Sale of Downtown building latest to avoid real estate transfer taxes
Another major Downtown building has changed hands in a transaction apparently structured to avoid payment of real estate transfer taxes.
The sale of the 388-unit Washington Plaza apartments by the Detroit Police and Fire Pension Fund to Faros Properties LLC was “a complicated deal that ended with WP Partner remaining as the owner of the apartment building,” said Justin Ackerman, an attorney with Babst Celland of Pittsburgh, on Wednesday.
WP Partner is the name of the corporate entity that owns the building.
Since only the pension fund's majority interest in WP Partner was acquired by Faros, the ownership of the building remained unchanged, he said. That meant there was no need to file a new deed, and that resulted in no transfer taxes being required.
“We followed the law on that matter,” said Jeremy Leventhal, a managing partner of Faros Properties, which has offices in New York and Boston.
No price was disclosed.
Ackerman represented Banyan Advisors, which acted on behalf of the Detroit pension fund that had been the owner of the I.M. Pei-designed property since the 1950s.
Leventhal said the Washington Plaza, as of Nov. 15, was placed under a new management team, with Debbie Roberts, former manager of the Cork Factory apartments in the Strip District, as its new general manager.
Cynthia Thomas, executive director of the Detroit Police and Fire Pension Fund, wrote in an email to the Tribune-Review that the property had been sold.
Ryan C. Bigelow, a spokesman for the Detroit Police and Firemen Retirement System, which controls the pension fund, said WP Partners was sold.
“We've already received our money from the sale,” he said.
A spokesman for the Allegheny County Department of Real Estate, which records deeds and other documents on real estate activity, said records don't show any recent activity on the property.
The sale follows other recent transactions in which no transfer taxes were paid.
Included are the 64-story U.S. Steel Tower on Grant Street, acquired by a group of investors headed by Mark Karasick of New York, which bought the property for $250 million.
Another is the recent purchase by Morgan Properties of New York and Blackstone Realty Partners VII LP, of four apartment complexes in Homestead, Pittsburgh, Pine and O'Hara with more than 1,100 units from Nationwide Realty Investors Ltd. of Columbus, Ohio. Morgan Properties purchased the corporate entity that owned the apartments.
In 2008, when Aaron Stauber of Rugby Realty Co. Inc. added the former Westinghouse Electric Corp. headquarters building, now known as 11 Stanwix St., to his holdings, he did not pay transfer taxes. Rugby, through an affiliated partnership, purchased a note that was in default from a lender. Instead of going through a foreclosure process, the building was acquired through a “deed in lieu of foreclosure.”
Documents filed in the county show the acquisition did not involve an actual sale of the building. The way the transaction was structured, it did not include payment of real estate transfer taxes, Jim Uziel, the department's deputy director, said earlier this year.
Later, when Rugby sold the building to GLL Real Estate Partners Gmbh for $66.7 million, $2.6 million in transfer taxes was paid.
To acquire U.S. Steel Tower, Uziel said the buyer formed a real estate company and created what is known as an 89-11 relationship — 89 percent of the company is owned by the buyer and 11 percent retained by the seller — for a period of three years. Once the three years expire, the remaining 11 percent can transfer to the buyer.
Leventhal said Faros plans a “multimillion-dollar upgrading and remodeling” of Washington Plaza next year. He did not detail what work will be done.
The transaction marks his company's first venture into the Pittsburgh market, but it may not be the last.
“Our focus is primarily on apartments and offices. We hope to expand our portfolio in the Pittsburgh market,” he said.
The Washington Plaza is 98 percent leased. Rents range from the high $900s for a studio apartment to over $1,800 for a two-bedroom unit. It offers a number of amenities to tenants, including an outdoor swimming pool, fitness areas, tennis and volleyball courts, and a parking garage with over 400 spaces. Cats are permitted.
The complex was listed for sale in April by the Pittsburgh office of Holliday Fenoglio Fowler with Matt Nick, Gerard Sansosti and Mark Popovich as the agents.
Sam Spatter is a staff writer for Trib Total Media. He can be reached at 412-320-7843 or email@example.com.