Master Lease Option Questions from a First Timer (Please Help)

[Austin Snyder]

Hello, 

I am working on my first multi-family deal as well as my first time working with a master lease option. It's a unique opportunity and even a bit strange so I'll provide some context below.

It's an off market 50 unit property that provides low income housing for seniors. Due to the nature of the government loan used to build this, the owner can't make a huge profit. Tenants pay 30% of their adjusted income or basic rent, whichever is better. However, there is a second business which is the management company who helps feed the seniors twice a day and provides them with transportation, activities etc which is a separate entity that makes most of the profit. The owner has owned both the real estate as well as the management company for about 25 years.

Now he's in his 80's and would like to sell because he doesn't have much interest managing real estate anymore but his objection is the huge tax liability from capital gains/depreciation recapture.

I wanted to come in and offer a master lease option with the agreement that I take over control of the property on maybe a 3-5 year lease and pay rent to him with the option only being exercised once he passes away so there is a stepped up basis for his heirs. If he doesn't die in 3-5 years then we just repeat the agreement until he passes away. To me it's a win for everybody, he no longer has to manage the property, I'm happy because I'm getting ownership with little money down, and his heirs as well as himself are happy they don't have to pay hundreds of thousands in taxes.

My questions are this: 

1. Does it sound like this would even be possible to do since it's essentially two entities: an apartment housing complex AND a management company? I was thinking from a tax perspective, maybe if he gifted me the management company and then I made a larger offer on the housing as a whole to make up for it if that would be possible since you can't use a master lease option to buy the management company I assume? 

2. If it's possible would it make sense for me to try to negotiate a seller financed note at 0% interest for the property once he passes and I have the option to buy the property? I have to assume a government loan with low interest that has a balance of $1,000,000. And I wanted to offer an additional $1,500,000 seller financed/promissory note upon his death at 0% interest. My thinking was this could still be a win for his heirs because they would get the stepped up basis and then have the option to either get payments for life OR sell the promissory note to a note buyer for up to approximately 90% of the note. However, I wasn't sure if a note buyer would actually buy a note that has 0% interest.

3. Lastly, are there lawyers that specialize in master lease options who would help through this whole transaction and essentially act as a transaction coordinator? 

Thanks so much in advance for any help.