CRANBERRY TWP — More than a month since its closing, details of the sale of the Cranberry Woods property housing the Westinghouse Electric Co. headquarters remain opaque to township and Seneca Valley School District officials.

While the Eagle determined through records that the buyer of the 823,000-square-foot property was Fortress Credit Advisors, a subsidiary of the New York firm Fortress Investment Group, the property's previous owner, Columbia Property Trust, did not announce the buyer's identity at the time of the sale, nor has a representative from the buyer reached out to the township.

Jones Lang LaSalle, the real estate firm that brokered the sale, similarly obscured the name of the buyer in its January announcement of the $180 million sale.

Filings with the Butler County Recorder of Deeds indicate the transaction was more complex than a sale of the property itself. Columbia created a subsidiary, CF Cranberry LLC, to facilitate the transaction. It then transferred to that subsidiary 100 percent of the property for a sum of $10.

Because the computed value of the property was $143.7 million, the company paid tax on that amount — about $2.9 million split between the commonwealth, Seneca Valley and Cranberry.

At least three other subsidiaries were set up to facilitate the transaction. The company that owns the property is, in turn, owned by CF Cranberry Properties LLC. Another subsidiary, CF Cranberry Holdings I LLC, holds an 11 percent interest in that holding company, while CF Cranberry Holdings II LLC holds an 11 percent interest in the first Cranberry holdings company.

One more subsidiary — CF Cranberry Buyer LLC — was created in Delaware during the week the other subsidiaries were registered.

A filing shows that CF Cranberry Holdings II became an “acquired real estate company” during the course of the transaction. Because it owned an 11 percent share of a company that owned an 11 percent share of the property, it paid tax on 1.21 percent of the property's value.

In sum, taxes were paid on $145.5 million, or about $34.5 million less than the announced sale price. That means the school district and township might have missed out on nearly $173,000 each in real estate tax.

Seeking answers

On Feb. 10, Cranberry township manager Jerry Andree and Seneca Valley School District superintendent Tracy Vitale sent a letter to Columbia seeking a “detailed breakout” of the transaction and contact information for the new buyer.

One of the key points mentioned in the letter is that both entities are responsible for certifying the property owner has complied with tax law and local ordinances. This is because the property is currently real estate-tax-exempt.

Andree called the letter part of an “ongoing saga to bring transparency.”

“There very well could be a legitimate reason as to the difference” between the sale price and the amount on which taxes were paid, Andree said.

But because the township is responsible for ensuring the owner complies with applicable law, he wanted to double check. “I don't want to sign something that could be inappropriate,” he said.

He added the township typically does not see transactions that have such a difference, although he said that may be due to the large cash value of the transaction.

“This is honestly the first time in my 30 years here that I've been asked to explain the difference,” Andree said.

Complex transactions

The Westinghouse campus sale is one on a lengthy list of examples statewide in which companies have created multiple subsidiaries to facilitate a commercial real estate transaction, rather than directly sell the property.

One such example would be so called 89-11 transactions, in which a company buys 89 percent of a property, or 89 percent of a company that owns the property. By doing so, it would avoid paying tax on the full value of the transaction.

That loophole was ostensibly closed in 2013, according to Jeffrey Johnson, a Pennsylvania Department of Revenue spokesman, by Act 52 of 2013.

Other ways in which companies avoided paying full deed transfer taxes quickly popped up.

In 2014, the Cork Factory apartment complex in Pittsburgh sold for likely more than $100 million, Mayor Bill Peduto told the Pittsburgh media at the time. But because the sale used at least two holding companies, real estate records indicate, transfer taxes were paid only on the property's assessed value — about $21 million.

A 2016 investigation by the Philadelphia Inquirer found that companies purchasing high-value properties in that city didn't pay tax on the purchase price, but rather on the assessed value, costing the state and Philadelphia as much as $12.1 million.

Philadelphia passed an ordinance later in 2016, lowering the threshold at which a change in ownership interest triggers the transfer tax, from 90 percent to 75 percent.

The Washington law firm Stroock & Stroock & Lavan worked on the deed for the Westinghouse property. Its website boasts of its “advice on the tax implications and structuring of a variety of (real estate) deals.”

Andree said he understands there are methods used by companies to avoid paying tax on the full value of a transaction and, while he isn't saying any were used in the Westinghouse campus sale, he wants to know how it was done.

“The sophistication of transferring property has grown so much, and there are legitimate ways to avoid taxes,” Andree said. “I respect that. Just let us know how you did it.”