Building Capital Development Grant Program Guidelines

The Building Capital Development (BCD) Grants Program awards grants up to $25,000, on a matching basis, to current grantees with the purpose of assisting in the acquisition of an office building and/or property. Acquisition projects will be eligible for consideration, including planning, architectural and renovation expenses, for up to eight (8) years of funding or a maximum of $200,000. Recipients of this funding must apply on an annual basis for all BCD grants. 

Funds disbursed pursuant to the Building Capital Development Grant Program are to be used as ongoing, operating funds and not as an endowment or reserve funds. Recipients contemplating using funds to purchase real property must demonstrate to the LBF that the proposed acquisition will enhance the operating ability of the Recipient. Real property purchased solely for investment purposes, regardless of the value of the investments, does not constitute an appropriate use of a Grant. Apart from its investment benefits, a real property purchase should provide some benefits to the Recipient operations, such as reduced occupancy costs, consolidation or continuity of office locations, or access to a unique space otherwise unavailable. The LBF reserves the right to make all determinations in its sole discretion. The applicant acknowledges that the LBF has made no representation about the taxability of the these payments. 

I. Limitations on Use of Grant Funds to Purchase or Renovate Real Property 
A. An Expenditure (as defined below) of Grant funds in a grant year for costs associated with the purchase of real property that exceeds annual fair market rental costs for property similar in size, location and improvements will be approved only if the expenditure will allow a Recipient either:

1. To obtain long-term occupancy costs that are less than fair market rental costs for property similar in size, location and improvements; or

2. To obtain long-term occupancy costs that are less than fair market rental costs for property reasonable suited to Recipients program, even if long-term occupancy costs are greater than fair market rental costs for property similar in size, location and improvements if the Expenditure will allow the Recipient:

a. To consolidate office location or permit continued occupancy after expiration of a lease; or

b. To provide access to a unique space otherwise unavailable. Even if one of the above factors (1) or (2) is present, the LBF may choose not to fund the proposed Expenditure if the LBF finds that the proposed Expenditure would not be in accordance with the purpose or objectives of this Grant Program.

B. No Expenditure shall be approved for a purchase of real property if the purchase price exceeds fair market value for that property. 

C. No Expenditure shall be approved, even if in technical compliance with these Guidelines, if the Expenditure is designed or intended to evade the purpose of these Guidelines to ensure that all Grant funds are used in accordance with the purpose and objectives of the Grant Program. 

D. These Guidelines shall not apply to Grant funds that are being used for debt service or similar payments for real property (1) that the Recipient purchased or received as a gift prior November 3, 2006, or (2) the purchase or renovation of which was approved five or more years prior to the grant year for which the Grant funds are to be allocated. 

E. These Guidelines shall not apply to Grant funds used for costs associated with real property if the costs are being incurred in accordance with a Budget previously approved by the LBF. 

F. The LBF may deny approval of Expenditures that would otherwise be permissible if the LBF finds that the Expenditure would conflict with the purpose of the Grant Program because of plans (1) to purchase or renovate real property jointly with or to lease real property to other persons or entities, or (2) to allow programs of the Recipient not qualified to receive Grant funds to use the real property. 

II. "Expenditure" defined. An expenditure for costs associated with the purchase of real property, including but not limited to:
A. Down payment; 

B. Non-refundable deposits in excess of $1,000; 

C. Purchase option costs; 

D. Architectural, engineering and permit expenses; 

E. Construction and renovation costs (except, in the case of tenant improvements paid for by a Recipient, costs that will be repaid by tenants of the Recipient) that would be treated as capital costs in accordance with generally accepted accounting principles; 

F. Purchase price payment; 

G. Closing costs (including transfer taxes, title costs, loan origination fees, brokerage costs, finders fees and escrow fees); 

H. Payments made on leases, investment contracts, to purchase securities, etc. that would constitute a transfer of ownership under the Louisiana State Constitution or that would otherwise constitute a transfer of beneficial ownership under Louisiana law; 

I. Debt service payments; 

J. Purchase of membership shares in a real estate cooperative corporation; 

K. Insurance payments in excess of insurance payments that would have been made if the Recipient were a lessee of the real property. 

No expenditures will be considered to be associated with the purchase or renovation of real property, even if the expenditure is of a type described above, if the expenditure, aggregated with all other expenditures associated with the purchase of real property made in the Grant year, does not exceed the lesser of $5,000 or 5% of the Grant that the Recipient receives in that Grant year.

III. Long-term occupancy costs.
Costs ordinarily shall be measured over a period of five years unless the Recipient shows good cause for selecting a different time period. The calculation of long-term occupancy costs shall include the actual interest or other costs incurred by the Recipient for any down payment or similar payment. If such payments are made with funds, including Grant funds, available to the Recipient without cost, no interest, lost opportunity or other cost shall be imputed to calculate long-term occupancy costs. 

IV. Budget Approval Procedure.
A Recipient may propose to make an Expenditure in the Recipients initial proposed Budget or in any amended or supplemental Budget. A Recipient proposing to make an Expenditure must submit the following information in addition to any information required by the Budget Materials or the Guidelines:

A. Information pertaining to cost: 

1. Preliminary title report, including legal description of property, dated within 90 days before the date of submission of the Proposed Budget. 

2. Description of the current use and condition of the property, including size, location, rental income, utility costs, owner, tenants, and if reasonably available, current financing arrangements and date and price of most recent previous sale. 

3. Purchase terms, including copies of relevant purchase or option agreements and all collateral documentation available at the time of the submission. 

4. Estimated fair market value of the property, including at least on written appraisal made by an appraiser with the qualifications described in (8) below. Copies of all appraisals of the real property to be purchased or of comparable property (whether for lease or sale) that are or have been available to the Recipient shall be submitted to the LBF staff. 

5. Estimated cost of proposed improvements. 

6. Estimated occupancy costs, including but not limited to, actual interest costs for down payment (if any) debt service, taxes, utilities, insurance, maintenance and contributions for a reserve for extraordinary expenses (e.g., roof or boiler replacement). Economic assumptions, such as the interest rate (if the Recipient will be repaying a variable rate loan) on potential rental income (if the Recipient will be leasing a portion of the real property) shall be stated. Occupancy costs should be stated in absolute terms and per net rentable square foot, and should be estimated for five years after the anticipated closing date. 

7. Estimated fair market rental costs of properties similar in size, location and improvements. Include estimated rent in absolute terms and per net rentable square foot, term of lease upon which estimate is based, and additional costs that lease would impose on tenant (e.g., taxes, maintenance, insurance). Estimates should cover the five year period after the anticipated closing date. 

8. Identify and describe the qualifications of the experts upon whom the Recipient has relied to evaluate: fair market value; comparable property values in the purchase and lease market; the condition of the property proposed for purchase; and the cost of repairs and improvements. Identify any brokers or finders with whom the Recipient has consulted and (a) who will receive any consideration from the transaction or (b) who have a financial interest in the real property being purchased. At least one appraiser of market value of the property being purchased and of comparable market values shall be a member of the American Institute of Real Estate Appraisers or shall have had at least 5 years of continuous experience, immediately prior to the date of the appraisal, of appraising similar property within the same county as the property to be purchased, for savings banks, commercial banks or trust companies, insurance companies, savings and loan associations, or similar financial institutions that have a net worth of not less than $20,000,000 or assets of not less than $100,000,000. 

9. Any other information that the LBF staff or the Recipient believes is relevant to determining the long-term occupancy costs of the property or fair market rental costs of similar property, or to ascertaining whether the proposed Expenditures will be in accordance with the Grant Program. 

B. Information pertaining to shared ownership or use:

1. Plans to share space with other programs of Recipient. 

2. Plans to share ownership or occupancy of the real property with other persons or entities. 

C. Board comments: 

1. Those portions of the minutes of the meetings of the Recipient's Board of Directors that pertain to the Expenditure or the purchase and/or renovation of the real property. 

D. Interested transactions: 

1. Any factor that would indicate that the Expenditure might entail an interested transaction as described in Section VI below. This disclosure should include de minimis interests, even if not prohibited by these Guidelines. 

2. Any relationship between the Recipient, any employee (as defined in Section VI below) or any seller of the real property and any agent, broker or similar representative of either the Recipient or the seller. 

V. Special Criteria.
If projected five-year occupancy costs will not be less than fair market rental costs for real property similar in size, location and improvements, the Recipient shall submit the following information in addition to any other information required by these Guidelines:

A. Suitability criteria:

1. Description of planned use of the space and its suitability for current and anticipated future Recipient needs.

B. Time period to justify Expenditure:

1. An estimate of the time period, if any, over which occupancy costs would be less than fair market rental costs for property similar in size, location and improvements, the bases of that estimate, and the factors supporting use of that time rather than 5 years as a reasonable period in which to evaluate the economic merits of the proposed purchase.

C. Other special factors:

1. Any plan to use the purchased space to consolidate the Recipient's office sites.

2. If purchasing space currently leased by the Recipient, evidence demonstrating the unavailability of a suitable renewal lease or reasons why purchase is preferable to lease renewal.

3. Factors that make the property a unique space unavailable except through the proposed purchase.

VI. Interested Transactions Prohibited: A Recipient may not engage in an Interested Transaction.
A. The following transactions are considered Interested Transactions: An Expenditure associated with the purchase of real property from, or the sale of real property acquired (in whole or in part) with Grant funds to: 

1. Any person who, within 24 months of the date of the Budget proposing the Expenditure or the date of the sale, as the case may be, was in any way compensated by the Recipient, in the aggregate in excess of $5,000, as a staff member, temporary worker, consultant, subcontractor or other service provider, or who, within that 24 month period was a creditor of the Recipient for an amount in excess of $5,000 or who is a member of the Family of any person described above; 

2. Any member of the Recipient's governing board, any person who was a member of that board within 24 months of the date of Budget proposing the Expenditure or the date of the sale, as the case may be, or any member of the Family of any of those board members, unless the Recipient clearly demonstrates that the Expenditure or sale is in the best interests of Recipient's program of providing civil legal assistance to indigent persons. 

3. An entity in which a person, whose involvement in the transaction would cause the transaction to be an Interested Transaction, has an ownership, equity or control interest, unless the LBF determines that the interest is de minimis. 

B. "Family" members shall mean persons with the following relationships: issue or ancestors, siblings or their issue (including, in all of the previous categories, adopted persons), aunts or uncles or their issue, a spouse or the parents or siblings of a spouse.

VII. Security Interest and Related Issues:
The LBF will not approve an Expenditure for a Recipient to purchase real property unless the Recipient has made adequate provisions for ensuring that the proceeds from any transfer of any of the Recipient's interest in the real property will be used in accordance with the Grant Program. The LBF also will not approve an Expenditure if it reasonably finds that the Recipient is unlikely to be able to pay occupancy and ownership costs for the real property. 

The "proceeds from any transfer of any of the Recipient's interest in the real property" shall include, but not be limited to, sale, insurance, liquidation, condemnation, lease or refinancing proceeds, but shall not include any proceeds in excess of the aggregate amount of Grant funds actually spent by the Recipient as Expenditures for the real property being transferred. 

To help the LBF determine whether an Expenditure will be used in accordance with the Grant Program, the Recipient must submit the following information: 

A. Security interest. A memorandum of counsel to the Recipient explaining, in detail, the procedures that will be taken to ensure that the proceeds of any transfer of any of the Recipient's interest in the real property will be used as required by Grant Program and in accordance with these Guidelines. In most cases the Recipient will provide the LBF with a mortgage on the real property during the Amortization Period (as defined below) to secure these obligations. The Recipient and its counsel should be prepared to meet with the LBF Board of Directors to supply the staff with supplemental information and agreements to satisfy the obligations to use Grant funds properly. The LBF staff is not authorized, absent LBF directions to the contrary, to renegotiate, amend, or release any security documents, or subordinate any security interest, on behalf of the LBF to permit the Recipient to refinance, sell, or otherwise transfer any interest of the Recipient in the real property. 

B. Credit Evaluation. Copies of all credit reports on the Recipient or any co-venturer of the Recipient that are provided to any seller or financier of the real property or, if no such reports have been provided, then a copy of a credit report on the Recipient and any co-venturer in form reasonably satisfactory to the staff. 

VIII. Disposition:
At the time of any approval by the LBF of an Expenditure, the LBF shall designate an Amortization Period for the Expenditure. The Amortization Period ordinarily will be 5 years or the period of time over which aggregate occupancy costs for the purchased property no longer exceed aggregate occupancy costs for similar leased property. Special circumstances, however, may cause the LBF to select a different Amortization Period. 

The proceeds of any transfer of any of the Recipient's interest in the real property that is made during the Amortization Period will be treated by the Recipient as if such proceeds were Grant funds received by the Recipient in the year of the transfer, provided, however, that the Recipient may carry over unspent proceeds for use in any of the 4 Grant years immediately following the year of the transfer and, as described in Section VII above, this restriction shall apply only to the amount of proceeds equal to the aggregate of all Grant funds spent by the Recipient as Expenditures for the real property being transferred. Proceeds of such transfers occurring after the Amortization Period expires will not be considered Grant funds. 

IX. Funding of Program:
The interest income from LBF reserves has been designated as a source of funding for this program. In addition, the LBF will seek funding from private sources to supplement the amount of funds available. The program participation will be monitored by the Board of Directors. Continued operation and funding allocations are contingent on available funding.

The Louisiana Bar Foundation is a non-profit 501(c)(3) entity organized under the state of Louisiana.