In October, 2009 Morgan Stanley published its Mall and Lifestyle Center Handbook. (Special thanks to Stephen Baumgarten, Senior Vice President Wealth Advisor Morgan Stanley Smith Barney Beachwood, Ohio for sharing the handbook with us). The handbook is a must read for all retail developers, lenders, investors and retailers to understand the market forces impacting shopping
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.
Continue Reading Ohio Creates New Markets Tax Credit and Revises Historic Tax Credit
Some time ago in this space I wrote about the prospects for revitalization from the creation of the Cuyahoga County Land Reutilization Corporation, better known as the County Landbank. Since then the Landbank has gotten up and running, or walking perhaps, but has made little progress toward its goal of returning significant amounts of abandoned and
Recently, the news about the $300 billion China Investment Corp. (“CIC”) invested an additional $500 million in Blackstone’s Fund-of-Funds unit and earmarked about $800 million for investing in a Morgan Stanley Global Property Fund has stirred up another round of excited discussions about China’s money pouring into the U.S. Lately, the Wall Street Journal reported that
Following an era of relaxed standards for issuing loans, lenders must be aware of a bankruptcy court’s ability to subordinate liens for equitable reasons. On May 13, 2009, in In re Yellowstone Mountain Club, the Bankruptcy Court for the District of Montana issued an order subordinating the secured lender’s $232 million claim below the (i)
When representing a tenant, I always want an SNDA so that if the landlord defaults on its mortgage my client is assured that it can remain in the space as long as there are no tenant defaults.
When representing a landlord, it is becoming increasingly more difficult to get lenders to make any change
A perpetual letter of credit (LOC) does not last as long as you might think. In physics “perpetual motion” is movement that goes on forever. Commercial law is less ambitious. Under U.C.C. § 5-106(d), a “perpetual” LOC expires after five years. To further complicate the issue, a recent case from the
So you finally got a buyer for your house after having it on the market for nine months. As frosting on the cake the buyer says she can close within a week.
Great! Right? Well, if your buyer made her mortgage loan application on or after July 30, 2009, it may take a little longer.
On July 30, Federal Reserve System rules (http://edocket.access.gpo.gov/2009/E9-11567.htm) went into effect implementing the Mortgage Disclosure Improvement Act of 2008 (MDIA). The rules – -applicable to purchase, construction and refinance situations – – impose various waiting periods between the time a transaction specific disclosure is made by the lender and the time when the residential loan transaction can close. The rules apply to all institutions engaged in closed-end, dwelling-secured lending for consumer purposes that is subject to RESPA.
The rule was going to go into effect in October 2009, but the date was moved up by the Fed two months in mid-May. Home equity lines of credit are excepted from the rule and are instead subject to separate rules for “open-end” credits. Different rules also apply for timeshare interests. Continue Reading Hurry Up and Wait
Where there’s trouble, there’s trouble. As a growing number of homeowners have defaulted or neared default on their mortgages, numerous schemes have cropped up taking advantage of their willingness to do whatever it takes to save their homes.
The Court in State v. Cicerchi, 2009 Ohio 2249 (Ohio Ct. App. 2009) took the time
A helpful reminder to lenders – if you’re going to foreclose, read the note and mortgage and do what they say. In a recent Ohio Court of Appeals case, the bank failed to follow these instructions and was rewarded by having its foreclosure complaint dismissed.
The borrower missed a payment on her mortgage and the bank