Did you turn 65 (or older) during 2013?  Happy Birthday!  Have an AGI over $30,000?  

If yes, congratulations, you are among the lucky few in Ohio who may still qualify for the Homestead Exemption!  

Under the recently enacted H.B. 59 which established Ohio’s budget for 2014, there are numerous changes coming that will affect residential homeowners. 

While lawmakers are starting to hear from their constituents, including those approximate 40,000 Ohio households who may lose out on eligibility next year, and bills to reverse the changes are being introduced, under the coming budget, homeowner’s will see the eventual elimination of the ten percent and two and one-half percent real property tax rollbacks on future levies and the loss of the automatic eligibility for those turning 65 under the Homestead Exemption, which has been adjusted from an age-test to a means-based test.

Under the old law, any Ohio landowner who currently lives in their home and that home is their primary residence, qualifies for an exemption if:

• He is at least 65 years old or will reach age 65 during the current tax year; or
• He is certified totally and permanently disabled, regardless of age; or
• Is the surviving spouse of a qualified homeowner, and who was at least 59 years old on the date of the spouse’s death.

Eligible homeowners were able to shield $25,000 worth of the market value of their home from local property taxes. For example, an eligible homeowner residing in Shaker Heights, Ohio could save up to $950 per year under the exemption. 

Under the new law, the exemption will only be available to eligible taxpayers with household incomes that do not exceed $30,000, as measured by their Ohio adjusted gross income for the preceding year. That amount will be indexed to inflation each fall and is expected to be around $30,400 for tax year 2014.

Existing homestead exemption recipients will continue to receive the credit without being subject to the income test.   Ohio does allow for late exemption filing for first time recipients.  Eligible homeowners, including those who turned 65 or older during 2013 have a ‘save’ and can file a late application during a one-time six (6) month window. If approved to receive the exemption retroactive for the 2013 tax year, those homeowners will remain eligible for future years event if their AGI exceeds the new income limitation.  And, the eligibility is “portable” if the owner moves his or her primary within the State.  

Applications can be obtained from your County Auditor or Fiscal Office can be filed as early as January 6, 2014 but no later than June 2, 2014. 

The International Council of Shopping Centers (ICSC) has its annual law conference in San Diego next week. For any attorney involved in retail leasing, it is a must see event. The seminars are very worthwhile. I have been doing leasing for over 20 years now and still come away from each conference feeling like I learned a number of things that will directly help our clients. In addition, the conference is a great opportunity to socialize with clients and maybe more importantly opposing counsel. Having a beer with opposing counsel makes getting a deal done with them so much easier. It is easy for someone to be difficult by email to someone they have never met in person; it is much harder for someone to be difficult after you have met them and become friends. Developing a relationship with opposing counsel directly benefits our clients. Not to mention that a couple days in San Diego never hurt anyone.

From the standpoint of a construction lawyer, there is no prettier site than construction cranes in the air.  Cleveland has seen its share over the last year, more so than since the mid-1990s when the Rock Hall, Gateway sports arenas and Science Center were constructed within a short span.

During the prior four months of 2013 alone, the East Bank/Ernst & Young office tower and the new Convention Center and Global Center for Health Innovation have opened in the heart of downtown Cleveland.  A few more cranes remain over a major construction project.  

On Wednesday, August 28, the final beams were put in place for the west bound Innerbelt bridge of Interstate 90 in downtown Cleveland.   Those beams connected the separate sections of the bridge which were constructed from the landings at the west and east ends of the bridge.   The photo accompanying this post, taken this past Sunday, shows the span as it approaches from the east.

Over 4,200 feet long and situated approximately 120 feet above the Cuyahoga River and the industrial valley that surrounds the river, the two-year project will carry five lanes of traffic upon completion.  The existing westbound bridge will begin to be dismantled at the end of the year after the new span opens.  

A separate east bound bridge will begin construction in 2014 with completion estimated in 2016.  Each bridge has an estimated project cost of $293 million, reportedly the biggest project in the Ohio Department of Transportation history.

The bridge is the first value based design-build project constructed by ODOT.  In the more traditional “one-step” design-build delivery system, the contract is awarded to the lowest-cost responsive and competent bidder.

In a value based design-build process, also referred to as a “two-step” process, the contract is awarded to the bidder with the best value score determined on a combination of bid price and a technical qualifications assessment.  As described in Ohio Administrative Code Section 153:1-6-02, the “two-steps” are a “qualification phase” and a “request for proposal” phase.  After a “short list” of no less than three bidders are arrived at through the qualification phase, they are then required to submit a “technical” proposal and a separate “price” proposal.  Fewer than three bidders are permitted if the qualifications review committee believes that there are fewer than three qualified firms available.

The technical proposals for the Innerbelt Bridge project were sent to an ODOT Technical Proposal Advisory Group for evaluation while the price proposals were retained, unopened, until after the technical proposals were scored.  Scores from each proposal were then subject to weighted averaging.  Walsh Construction was awarded the contract and performed the work.

The Ohio rules for two-step design-build public contracting were adopted in February 2012 and come up for review five years thereafter.

Wine is a great hobby – it combines art and science; it has a social component; it may be heart healthy; it definitely improves mental well-being. Combine good wine, with great food in a cool environment and you are asking where to sign up, right?

Cooper’s Hawk is a new retail concept that is becoming a huge draw for high end retail sites. It is a restaurant that features wine they make themselves. Picture a Napa winery with a gourmet restaurant inside. They make 48 varieties of wine (I have tried several – they are all good, but I must say I can drink the Cooper’s Hawk Red every day of the week – and sometimes do). Their Blanc de Blanc sparkling wine was actually used at the past two presidential inaugurations. They have the grapes shipped in predominantly from California to their facility in Chicago where they make and bottle their wine. They currently bottle 225,000 cases per year from their Chicago facility. The food is top shelf also. Customers who don’t even drink wine want to come because of the food.  Asian pork belly nachos, jambalaya and short rib risotto, cilantro ranch chicken and avocado sandwich… you get the idea. This is not your average brew pub fare.

 

A typical Cooper’s Hawk contains approximately 11,000 square feet. 15% of the space is for the wine tasting area, 20% for the bar and there is always a private dining area. They have 12

Restaurants open – all in high end shopping centers. They project two more to open in 2013 with five to open in 2014 and up to six in 2015.  Average annual gross sales for a Cooper’s Hawk have been exceeding $8.5 million. A Cooper’s Hawk is a great amenity and draw for any center.

 

And you can actually sign up for this. They have a wine club where you can buy their wines on a monthly basis. See the video below on how they make this concept a reality.

 

 

Amendments to FIRPTA through H.R. 2870 (also known as the Foreign Investment in Real Property Tax Act of 2013) are being proposed in Congress and if approved by the President should increase foreign capital invested in U.S. Reits.  H.R.2870 will permit the foreign ownership threshold of REITs subject to FIRPTA to increase from 5% to 10%.  Also, H.R.2870 would eliminate the negative impact on foreign investors of IRS Notice 2007-55 by characterizing REIT share redemptions and liquidating distributions to be handled like capital gainsdistributions. H.R. 2870 would clarify FIRPTA so that a REIT can assume that its shareholders are all U.S. persons, except where the REIT knows otherwise.  

Take a look at H.R.2870 by clicking on the link above.  If you work with foreign investors or REITs passage of this legislation will benefit the real estate markets and your clients.  You might want to write your Congressman and encourage their support ! 

In the 2011 book The High Cost of Free Parking Professor Donald Shoup thoughfully walks the reader through the history of parking in the United States into the present situation in which we find ourselves.  Everyone wants a free parking space; but as Professor Shoup explains, there is no such thing as a ‘free" parking space.  Parking is a resource which should be treated like any commodity and priced accordingly.

The concept of "dynamic" pricing (ala airline seats and hotel rooms) should be applied to street and off street parking according to Professor Shoup.  He calls this "performance" parking.  He argues that street parking should be high enough to keep one or two curb spaces open during most times.  This will prevent the circling the block syndrome and create efficiencies.  San Francisco has adopted such a model in their SF Park program.  Take a look at their website for details. 

If parking costs rise and become an efficient economic model as opposed to a subsidized one less time will be spent looking for parking and ridership of public transportation will increase, thereby creating better economic benefits for that public resource. 

Professor Shoup advocates for the removal of parking requirements in our new development zoning codes and return meter revenue to the neighborhoods which generate the same.

According to Collier’s International 2012 Parking Rate Survey  (a copy of  which can be downloaded by clicking on the link) identifies Cincinnati’s parking costs as relatively low as compared to other major metropolitan areas. 

A concertive effort must ne made by city governments, transportation officials and developers to reverse to expectations and effects of "free" parking.

Landlords and their lenders need to rethink their position on payment of construction allowances. The rental structure of a lease is based in part on the amount of the allowance. If a tenant receives no allowance, the lease would undoubtedly provide for a lower rent payment. A portion of the rent is repayment of the allowance with interest. Yet, I see landlords and lenders insist upon provisions that ignore the reality of the allowance structure.

 

1.      Landlords often insist that the allowance only be used for certain items and that the tenant provide evidence that it is spending the allowance only on these items. And that the tenant will not receive the allowance to the extent it does not so spend the funds. However the landlord is unwilling to reduce the rent if tenant does not get the full allowance. The landlord thus gets a windfall: tenant pays the full rent including that portion allocable to the allowance, but does not get the full allowance. The essence of the lease is defeated. It would seem, that either the landlord should agree to pay the allowance, regardless of costs, or should agree to a rent reduction to the extent the full allowance is not paid. Landlords sometimes say this is a requirement of their lender. If that is really the case, the lender needs to rethink their position based on the reality of the structure of the lease.

 

2.      Lenders are increasingly refusing to allow a tenant to offset rent for any part of the allowance not paid (as it relates to a post foreclosure offset). Once again, this leads to the tenant paying full rent (for which the lender or its assignee gets the full benefit) without receiving the full allowance. If the lender approves the lease, and in fact the execution of the lease benefits the lender as it increases the value of its security, the lender should allow the offset separate and apart from the fact that it gets the benefit of the full rent.

 

3.      Landlords sometimes insist that upon default, in addition to the other damages, landlord wants repayment of the unamortized allowance. However, the tenant is obligated to pay the rent – unpaid rent is clearly an element of damages. If the rent includes repayment of the allowance, having the unamortized allowance included as a separate element of damages is a double recovery for landlord.

 

Resolving this issue not only solves difficult lease issues, but would alleviate a key issue in the SNDA.

 

Thanks to our partner, Eric Robbins, Chair of our Intellectual Property Group for bringing this video to our attention.  As an engineer at heart Eric thought that our readers involved in development and construction  will find this time lapse video facinating.  Watch as a hotel is constructed in China in 30 days !  While the prefabrication concept is nothing new, the speed with which it takes place is amazing !  Take note of the air handling system technology.  Could we do this in the US ?  Would we want too ? 

My office in the southwest corner of the top floor of the  Skylight Office Tower in downtown Cleveland provides a great view point for the comings and goings on the Cuyahoga River below. 

My last blog post dealt with the development of the Towpath reclamation project along the River south of Collision Bend. Today, I am witness to the beginning of the removal and replacement of the Columbus Road lift bridge which has connected Ohio City and Tremont to downtown Cleveland for 74 years. This bridge is the fourth bridge to occupy this historic spot since the initial bridge was installed in 1836. 

 The rusting mass of iron closed for good this morning, May 29, and the deck is to be cut away over the next few weeks. The deck will then shipped downriver by barge for disassembly. The photo at left taken from my office window shows the barge being pushed into place by a river tug.

 

I have used the bridge daily for the last 7+ years as a convenient entry route to the Tower City office complex from West 25th Street via I-90 from the western suburbs. Until the replacement bridge is finally open in June 2014, convenience flies out the window.

 

For all the reports about the bridge’s serious and “moldering” condition – undoubtedly true – the bridge deck has provided a much smoother ride than the moon-like surface of Columbus Road approaches on the north and south ends of the bridge. Let’s hope that some of the $34 million replacement cost which is being funded in large part with federal funds will be used to resurface those approaches which have caused more damage to automobiles than anything accounted for by the bridge itself.

 

Dennis Lane would have liked this.  In fact, he would have liked this on at least two fronts. 

First, with an avid love of the water, biking and outdoor activities, Dennis would have appreciated what’s going on in downtown Cleveland along the banks of the Cuyahoga River just south of Collision Bend.  As seen in this photo from my office window,  the clearing of debris, dilapidated structures and scrub brush which began last fall is well underway for the first publicly funded portion in Cleveland of the Towpath Trail. 

 

The Trail which will extend all the way to Canal Basin Park in Akron traces the path of the historic Ohio Canal.  It will provide walking and biking enthusiasts with an opportunity to enjoy the Cuyahoga River in ways which could only have been dreamed of during the dark days of the Cuyahoga 40 years ago.  Those were the years Dennis lived in Cleveland while we attended John Carroll University together.

 

Public funding for this stretch of the Towpath Trail came from Great Lakes Restoration Initiative grants and Clean Ohio funds.  The project will restore 2,800 feet of natural shoreline and will convert nine acres of industrial wasteland into meadowland. 

 

That’s good stuff.  Dennis would certainly think so.  Converting valuable riverfront commercial property into recreational land is not normally high on the wish list of those in the real estate industry.  But Dennis was a different kind of real estate professional. 

 

He spent his entire career in real estate.  First working for the Rouse Company on the East Coast, West Coast and Sun Coast for many years, then with various other firms doing commercial brokerage and office development.  Yet, Dennis always appreciated a vision of what could be done with an underused piece of property and that did not always mean converting it to the most profitable use.

 

Dennis would have spoken out in favor of this kind of project in his usual direct and unvarnished manner. For Dennis was a prolific blogger on all things relating to real estate and politics in his home base of Howard County, Maryland.  His Tale of Two Cities blog exposed Dennis’s views on his beloved home towns of Columbia and Ellicott City.  If you want to see what good writing and blogging is all about, go to for his “Tale of Two Cities blog”.  He was universally recognized as the “voice of Howard County” and the most well-read blogger in suburban Baltimore.

 

Which explains the second reason why Dennis would have liked this.  Dennis always encouraged me to blog more and to post more items to this Real Estate Advisor Law blog.  In fact, he is likely the only person to ever comment on one of my blog posts – probably because I quoted from a Patti Smith song. 

 

But I failed him in this regard.  My last blog post was too many months ago and I have allowed others in our real estate practice to bear the obligation of blogging.  Dennis would have liked the fact that I blogged about the Towpath Trail.  He might even had commented favorably on it.  I could have only hoped.

 

Dennis Lane’s last Tale of Two Cities blog post was on May 9.  On Friday, May 10, Dennis was stabbed to death during the early morning hours in his Ellicott City home by the 19-year old boyfriend of his daughter.  Senseless.  Unbelievable.  Dennis was my friend for 40 years, my beloved fraternity brother, the best man in my wedding, but most of all he was a good friend to many, many people of all walks of life, a great father, a loving brother to his four siblings and a wonderful companion to his dear Denise. 

 

I will have to blog more often from now on.  Dennis would be all over me if I didn’t.