Real Estate Tax

Arent Fox has experience in the most complex areas of federal, state, and local tax law impacting real estate transactions. Whether we are representing lenders, borrowers, investors (both inbound or outbound, taxable or tax-exempt), developers, contractors, tenancies in common (TIC arrangements) or other parties to a real estate transaction, our tax professionals bring practical business judgment and technical tax experience to the firm’s transactional team.

Our Focus

The Arent Fox Tax group enables our clients to make informed decisions regarding the material tax risks and opportunities presented by their business. Our tax team offers strategies to minimize a particular tax risk and creates alternative transaction structures to accomplish our clients’ business objectives. Each of our tax professionals works closely with practitioners in various real estate and related practice areas (including hospitality, construction, bankruptcy, sports, long term care/senior living, and finance) to produce an optimal tax result for the client. Our lawyers are experienced in a wide range of tax issues pertaining to real estate, including partnership and corporate structuring, syndicated offerings, acquisition and disposition planning, like-kind exchanges, tax considerations for tax-exempt investors (including the Fractions Rule), foreign investment (FIRPTA) issues, historic preservation and investment tax credit opportunities, real estate investment trusts (REITs), and tax accounting considerations.

Acquisition & Disposition Planning

Tax is an integral part of any business acquisition or disposition. Arent Fox tax attorneys work routinely with practitioners from our real estate, corporate, estate planning and other practice groups to structure business acquisitions, dispositions, mergers, joint ventures, asset and stock sales/purchases, and business successions. The Arent Fox tax group helps clients understand and manage the tax risks and opportunities revealed during due diligence and coordinates technical expertise with business knowledge to create optimal solutions for our clients.

Arent Fox is well versed in both tax-free and taxable acquisition and disposition planning. For example, Arent Fox has executed like-kind exchanges, partnership and corporate mergers, and property acquisitions for clients. Similarly, Arent Fox has structured “cash out” and taxable acquisitions and dispositions for its clients. Arent Fox has extensive experience with public and private offerings of tax-sensitive securities and the preparation of offering materials.

Our Work

  • The RLJ Companies: Represented affiliates of The RLJ Companies in connection with the $58,500,000 purchase of the Homewood Suites by Hilton Washington, located in the Thomas Circle area of Washington, DC.
  • Goldman Sachs: Arent Fox represents affiliates of Goldman Sachs in connection with hundreds of millions of dollars of real estate acquisitions and sales and joint venture work across the country, including projects for the Whitehall Street Real Estate Partnerships, the Archon Group and for Goldman’s own balance sheet.
  • WRIT: Represented Rockville, Maryland-based Washington Real Estate Investment Trust (WRIT) in the acquisition of two office buildings located in the Quantico Corporate Center, Quantico, Virginia. WRIT paid $68 million for the newly constructed, four-story Class A office buildings. The development includes room to develop up to one million square feet of office, research, hotel and retail space.
  • Revolution LLC: Arent Fox represented Revolution LLC in its acquisition of land on the Northwest coast of Guanacaste, Costa Rica, for the development of a luxury resort community including a One&Only Resort, a Tom Doak 18-hole golf course and approximately 300 for-sale residential units.
  • Horizon Bay Retirement Living: For over a decade, Arent Fox has represented affiliates of Horizon Bay Retirement Living in the structuring of ventures which own senior living facilities. Arent Fox routinely advises on these complex ownership interest structures, including the structuring of ownership vehicles and advising on matters pertinent to taxable and tax exempt investors.
  • The Artery Group LLC: Arent Fox represented the Artery Group in a joint venture involving development of the Washington Dulles Marriott Hotel. Arent Fox counseled the client and advised on joint venture structuring, including both lender and equity financing and owner incentive planning in the ownership vehicles.
  • DLC Management Corp.: Arent Fox represents DLC in the structuring of its nationwide equity transactions designed to purchase, operate and manage shopping centers.
  • National Capital Property Trust II: Arent Fox provided counsel to National Capital Property Trust II, a private REIT affiliate of Quadrangle Development Corporation, in connection with the acquisition of the National Press Building in Washington, DC.
  • Getty Realty Corp.: A publicly traded REIT, turned to Arent Fox for advice in connection with a sale and leaseback transaction involving 37 gasoline stations located in Prince Georges County, Maryland.
  • Quadrangle Development Corporation: Arent Fox represented REITs sponsored by Quadrangle Development Corporation in connection with restructuring the construction and refinancing of the Grand Hyatt Hotel in Washington, DC.
  • Sunrise Senior Living, Inc.: Sunrise sought counsel from Arent Fox in negotiating joint ventures with REITs as co-investors, requiring analysis into the REIT compliance rules.
  • Quadrangle Development Corporation: Arent Fox advised private REITs sponsored by Quadrangle Development Corporation in the negotiation of a joint venture and through the construction and financing stages in the acquisition of the Towers Crescent Building in Vienna, Virginia.

Historic Preservation & Investment Tax Credits

Arent Fox’s tax professionals have extensive experience identifying tax-funded resources to finance real estate development. We routinely advise clients on the use and availability of New Markets Tax Credits, Charitable Contributions for Historic Preservation purposes, Low-Income Housing Tax Credits, and Rehabilitation Credits to help our clients achieve their business goals. Arent Fox represents both lenders and borrowers in real estate structures designed to utilize tax credits.

Representative Transactions

  • Borrower’s Counsel: Represented the Borrowers in renovation of Ford’s Theatre, in Washington, DC, the Brexton Hotel in Baltimore, Maryland, and the KIPP DC Charter School in Washington, DC by means of New Markets Tax Credits.
  • Borrower’s Counsel: Represented the Borrowers in financing of Mary’s Center for Maternal Care and Barbara Chambers Children’s Center, both in Washington, D.C., using New Markets Tax Credits.
  • Lender’s Counsel: Represented the leveraged lender in renovation of elder care facilities and office buildings in Virginia, using New Markets Tax Credits.
  • So Others Might Eat: Represented DC-based So Others Might Eat in complex $36,000,000 financing with a combination of tax-exempt bonds and low income housing tax credits for the acquisition and rehabilitation of multifamily sites in Washington, DC.

Real Estate Structuring

Getting a real estate deal closed requires the cooperation and involvement of many different parties. Developers, financiers, property managers, land owners, and leaseholders routinely engage in joint ventures, alliances, and other contractual arrangements in organizing their project. Arent Fox advises clients on the business and tax-efficient methods of structuring their arrangements. We understand the tax implications of joint venture and other equity arrangements, sale-leaseback arrangements, ground leases, mezzanine loans, credit syndication, and preferred-equity transactions.

Arent Fox enables its clients to make informed decisions regarding the principal tax risks and opportunities involved in a real estate transaction, including strategies to minimize a particular tax risk, such as state or local property tax, or to seize a particular opportunity. We work with our clients to evaluate and implement ownership arrangements tailored to a specific transaction or asset, and to minimize the impact of an unplanned or unforeseen venture exit.  We assist our clients with the identification, evaluation and implementation of structures including investment funds, joint ventures, REITs and other upper-tier vehicles designed to implement new financing and equity investment mechanisms, or to form longer-term, multi-property relationships with third party partners. In other cases, a change in market conditions, a change in the parties’ economic needs or other circumstances not anticipated at the outset might change a client’s tax risk, exposure, or opportunity. In whatever context the need arises, our focus is always on addressing our clients’ tax concerns while preserving the underlying economic arrangement and allowing our clients the maximum possible flexibility.

Representative Transactions

  • Quadrangle Development Corporation: Arent Fox advised private REITs sponsored by Quadrangle Development Corporation in the negotiation of a joint venture and through the construction and financing stages in the acquisition of the Towers Crescent Building in Vienna, Virginia.
  • Horizon Bay Retirement Living: For over a decade, Arent Fox has represented affiliates of Horizon Bay Retirement Living in the structuring of ventures which own senior living facilities. Arent Fox routinely advises on these complex ownership interest structures, including the structuring of ownership vehicles and advising on matters pertinent to taxable and tax exempt investors.
  • The Artery Group LLC: Arent Fox represented the Artery Group in a joint venture involving development of the Washington Dulles Marriott Hotel. Arent Fox counseled the client and advised on joint venture structuring, including both lender and equity financing and owner incentive planning in the ownership vehicles.
  • DLC Management Corp.: Arent Fox represents DLC in the structuring of its nationwide equity transactions designed to purchase, operate and manage shopping centers.
  • Forest City Washington: Arent Fox has served as lead counsel in connection with a joint venture between Forest City Washington and Gould Property Company involving the development of a 119-acre town center in Prince Georges County, Maryland, which will include a major retail center, residences, offices, hotels and other uses.
  • Sunrise Senior Living, Inc: Arent Fox counseled Sunrise Senior Living in the negotiation of joint venture agreements with six separate joint venture partners for eight portfolios, consisting of over 100 properties located in 21 states valued at more than $1 billion.
  • Fundamental Long Term Care: Arent Fox represented Fundamental Long Term Care in a joint venture with a Texas owner/operator for the operation of 14 skilled nursing facilities.  We assisted in all aspects of the negotiation of the joint venture relationship.
  • Revolution LLC: Arent Fox represented Revolution LLC in its acquisition of land on the Northwest coast of Guanacaste, Costa Rica, for the development of a luxury resort community including a One&Only Resort, a Tom Doak 18-hole golf course and approximately 300 for-sale residential units.
  • Arent Fox provided tax planning and structuring to private REITs involved in the development of the Washington, DC downtown Convention Center Hotel.
  • Quadrangle Development Corporation: Arent Fox represented REITs sponsored by Quadrangle Development Corporation in connection with restructuring the construction and refinancing of the Grand Hyatt Hotel in Washington, DC.

Real Estate Workouts

Distressed real estate loans raise a multitude of legal issues and Arent Fox’s tax professionals are an integral part of the firm’s real estate workout team. Structuring the most favorable solution to a troubled loan requires an understanding of the potential income tax consequences of a workout. We understand the tax consequences of debt forgiveness and the impact of nonrecourse vs. recourse debt forgiveness on taxpayers; we have counseled clients on the exceptions to cancellation of indebtedness income and the potential deferral of losses pursuant to the American Recovery and Reinvestment Act of 2009.

Tax-Exempt Financing

Arent Fox provides the highest level of tax experience in the area of municipal finance. We advise municipalities, underwriters, credit enhancers and borrowers on every aspect of tax law relating to municipal finance, including compliance with the private activity bond limitations. Arent Fox has served as special tax counsel for the California State University System, District of Columbia and numerous conduit issuers.

Our lawyers have advised clients on obtaining private letter rulings and determination letters from the Internal Revenue Service relating to municipal finance and tax-exempt organizations. We have drafted federal legislation relating to changes to Section 103 of the tax code and successfully lobbied Congress for the passage of such legislation. Our experience includes Section 103 of the tax code and extends to low-income housing tax credits, including tax controversy and private business use reporting protocols.

Representative Transactions

  • Howard Hughes Medical Institute: Arent Fox represented Howard Hughes Medical Institute over the last two decades in  numerous financing and derivative transactions, including, a $600 million taxable bond financing, a $500 million tax-exempt bond financing, an $83.5 million tax-exempt bond financing, and a $23 million tax-exempt bond financing.
  • Georgetown University: Arent Fox represented Georgetown University (including Georgetown University Medical Center) in more than $1.275 billion tax-exempt and taxable financings, including new construction, refundings, interest rate conversions and derivative transactions, using auction rate securities, fixed rate bonds and variable rate demand bonds.
  • Metropolitan Washington, DC tax-exempt bond issues for which our attorneys have been approving bond counsel include, through the District of Columbia, Georgetown University, National Children's Center, American Association for the Advancement of Science, American Geophysical Union and, through local municipalities, Providence Hospitals.
  • Outside of the local area, our attorneys have acted as approving bond counsel for tax-exempt issues on behalf of hospitals, nursing homes and other eldercare facilities and other nonprofit and commercial entities in Massachusetts, California, Texas, Florida, South Carolina, New Mexico, Arizona, Michigan, Delaware, and Tennessee, among other states.
  • Arent Fox has substantial experience in project financings for nonprofit organizations. We have served as borrower’s counsel in tax-exempt and/or taxable borrowings for many clients, including The Phillips Collection, American Association for the Advancement of Science, American Geophysical Union, Carnegie Endowment for International Peace, Howard Hughes Medical Institute, United States Pharmacopeial Convention, Metropolitan Washington Council of Governments, American Association of Obstetricians and Gynecologists, Association of American Medical Colleges, American Type Culture Collection, St. Andrews, and the Maret School.
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