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Acquiring Real Estate / Site Selection | Michael E. Zatezalo
 

Acquiring Real Estate / Site Selection | Michael E. Zatezalo

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Federal restrictions and best practices if you are looking to acquire real estate in the United States. Includes an outline of federal and state tax incentives.

Federal restrictions and best practices if you are looking to acquire real estate in the United States. Includes an outline of federal and state tax incentives.

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  • Dear All,

    two usefull tools for electronics site selection:
    http://www.slideshare.net/csorjan/how-to-select-your-new-electronics-manufacturing-site-in-cee
    http://www.slideshare.net/csorjan/site-selection-questionnaire

    Regards,
    Balazs
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    Acquiring Real Estate / Site Selection | Michael E. Zatezalo Acquiring Real Estate / Site Selection | Michael E. Zatezalo Presentation Transcript

    • Acquiring Real Estate/Site Selection Issues Presented by Michael E. Zatezalo, Esq.
    • Acquiring Real Estate in the U.S.
      • State Restrictions / Reporting Requirements
        • Varies greatly by state
        • In several states, restrictions apply only to agricultural land
        • Foreign corporations are often not restricted as long as they qualify to do business in the state
        • Many states, including Ohio, do not have restrictions on ownership, but simply a reporting requirement
    • Acquiring Real Estate in the U.S.
      • Federal Restrictions
        • Variety of restrictions with respect to public lands and energy resources
        • Reporting requirements are contained in the following:
          • International Investment and Trade in Services Survey Act of 1976 (IISA)
          • Agricultural Foreign Investment Disclosures Act of 1978 (AFIDA)
          • Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
          • Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
    • Acquiring Real Estate in the U.S.
      • Federal Restrictions, cont.
        • Each of these acts has a different definition of a foreign person and exemptions.
          • For example, FIRPTA does not apply to foreign-controlled domestic entities, such as corporations or LLCs
    • Acquiring Real Estate in the U.S.
      • Forms of Ownership and Use
        • Fee simple ownership
        • Leases
        • Ground Lease
          • Land is leased, but tenant owns the improvements
        • BOT: Build Operate Transfer
    • Acquiring Real Estate in the U.S.
      • Site Selection
        • Most states and major municipalities have development departments and/or chambers of commerce that will assist in procuring a project site
        • Site Selection companies
        • National real estate brokerage firms or networks
        • Important to work with real estate professionals familiar with the local market
    • Acquiring Real Estate in the U.S.
      • The tax treatment (both federal and state) must be taken into account in structuring the ownership of a project
      • Important to explore the availability of financial incentives early in the process
        • Timing and approval issues
        • Agreements should be made contingent upon receiving incentives
        • In Ohio, your local legal counsel can work with the Ohio Department of Development to take a lead role in putting together a package of incentives and also coordinate state efforts with local officials
    • State and Local Incentives for Doing Business in the U.S
      • Overview
        • Most states and municipalities collaborate with businesses, foreign and domestic, to develop and implement financial incentives
        • The goal is usually to attract businesses to a location where that business can thrive and grow while simultaneously boosting the state or municipality ‘s economy through taxes, employment, and community partnerships
        • In Ohio, there are more than 60 business incentives, including loan programs, grant programs, tax incentives, tax exemptions, and job training incentives
    • Examples of State Incentives in Ohio
      • Mini-Loan Guarantee Program
        • Guarantees are directed to businesses with fewer than 25 employees for fixed asset expansion projects of less than $100,000
        • The state has targeted 50 percent of the guarantee funds for allocation to businesses owned by minorities and women
        • Funds can be used for the purchase of land, building, machinery and equipment, renovations and leasehold improvements
        • Minimum guarantee of $4,500 and maximum guarantee of $45,000
          • Guarantee in the form of a loan guarantee account bearing a 1 percent rate of interest. Up to 45% guarantee of an eligible bank loan interest rate on the state-guaranteed portion of the loan is currently 5.5%
        • Maximum term of the guarantee is 10 years
    • Examples of State Incentives in Ohio
      • Research and Development Investment Loan Fund
        • Provides loans for economic development, business expansion, and job creation by encouraging private-sector R&D investments
        • Businesses that meet the program requirements will be eligible for a dollar-for-dollar credit against their Ohio tax liability, equal to the amount of principal and interest repaid on the loan
        • The maximum credit is $150,000
        • The credit will be non-refundable, but can be carried forward
    • Examples of State Incentives in Ohio
      • Research and Development Investment Loan Fund, cont.
        • Eligible projects are defined as those in which research is undertaken for the purpose of discovering and developing new or improved products, processes, techniques, formulas or inventions
        • The R&D Fund can finance up to 50 percent of a project ’s allowable costs, with loans ranging in size from $1 to $25 million
        • The fund is administered by the Ohio Department of Development ’s Economic Development Division
    • Examples of State Incentives in Ohio
      • Job Ready Sites (JRS) Program
        • Stimulates the development of large parcels of land and/or buildings that will be marketed to attract state economy-shifting development parcels
        • The state will provide grants to eligible applicants to undertake site improvement projects
        • Maximum grant of $5 million per site improvement project; or 75 percent of the total costs incurred under the site improvement project, as calculated at the time of application for JRS Program assistance and upon completion of the site improvement project
    • Examples of State Incentives in Ohio
      • Job Ready Sites (JRS) Program, cont.
        • Awards are calculated on the basis of the site improvement project's estimated allowable costs, which include:
          • the acquisition of land and buildings
          • building construction
          • improvements to land and buildings, etc.
    • Examples of State Incentives in Ohio
      • Ohio Job Creation Tax Credit
        • State and municipal tax incentives for businesses that expand or locate in Ohio
        • A business can receive a refundable tax credit against its corporate franchise/income tax based on the state income tax withheld on new, full-time employees
        • The amount of the tax credit can be up to 75 percent of the state income tax withheld on new, full-time employees for up to 10 years and can exceed 75 percent only upon recommendation of the Director that there is an extraordinary circumstance that merits an exception
        • Approved projects generally range between 50 percent to 60 percent for 5 to 10 years
        • Municipalities can provide a similar arrangement with their local employee income taxes
    • Examples of State Incentives in Ohio
      • Ohio Job Creation Tax Credit, cont.
        • Businesses must agree to create at least 25 new, full-time jobs within 3 years of operation
        • The average wage of all employees must be at least 150 percent of the current federal minimum wage
        • The business must demonstrate to the state that the tax credit is a major factor in its decision to go forward with the project
        • The local community must also provide financial support for the project
        • Incentives include substantial state and municipal tax reductions, which minimize capital expenditure to encourage business expansions and locations in Ohio
        • The state will issue the tax credit in the form of a check
    • Incentives for Minority Businesses
      • Most U.S. states have incentives for minority-owned businesses
      • Definition of minority-owned businesses may vary from state to state
    • Incentives for Minority Businesses in Ohio
      • What is a Minority Business Enterprise (MBE)?
        • An individual, partnership, corporation or joint venture of any kind
        • At least 51 percent of the enterprise must be owned and controlled by U.S. Citizens and residents of Ohio who are and have held themselves out as members of the following socially and economically disadvantaged groups: Blacks, American Indians, Hispanics and Orientals (origins from China, Japan or South East Asia)
        • Certified with the Ohio Department of Development as an MBE
    • Incentives for Minority Businesses in Ohio
      • Additional Requirements for MBEs
        • MBE must have been in business at least one year prior to applying for certification as a minority business enterprise. This requirement does not apply to joint venture applicants
        • The contributions of capital or expertise by minority owner(s) to acquire their interests in the firm should be real and substantial
        • The minority owner(s) should possess the power to direct or cause the direction of the management and policies of the firm and to make day-to-day, as well as major decisions on matters of management, policy and operations
        • MBE must possess all licenses, permits and authorizations required by law to perform the scope of work within classifications requested
    • Incentives for Minority Businesses in Ohio
      • Restrictions on MBEs Relationship with a Non-MBE
        • A business that is not an MBE can own a maximum interest of only 49 percent in an MBE
        • A relationship between an MBE and a non-MBE, which has an interest financially or otherwise in the MBE, will be carefully reviewed to determine if the interest of the non-MBE conflicts with the ownership and control requirements of the program
        • If the actual management of the firm is contracted out to or otherwise has been placed with individuals other than the minority owner(s), those persons who have the ultimate power to hire and fire the managers will ordinarily be considered as controlling the business
    • Incentives for Minority Businesses in Ohio
      • Minority Business Bonding Program
        • Provides bonding assistance to MBEs who otherwise cannot obtain bonding
        • Maximum bond amount is $1 million per company
        • A premium for each bond issued is charged, however there is no charge for bid bonds if the bid is unsuccessful
        • The actual premium rates charged will be determined by the Ohio Department of Development ’s Office of Minority Financial Incentives on a case-by-case basis
    • Incentives for Minority Businesses in Ohio
      • The Minority Direct Loan Program
        • Eligible borrowers include any business certified by the State Equal Opportunity Coordinator as an MBE or any business certified by the National Minority Supplier Development Council or its Ohio affiliates; and has a significant Ohio presence
        • Provides direct loans for business locating or expanding in Ohio that demonstrate they will create new jobs for Ohio citizens
        • Minimum loan amount available is $45,000 and maximum is $450,000 or up to 40 percent of eligible costs
        • Private lender is required for financing and ten percent owner equity is required
    • Incentives for Minority Businesses in Ohio
      • The Minority Direct Loan Program, cont.
        • Eligible costs are the purchase, construction or renovation of land and building, machinery or equipment, office equipment, commercial trucks, molds, dies, office furniture and fixtures
        • Term cannot exceed ten years for machinery and equipment; 15 years for real estate; five years for commercial trucks, office equipment, furniture and fixtures
        • The rate is three percent fixed
        • A job creation/retention ratio of $35,000 per job created or retained. Jobs must be created within three years of project completion
        • $300 nonrefundable application fee and a 1.5 percent commitment fee
    • National Minority Supplier Development Council, Inc.
      • The National Minority Supplier Development Council, Inc. (NMSDC) provides increased procurement and business opportunities to minority companies of all sizes
      • In 2005, the largest U.S. corporations purchased more than $94.6 billion in goods and services supplied by MBEs
    • National Minority Supplier Development Council, Inc.
      • NMSDC and MBEs
        • A minority-owned business is a for-profit enterprise, regardless of size, physically located in the United States or its trust territories, which is owned, operated and controlled by minority group members
        • Minority members must own at least 51 percent of the business
        • Minority members must be U.S. citizens
    • National Minority Supplier Development Council, Inc.
      • NMSDC and MBEs, cont.
        • Exception
          • A minority business may be certified as a minority-controlled enterprise if the minority owners own at least 30 percent of the economic equity of the firm and a non-minority professional institutional investor contributes a majority of the firm's risk capital (equity). The professional institutional investor must:
            • Be in the business of making equity investments
            • Manage more than $25 million in capital
            • Minority owners, however, must continue to control the day-to-day operations, retain a majority of the voting equity and control the board of directors
    • National Minority Supplier Development Council, Inc.
      • Who Is a Minority?
        • "Minority group members" include United States citizens with at least ¼ or 25 percent minimum of the following:
          • Asian-Indian: A U.S. citizen whose origins are from India, Pakistan and Bangladesh
          • Asian-Pacific: A U.S. citizen whose origins are from Japan, China, Indonesia, Malaysia, Taiwan, Korea, Vietnam, Laos, Cambodia, the Philippines, Thailand, Samoa, Guam, the U.S. Trust Territories of the Pacific or the Northern Marinas
          • Black: A U.S. citizen having origins in any of the Black racial groups of Africa
          • Hispanic: A U.S. citizen of true-born Hispanic heritage, from any of the Spanish-speaking areas of the following regions: Mexico, Central America, South America and the Caribbean Basin only
          • Native American: A person who is an American Indian, Eskimo, Aluet or Native Hawaiian, and regarded as such by the community of which the person claims to be a part
    • National Minority Supplier Development Council, Inc.
      • Business Consortium Fund, Inc. (BCF)
        • Created by the NMSDC, the BCF provides access to capital exclusively to NMSDC-certified ethnic minority-owned businesses that have supplier/vendor relationships with NMSDC national and regional corporate members and are experiencing difficulty obtaining financing through conventional channels on reasonable terms
    • National Minority Supplier Development Council, Inc.
      • BCF Loan Guaranty/Loan Participation Program (LGPP)
        • LGPP loans are made by lenders subject to the BCF's guarantee or participation and final approval
        • The total amount of a LGPP loan is determined by the participating lender; however, the BCF's maximum exposure may not exceed $750,000 in a participation loan, or $562,500 on a guaranteed loan
        • Specialized loan programs and products are also available
    • Thank you!
      • Michael E. Zatezalo, Esq.
      • Managing Director
      • Kegler, Brown, Hill & Ritter Co., L.P.A.
      • Suite 1800, 65 East State Street
      • Columbus, Ohio 43215
      • Direct Dial: +1 614 462 5497
      • Fax: +1 614 464 2634
      • Email: [email_address]
      • www.keglerbrown.com