Structured Lease
A structured lease involves The Port owning and leasing a project to a company or organization.
Benefits of a Structured Lease
In lease financings, The Port’s tax-exempt status can be deployed to help developers and companies control costs of constructing a new building through sales tax exemption on the purchase of project building materials. As such, The Port’s ownership of the asset is a condition of using this incentive. For a project with ~$5 million or more in hard construction costs, this financing structure can reduce construction costs through sales tax savings.
FEATURED PROJECT
Mariemont City Schools
The Port entered into a long-term lease with the Mariemont City School District for redevelopment of their current high school campus. The project will update the school's academic, performing arts, and athletic spaces.
Capital Lease Structure
Under Structured Lease arrangement, The Port holds title to the project. The Port enters into a Capital Lease with the Lessee which can be a company or a developer. The Lessee books the asset and any debt on its balance sheet. The Lessee receives all ownership benefits for federal tax purposes, i.e. depreciation, interest expenses. Under the Capital Lease, the Lessee typically has the right to purchase the asset for a nominal amount at the end of the lease. A right for the Lessee to purchase the asset prior to the end of the lease
term can be negotiated.
Role of The Port
The Port may:
- Own the project (via fee simple interest or ground lease);
- Lease the project directly to the business or to a master lessee; and
- Issue the lease bond debt (typically under a trust indenture).
The source of repayment for any bonds is the master lease, the terms of which are negotiated among the bondholder, The Port, the business and the developer.
The Port is committed to working with the developer or company to make this structure fit within their goals for the project lease.