The acquisition involves an operating lease plus a purchaseoption after 10 years, "a structure that accommodates the seller'stax considerations," Leo Ullman, Cedar's president and CEO, Identifying the seller only as "a partnership ofinvestors run by a New York City lawyer," Ullman explains that,under this structure, "the seller can defer capital gains andpreserve a depreciation deduction.

Ullman says Cedar has used this structure in the past. "We prideourselves in working with owners and sellers to meet their needs.Our cost of capital is higher than some of the bigger buyers, so wework to be flexible in order to compete."

At the close of the agreement this August, Ullman says Cedarwill pay the seller between $5.5 million and $5.7 million in cashfrom its revolving credit facility and also assume just under $23.3million of first-mortgage financing at 5.42% due in 2014. Afterexercising the purchase option in 10 years, "there will be a modestadded cost for inflation," he adds.

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