfast sponsored by the University of Cincinnati, I was introduced to a fascinating new concept – the Roof Lease. Featured speaker Mike Phillips, President of Cincinnati based national real estate developer Phillips Edison Company, mentioned that Roof Leases are starting to spring up across the country. The basic concept is that in exchange for 15 – 20 years of guaranteed income (or in other words, payment for electricity generated from solar panels installed on the roof) a solar energy provider installs and maintains solar panels (generally with the help of grant money) on the roof of your shopping center. Once installed, the solar panels are capable of generating sufficient electricity to power the entire shopping center and provide a number of direct benefits for the landlord. These benefits include the ability to market as a green center featuring controlled electricity costs for tenants, reduced common area electric costs for itself, and the potential of becoming eligible for certain energy related tax credits. As an added benefit, solar panels can be easily hidden from sight; so there are no aesthetic concerns nor is their addition to an existing center likely to run afoul of antiquated zoning code height restrictions.

As a side note, if anyone knows about emerging trends in the shopping center world, it should be Mike Phillips. His company owns more than 240 properties across the county and his popularity was evidenced by the largest turnout by far of any UC Real Estate Roundtable breakfast in recent memory.