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. 

If you are building new or renovating an existing building, you may have considered trying to obtain LEED certification for your project but decided after analyzing the cost that it was not within your budget. Well now, thanks to the Ohio Bipartisan Job Stimulus Plan (HB 554), LEED-certified projects may be eligible to receive funding. A little-known agency in Ohio has been tasked with reviewing and approving grants and loans under the Advanced Energy portion of HB 554. With $150 million in funding available over the next three years, this little-known agency, the Ohio Air Quality Development Authority (OAQDA), could become your next funding source.

The $150 million has been divided into two parts: $66 million for clean coal technology projects and $84 million for non-coal related projects (to be distributed in three $28 million annual appropriations). The projects eligible for non-coal related funding include various projects such as fuel cells, increased efficiency in electricity generation, advanced solid waste or construction and demolition debris conversion technologies, and renewable energy resources (wind, solar, etc.). Another category includes, “Any technologies, products, activities or management practices or strategies that reduce or support the reduction of energy consumption or support the production of clean renewable energy.” 

 

At a recent presentation given by Kimberly Gibson, Assistant to the Energy Advisor at OAQDA, Ms. Gibson noted that “green” building projects may be eligible to receive a grant or loan under this last category. Constructing or renovating your building to be green would reduce the building’s energy consumption, the requirement of this last category. Inclusion within one of the categories is not the only requirement. When determining whether to approve a grant or loan, OAQDA also evaluates whether the project will result in new jobs, will assist Ohio manufacturing, and whether the project is adequately funded.

You know how you can smell the familiar scents of the changing seasons in the air ? Well those of us who have the honor to have survived a career in the real estate industry have recognized the smell in the air for some time. Right now that smell is pretty offensive; but we know from experience that it is going to turn sweet before you know it ! Recently, I was speaking with Mark Sinkhorn of Lawyer’s Title Insurance Company National Services Division in Columbus, Ohio who reminded me that back in 1980 when the economy was experiencing record inflation and the only transactions we were doing were land contracts; and more recently in 1987 and 1994 there was a similar collapse in the lending market. In all instances, the economy and real estate industry rebounded .

Today, other than for some condominium developments in larger markets, the commercial real estate market is not over-built and once credit frees up again commercial development should lead the way as businesses expand their operations. In the mean time, manufacturing and distribution operators might wish to consider sale-leaseback transactions as an alternative to creating cash and moving assets from on balance sheets to off balance sheets. Sale-leaseback transactions properly structured are a "win-win" for both the developer (buyer/landlord) and the company (seller/tenant).  Residential sellers might consider loan assumptions, seller purchase money mortgages and land contracts once again as tools to move their properties. There is a lot of room for creativity in commercial and residential property transactions, but care should be taken in the structuring of the same.

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