I have posted here before Partners' structuring of its sales to
subdevelopers. Partners' requires an upfront payment and "post
closing" consideration of a specific amount per unit for
infrastructure and a percentage of gross sales of the condos. For
instance, for the C-8 site, Metro paid roughly $17.1 million up
front and must pay $4,450,000 for infrastructure and 7% of the sales
prices. That latter figure was forcasted (in Metro's proforma) to a
little over $11 million. That's a total of almost $33 million. The
earlier sales were structured similarly, however, the "post closing"
obligations were structured in mortgage documents. In the Metro
sale, Partners paid transfer taxes on the $17.1 million (around
$204,000) but nothing on the post closing obligations, which I
maintain are part of the actual consideration. The seller signs an
affidavit attesting to the "total consideration." It appears to me
that Partners skirted paying the full amount of transfer taxes, and
although some of the consideration is based upon future events
(sales prices), under the law, the seller has the obligation to make
a good faith effort in estimating any future consideration. NJ does
not have a mortgage tax. Accordingly, if I followed Partners' lead I
could sell a property for $1 million with $1 up front and $999,999
in a purchase money mortgage or as a post closing obligation and
only pay transfer taxes on the $1. That is not the intent of the law
and the transfer taxes are supposed to be based on the entire $1
million. I have contcted NJ Division of Taxation to look into the
sales between Partners and the subdevelopers and it has agreed to do
so. Stay tuned.
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/AsburyPark/
<*> Your email settings:
Individual Email | Traditional
<*> To change settings online go to:
http://groups.yahoo.com/group/AsburyPark/join
(Yahoo! ID required)
<*> To change settings via email:
mailto:[EMAIL PROTECTED]
mailto:[EMAIL PROTECTED]
<*> To unsubscribe from this group, send an email to:
[EMAIL PROTECTED]
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
