The Ultimate Solution for Affordable Housing!
We convert FOR-PROFIT hospitality & residential real estate properties into affordable co-live/work communities? This strategy will work with hospitality, multi-family, and SFR units for short-term rentals (Airbnb).
We can do this by taking advantage of current tax law, member-owned cooperatives' advantages, and community development non-profit charities. Creating a comprehensive solution to affordable housing for all!
Step 1. Target properties for Corp2Coop Conversion. The ideal target property is current ownership with significant capital gains tax liabilities if sold at Fair Market Value. Additionally, if the current owner/s is motivated to sell due to estate and succession issues. For example, next generation is not interested in taking over the daily operations of the business properties.
Step 2. Collaborative Commerce Enterprise [C2E] makes a Fair Market Value (IRS definition) offer to acquire the corporation including real estate assets.
The offer will be a percentage of equity member ownership shares in the community development cooperative and a percentage in a donation to the non-profit 501(c)3 Charity Foundation.
The net result of this corp2coop conversion strategy is maximum financial benefit to the current ownership plus the community acquires properties at below fair market prices by taking advantage of the estate and charitable gifting tax laws.
To illuminate how this works, I will share an example:
100 Unit Hospitality Resort is located in a desirable southern California beach community. The fair market value determined by appraisals is $10,000,000 USD. The current owners acquired the property in 2010 at $4,000,000 and made $1,000,000 in allowable improvements. The property's "cost basis" is $5,000,000. If the property is sold at fair market value the owners will have capital gains tax liabilities of $5,000,000. Further, the married couple that owns the property has additional assets creating significant estate tax issues. The estate heirs have careers and are not interested in changing their lives or fighting over who will take over the business operations.
C3Alliance collaborative commerce enterprise makes an offer of $10,000,000. $5,000,000 will be a charitable donation of the real estate assets (cost basis) to the non-profit foundation and $5,000,000 is enterprise (cooperative) ownership shares. By receiving cooperative equity shares the owners gain significant flexibility in their estate planning plus if the property generates an operating surplus will be eligible for passive income from member dividends. In addition, the enterprise will contractually guarantee liquidity to the $5,000,000 in shares, so the owners can "cash out" as they please. The advantage of donating the real estate assets to charity gives the owners a $5,000,000 tax deduction. We can contractually structure this gift to maximize the donation credit. There are some VERY complicated tax rules that must be followed so we employ tax and legal experts to structure these agreements to maximize the gift effectiveness and net benefit to the donors. The net result is achieving full fair market value for their corporation plus solving the estate and succession issues!
C3 Alliance collaborative commerce enterprise [C2E] will take over operations of the resort. However, the now new members (owners) are eligible to stay on as staff and receive compensation for services provided to the cooperative. Creating a win-win-win for all involved and now C3 Alliance can provide affordable housing communities to members.
To learn more about C3 Alliance Corp2Coop conversion strategy please email us at [email protected].