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GPLET Leasing Issues

GPLET Leasing Issues 

In most commercial real estate development projects, the real property is subject to state property taxes.  In triple net leases, those property taxes are passed through to the tenants in the project on a pro rata basis as additional rent.

Cities, towns and other municipalities are able to offer an alternative to property taxes called Government Property Lease Excise Tax (GPLET).  GPLET rates are much lower than traditional property tax rates and often completely abated for the first eight years after completion of construction of the development project.  In order to qualify for GPLET status, the property must be owned by a government entity, and then leased to a developer or other end-user (most often under a long term ground lease).  Several conditions apply in order to qualify for GPLET status, including the property must be in an area designated as a slum or blighted area in accordance with ARS 36-1471 et seq., and the new improvements to the property must increase the value by at least 100% of the original value. 

GPLET has been the source of controversy and recent legislation.  This blog entry will not focus on the controversies or recent legislation, but you can read about it for yourself here: http://www.goldwaterinstitute.org/article/4443 and here: http://www.goldwaterinstitute.org/article/4726.  Instead, this blog entry focuses on the basic considerations for tenants when negotiating leases subject to GPLET instead of traditional property tax rates.

You can read the rest of this blog entry at: http://rrlawaz.com/2010/11/gplet-leasing-issues/

This blog has permanently moved to: http://rrlawaz.com/blog/

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