RICHMOND-A historic hotel here, the Hotel John Marshall, is being renovated into a mixed-use project–with the financing provided through HUD’s Section 220 Urban Renewal Program and Berkadia Commercial Mortgage. Essentially a historic tax credit financing, the twist is that it is based on a master-lease. This structure has only been used a handful of times–but appears to be more commonplace as both lenders, developers and HUD’s own field offices becomes comfortable with it.

Typically, with historic tax credit transactions the tax credit partner would own a majority of the entity in order to reap the benefits of having the tax credit, explains Berkadia senior vice president David Blake. A new application of this model is to lease all of the building to a master tenant, which gets the tax credit benefit instead, he tells GlobeSt.com. So far, there have been only a handful of such deals structured.

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