ANNAPOLIS-Last year the state of Maryland passed legislation that effectively made IDOTs, or Indemnity Deed of Trusts, functionality obsolete. IDOTs are a borrower structure that allowed companies to significantly reduce their borrowing costs, which at around 1.5% are among the highest in Maryland. Essentially, explains Centerline VP James Kelly, IDOTs used to allow borrowers to put off these costs until the property was sold. The legislation passed last July, eliminated that relief for loans over $500,000. Caps rates have dropped slightly since then, Kelly says, most likely as a result of this legislation.
"The increased cost in taxes to property owners directly impacts property values since a buyer must now discount the purchase price in order to achieve the same rate of return," he explains.
GlobeSt.com spoke with Kelly about the legislation and how, in his opinion, it has impacted deals in Maryland.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
