Commercial property sales show art of paying no taxes
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The U.S. Steel Tower: bought by a New York real estate group last month for $250 million. Deed transfer taxes paid to date by the new owners: Zero
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If you buy a $200,000 four-bedroom colonial in Squirrel Hill, chances are close to 100 percent that you will pay a 4 percent deed transfer tax on the transaction. But if you purchase a $200 million skyscraper Downtown, you might not pay a dime.
Some commercial real estate investors have exploited loopholes in state law to sidestep millions of dollars in deed transfer taxes on deals involving some of the city's largest properties.
"My experience is that, especially with the buildings Downtown, they will try to come up with a way to avoid the transfer tax. They get as creative as they can," said Jim Uziel, deputy manager of the Allegheny County Department of Real Estate.
Perhaps the latest example is U.S. Steel Tower, purchased last month for $250 million by a group led by New York real estate investor Mark Karasick.
The only documents filed so far with the Department of Real Estate have involved the assignment of leases and rents that are not covered by the transfer tax.
Had a deed been filed, the property would have been subject to $10 million in transfer taxes, based on the sales price. No deed has been recorded to date.
If nothing changes, it could be the second time in six years that the city's tallest skyscraper changes hands without a penny of transfer taxes being paid. The building was acquired in 2005 by 600 GS Prop LP LLC at a sheriff's sale. Deeds obtained that way are not subject to the tax.
But U.S. Steel Tower is not the only Downtown property where the tax has been an issue in recent years. The tax, which varies from 2 to 4 percent depending on the municipality, is to be paid on all property sold in Allegheny County. In Pittsburgh, 2 percent goes to the city, 1 percent to the school district and 1 percent to the state.
An investor group that purchased CNG Tower, now known as EQT Plaza, in 2000 avoided $2.7 million in transfer tax in the $82 million transaction by technically buying the partnership that owned the building rather than the property itself.
Three years ago, New York-based Rugby Realty, one of Downtown's largest property owners, initially did not pay transfer tax after acquiring the former Westinghouse building, now known as 11 Stanwix St., using a procedure called a deed in lieu of foreclosure that made the purchase exempt.
First Published May 11, 2011 12:00 am
