in Ground Leases Dealing with Thorny Issues Arising Out of Arrangements that Last a Lifetime or More Janet M Johnson Schiff Hardin LLP Robert J Shansky Scarola Malone amp Zubatov ID: 807490
Download The PPT/PDF document "Marital Counseling and Divorce" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Marital Counseling and Divorce in Ground Leases: Dealing with Thorny Issues Arising Out of Arrangements that Last a Lifetime (or More)
Janet M. Johnson, Schiff Hardin LLPRobert J. Shansky, Scarola Malone & Zubatov LLPJoshua Stein, Joshua Stein PLLC
ACREL 2014 Mid-Year Meeting
March 27-30, 2014 Kauai, Hawaii
Slide2PART IGround Leases 2014
Slide3Manner of Property DispositionCreation and preservation of wealth
Unleashing value of underutilized propertyAvoid tax on saleDisposition by sale not permittedAdvancing public purpose and raising capital
Slide4Lessor Oriented TransactionMost of benefits and obligations transferred
Rental determination and adjustmentsComplications for financingRestrictions on use and transferability
Slide5Business Plan and ObjectionsIndustry specific, such as telecommunications and energy
Market for investmentForm of financingDevelop and build to suitGovernmental incentives
Slide6Roosevelt Island NYC Tech Project
World class applied science and engineering campusOver 20 years, 2.13 million square feet campus on 12.5 acresCornell University in partnership with Technion University-Israel Institute of Technology10 buildings, academic, corporate co-location, conference center, hotel, retail, residential and accessory improvements
Slide7PART IIThe Most Important Issue in Every Ground Lease and
It Seemed Like a Good Ideaat the Time (ROFO’s and ROFR’s)
Slide8Ground Rent IssuesTraditional Land Value Rent Resets
Possible Alternatives
Slide9Traditional Land Value Rent Resets
6% to 7% of Value of the “Land”Unimproved and UnencumberedInteraction with Use ClauseUpzoning/Downsizing“Taking into Account the Terms of the Lease”?Whatever You Come Up With, Show to an AppraiserInterim CPI Adjustments with Low Caps
Slide10Alternatives to Traditional Land Value Rent Resets
Appraisal of “Rental Value” of Premises (Land)Interest-Market-Sensitive Measure Instead of 6%-7%Multiple Valuation DatesPercentage RentGround Rent Coverage Ratio (Floor and Cap)Fixed Rent Stream – Just Like a Bond
Slide11Some Other PossibilitiesThird-Party Index or Indexes of Real Estate Values
Multiple Indexes to Benchmark Performance of Similar BuildingsPreservation of Relative Percentages of ValueGold ClauseCarried Interest in Tenant EntityHedging with Real Estate Derivatives
Slide12Rights of First Offer and First Refusal
Nomenclature – ROFO vs ROFRUnrealistic Turnaround TimeMurky Obligations Upon ExerciseHolder’s Ability to “Flip”Dealing with Uncertainty and Disputes
Slide13PART IIIStaying Alive! How Do Those Leasehold Mortgagee Protection Provisions Really Work? (Or Do They?)
Slide14The Right to Mortgage the Leasehold Estate
Defaults by the Lessee under the Leasehold Mortgage without a default under the Ground Lease – Protecting the Lessor
Slide15Notices of Lessee Defaults; Opportunities to Cure; Rights to a New Lease
Bank of New York Mellon v. P2D2, LLC, 100 So.3d 205 (Fla. App. 2012)Duenas v. George and Mathilda Kallingal, P.C., 2012 WL 1871060 (S. Ct. Guam Terr. 2012)Adams v. Glitz & Assoc., Inc., 2012 WL 4755172 (Ct. App. Ohio 2012)
Slide16Right to Assign Leasehold Estate:Ground Lease Provisions Still
Matter After ForeclosureIn re Circle Factory Outlet, LLC, 2009 WL 3856189 (Bankr. N.J.)
Slide17Limiting Leasehold Mortgagee’sObligation to Make Future Improvements
The Ground Lessor’s Nightmare
Slide18Ground Lease Terms: How Long isLong Enough?
Hawaii National Bank v. Cook, 99 Haw. 334, 55 P.3d 827 (Haw. Ct. App. 2000)Hawaii National Bank v. Cook, 100 Haw. 2, 58 P.3d 60 (Haw. 2002)
Slide19PART IVPanel Discussion
Slide20What Makes a Lease a Ground Lease?
What about transactions involving premises with existing improvements?
Slide21How Do NYC RFPs for GroundLease Projects Compare to
“Traditional” Land Value Ground Lease Resets?
Slide22What Problems Can Lurk in Formulas for Ground Rent?
Based on the Lessee Earnings/Income?Based on a Constant % of Overall Project Value?
Slide23Questions?Join Us for the Roundtable Discussions