Corporate surplus property: Always a challange, Part 2

Continued from the June 26th edition of the New York Real Estate Journal's Upstate section. Those properties with special-use limitations, marginal locations and deteriorated structures that are still on the books are still demanding full-time corporate management and much financial support and are now showing no results to the corporate bottom line. Sometimes properties with special uses will produce a higher justifiable appraisal. The companies who have used real estate donations as a disposition strategy reads like a Who's Who in the corporate world. R. J. Reynold's Tobacco Co. - a tract of 452 acres of land, a division of Kodak Co. - 146 acres and research center, Trinity Industries - former barge manufacturing facility and Cardinal Health - distribution center. When the decision is made to donate that surplus piece of real estate the structuring process begins. A real estate donation is not unlike any other conventional real estate transaction. However, instead of cash, the donor can receive tax deductions. At some point the deduction for the donor has a cash equivalency. The donor will need to establish value through a fair market value appraisal and in some locations need a certified appraisal. Keeping in mind fair market value is the price a willing buyer would pay a willing seller, when both parties have reasonable knowledge and information pertaining to all salient facts and issues while neither party is under any obligation to buy or sell. As in all valuations of property for transfer, the property appraisal must demonstrate the highest and best use to which the property would be used on the current market place. Once the market value is established, contracts are signed, due diligence is undertaken by the charity and the typical professionals you see in any closing are completing their area of expertise. One thing that is often forgotten, pick a charity that has a good tract record. The Internal Revenue Service keeps a list of qualified charities. All it takes is a simple phone call to check on the status of the charity or check on the IRS website. Additionally, don't let any charity do the appraisal for you. Go out and get your own independent qualified appraisal. There are many corporate benefits from a real estate donation. The transaction puts an end to the cost and risks of ownership you and/or your client are currently experiencing. The donation may create more after-tax dollars than that harder to achieve conventional sale. The transaction allows for a better and faster allocation of corporate resources. The transaction can typically take place quicker. The tax deduction can be applied to the current corporate year's taxes and any unused deduction can be carried forward for 5 years. Additionally, corporations can get some great public relations coverage for the donation. Ronald Peters is a real estate consultant at Peters & Associates, Saratoga Springs, N.Y.