Sometimes press releases have the strangest things in them. Many individuals complain about corporate welfare, but we are curious to know if shareholders actually care about when the companies they have invested into are spending money on things that will never directly translate back into shareholder returns. Google Inc. (NASDAQ: GOOG) is that company today and this is not exactly Google’s first initiativet that will never offer any real direct returns to the company. It is still very possible that the end result does help the company directly and indirectly. We are curious to know if this is the case, and more importantly we want reader and shareholder input in a YES/NO reader poll.
Today came a Business Wire press release called “AEGON USA Realty Advisors, LLC and Google Inc. expand their Low-income Housing Tax Credit Investment Partnership” late in the day. Normally, when you see the terms “low-income housing tax credit” you think of government assistance. Before we get too hard on Google, it is quite possible that this does actually make sense. It is very possible that Google’s Treasurer, CFO, and outside counsel have all determined that this is Google’s best tax strategy.
In Google’s first quarter earnings report it disclosed, “Income Taxes – Our effective tax rate was 25% [updated from 21%] for the first quarter of 2011.”
Today’s press release showed that AEGON USA Realty Advisors, LLC, “a commercial real estate investment and management arm of AEGON and manager of a Low-Income Housing Tax Credit fund (Garnet LIHTC Fund XXV, LLC, “Fund”) for Google Inc. (“Google”) has added an additional property to the Fund with a new $47 million Google investment.”
The new property is called the Towers at Kuhio Park Terrace and is located in Honolulu, Hawaii. The property is a public housing community that is two different sixteen-story high rises. The report showed that the fund will “provide a major source of funding for the rehabilitation of 555 units for families.”
Google’s Vice President and Treasurer, Brent Callinicos, did note in this release, “We’re proud to once again partner with AEGON to help people afford quality homes. This initiative reflects our continued commitment to invest in areas that not only make good financial sense but also benefit local communities.” The first tranche of the Fund closed earlier this year and included a $28 million investment in two low-income housing developments in Minneapolis, MN (Riverside Plaza Apartments) and Sante Fe, NM (Villa Alegre Senior Apartments).
AEGON noted that The Towers are just the first phase of a 1,025 community that is being redeveloped by the Michaels Development Company in partnership with Vitus Group and the Hawaii Public Housing Authority with new windows, doors, plumbing, appliances, and electrical fixtures. The property is also adjacent to the headquarters for Parents and Children Together.
Google does of course have the Google Foundation. Its projects include the Google Earth Engine, Flu trends, crisis response, power meters, and efforts which develop utility-scale renewable energy cheaper than coal. In its history section of the foundation website, it noted “Since its inception, Google.org has committed over $100 million in grants to non-profits and investments in companies with breakthrough technologies.”
Google’s share price of about $519.00 generates a market capitalization rate of $167.3 billion and its 52-week trading range is $433.63 to $642.96. The stock has been stuck for the better part of two years now per many investors. Larry Page is now back as the company’s CEO running day-to-day operations and Chairman Eric Schmidt is now focusing more on strategic efforts rather than providing what many pundits have referred to as “adult supervision” for Sergey, Larry, and the rest of the crew.
Google is approaching the $40 billion mark in cash and cash equivalents. The company has not ever paid a single dividend to the common shareholder. It is very possible that Google might be driving down its tax rates in states and with federal agencies by being philanthropic with its cash. We just want to give you both sides of the coin before we ask you the question.
This is one of the big unknown issues out there when it comes to what shareholders want versus what management wants. Maybe it is the same, maybe it is different. It is also a topic which spans shareholder issues, corporate governance, taxation, accounting, philanthropy, and even politics. So, we ask simply…
JON C. OGG