Hospitality Makes for Perfect Bedfellows

Historic Rehabilitation Tax Credit Issues and Challenges

at the West Baden Springs Hotel

Eric DarlingCarlisle Tax Credit Advisors LLC

33 Union Street, 2nd FloorBoston MA 02108(617) 367-4304

• My role today

– To be the token technical guy– To alert you that these projects that combine many

parties, including tax exempts, may create a multitude of tax and syndication issues.

– To reassure you that, with enough effort, most of them can be resolved.

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The Historic Landmarks Era

• Historic Landmarks of Indiana owned West Baden for many years

• In the 1990s, Historic Landmarks approached Mr. Cook for assistance

• Mr. Cook expended $37 million on the hotel. This was not a charitable donation - the assets were capitalized on the books of CFC, a Cook entity.

Call from Jason

• In 2003, I receive a call from Jason Rager of the Cook Group.

• Jason describes a fantastic old hotel that seems right out of an old storybook

• He just needs answers to a few issues

Sample Issues

• How could they preserve the value of the prior $37 million in expenditures?

• How would project ownership by tax-exempt entities impact the tax credit?

• What portion of a comprehensive rehabilitation of the hotel, its outer buildings, the grounds and the construction of a new golf course would qualify as QREs?

• What would be the impediments to a tax credit syndication?

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The visit to West Baden

• The reality of West Baden is stunning - no longer just numbers!

• The introduction of the French Lick Hotel & Spa to the mix

• The possibility of a casino affiliated with the hotels

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The Plan

• How to implement the grand design of casino/golf course/hotels

• Bring in another developer• Arrange a taxable bond issue• Work through the Indiana Gaming

Commission issues• Perform a HTC syndication

The Reality

• Complications arose!• The syndication could not be completed to a

third party• Mr. Cook rises to the occasion one more time• Cook Group Inc. invests for the tax credit• Ultimately, Cook Group takes over the entire

ownership of the project • The project is completed to rave reviews

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