Opinion ID: 210344
Heading Depth: 1
Heading Rank: 4

Heading: lihprha

Text: The more serious question is whether the enactment of LIHPRHA constituted a taking. During the period that LIHPRHA was in effect (from November 28, 1990, until the HUD appropriations statute implementing HOPE was enacted on April 29, 1996) the plaintiff owners' twenty-year prepayment deadline expired and some of the owners, in view of the regulatory regime imposed by LIHPRHA, entered into use agreements. The question is whether these restrictions imposed by LIHPRHA resulted in a taking. In our view, in concluding that they did, the Court of Federal Claims erred as a matter of law in certain respects.
We think the Court of Federal Claims erred in not considering the impact of the restriction on the property as a whole. Rather, the Court of Federal Claims compared the rate of the return that the owner would receive on its investment with and without the restriction of a single year. This error impacted the court's Penn Central analysis. The Court of Federal Claims applied a return-on-equity approach, considering the income from the project for each individual year as a separate property interest. Cienega IX, 67 Fed.Cl. at 475-76. For each owner, the court compared the return on equity that the owner received under the restrictions with the return on equity that the owner would receive absent the restrictions. The court determined that, under LIHPRHA, the owner's return was limited to a six percent dividend on its initial equity investment. The court found that without the restrictions the owner could receive an 8.5 percent annual return (the Fannie Mae bond rate) on the owner's entire equity in the property at the prepayment eligibility date. The initial equity investment was significantly smaller than the entire equity value at the prepayment date because the owners had built equity in the property over the twenty-year period by making mortgage payments. Accordingly, the court found that the economic impact on the plaintiffs ranged from 90.5 to 97.7 percent. Id. at 476-78. We believe that, in adopting this approach, the Court of Federal Claims erred. The Supreme Court, in cases like Penn Central, Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust for Southern California, 508 U.S. 602 (1993), and Tahoe-Sierra has made clear that in the regulatory takings context the loss in value of the adversely affected property interest cannot be considered in isolation. Penn Central, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631, arose in the permanent regulatory takings context. New York City had designated Penn Central station, and the city block that it sat on, as a historic landmark site, and thus restricted development of the property. The appellants argued that the taking at issue was a taking of the air space above Penn Central station. The appellants urged that the economic impact of this restriction on developing the air space should be considered in isolation, rather than considering the property as a whole. Id. at 130, 98 S.Ct. 2646. The Supreme Court rejected this approach as quite simply untenable. Id. The Court explained: Taking jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole  here, the city tax block designated as the landmark site. Id. at 130-31, 98 S.Ct. 2646. The Supreme Court reaffirmed that the correct approach is to consider the parcel as a whole in Concrete Pipe, 508 U.S. at 643-44, 113 S.Ct. 2264. There the Court reiterated Penn Central' s holding: [A] claimant's parcel of property could not first be divided into what was taken and what was left for the purpose of demonstrating the taking of the former to be complete and hence compensable. To the extent that any portion of property is taken, that portion is always taken in its entirety; the relevant question, however, is whether the property taken is all, or only a portion of, the parcel in question. Id. at 644, 113 S.Ct. 2264. The Court explained that our test for regulatory taking requires us to compare the value that has been taken from the property with the value that remains in the property, [and] one of the critical questions is determining how to define the unit of property `whose value is to furnish the denominator of the fraction.' Id. (quoting Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 497, 107 S.Ct. 1232, 94 L.Ed.2d 472 (1987)); see also Andrus v. Allard, 444 U.S. 51, 65-66, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979) (where an owner possesses a full `bundle' of property rights, the destruction of one `strand' of the bundle is not a taking, because the aggregate must be viewed in its entirety); Seiber v. United States, 364 F.3d 1356, 1368 (Fed.Cir. 2004) (The Supreme Court has repeatedly instructed that the impact of an alleged taking must be considered in terms of the `parcel as a whole'. . . . ). In Tahoe-Sierra, the necessity of considering of the overall value of the property was explicitly confirmed in the temporary regulatory takings context. 535 U.S. at 331, 122 S.Ct. 1465. There the petitioners argued that a thirty-two-month moratorium on building was a per se regulatory taking because there had been a complete taking of development rights during that thirty-two-month period. The Supreme Court rejected this argument stating: Of course, defining the property interest taken in terms of the very regulation being challenged is circular. With property so divided, every delay would become a total ban; the moratorium and the normal permit process alike would constitute categorical takings. Petitioners' conceptual severance argument is unavailing because it ignores Penn Central 's admonition that in regulatory takings cases we must focus on the parcel as a whole. Id. The Court thus concluded that the District Court erred when it disaggregated petitioners' property into temporal segments corresponding to the regulations at issue and then analyzed whether petitioners were deprived of all economically viable use during each period. Id. Justice Thomas's dissent specifically complained that the majority had improperly compared the reduction in value resulting from the regulation to the value of the parcel as a whole, i.e., the land's infinite life. Id. at 355, 122 S.Ct. 1465 (Thomas, J., dissenting). Thus we conclude that in a temporary regulatory takings analysis context the impact on the value of the property as a whole is an important consideration, just as it is in the context of a permanent regulatory taking. The plaintiffs justify the return-on-equity approach by relying on the Supreme Court's decision in Kimball Laundry Co. v. United States, 338 U.S. 1, 69 S.Ct. 1434, 93 L.Ed. 1765 (1949), which held that just compensation for the taking of a laundry was the rental that probably could have been obtained. Id. at 7, 69 S.Ct. 1434. However, the reasoning of Kimball Laundry does not apply here. First, as the plaintiffs recognize, the Supreme Court in Kimball Laundry applied the return on equity approach when determining just compensation and not when determining whether a taking had occurred in the first place. Second, Kimball Laundry is a physical takings case and thus does not govern the regulatory takings context. As the Supreme Court concluded in Tahoe-Sierra, [t]his longstanding distinction between acquisitions of property for public use, on the one hand, and regulations prohibiting private uses, on the other, makes it inappropriate to treat cases involving physical takings as controlling precedents for the evaluation of a claim that there has been a `regulatory taking,' and vice versa. 535 U.S. at 323, 122 S.Ct. 1465; see also Tuthill Ranch, Inc. v. United States, 381 F.3d 1132, 1135 (Fed.Cir.2004) (The Supreme Court has recognized that the government may `take' private property by either physical occupation or regulation, and that these two categories of takings are subject to different analyses.) Consideration of the property as a whole is particularly important because our cases have established that a regulatory taking does not occur unless there are serious financial consequences. In Cienega VIII, we stated that [w]hat has evolved in the case law is a threshold requirement that plaintiffs show `serious financial loss' from the regulatory imposition in order to merit compensation. 331 F.3d at 1340; see Loveladies Harbor, Inc. v. United States, 28 F.3d 1171, 1177 (Fed.Cir.1994). We previously have explained that the requirement of severe economic deprivation comes from the nature of regulatory takings claims, which lack the `typically obvious and undisputed' predicate of a physical invasion or appropriation of private property by the government and are in essence, a claim that `a taking has occurred because a law or regulation imposes restrictions so severe that they are tantamount to a condemnation or appropriation.' Rose Acre Farms, Inc. v. United States, 373 F.3d 1177, 1195 (Fed.Cir.2004) (quoting Tahoe-Sierra, 535 U.S. at 322 n. 17, 122 S.Ct. 1465). We note that in a temporary taking situation, there appear to be at least two ways to compare the value of the restriction to the value of the property as a whole so as to determine if there has been severe economic loss. See Rose Acre Farms, 373 F.3d at 1188 (stating that there are a number of different ways to measure the severity of the impact of the restrictions). First, a comparison could be made between the market value of the property with and without the restrictions on the date that the restriction began (the change in value approach). The other approach is to compare the lost net income due to the restriction (discounted to present value at the date the restriction was imposed) with the total net income without the restriction over the entire useful life of the property (again discounted to present value). Neither approach appears to be inherently better than the other, and on remand the Court of Federal Claims should consider both as well as any other possible approaches that determine the economic impact of the regulation on the value of the property as a whole. [13]
The second error committed by the Court of Federal Claims lies in its failure to consider the offsetting benefits that the statutory scheme afforded which were specifically designed to ameliorate the impact of the prepayment restrictions. This error affects all of the plaintiffs. The Court of Federal Claims characterized the government's argument as overreaching, Cienega IX, 67 Fed.Cl. at 470, theorizing that Congress may not establish through an option that it will provide value equal to forty, or fifty, or sixty cents on the dollar for a taking, and thereby evade paying the constitutionally-required just compensation. Id. The court stated that the value of any options the plaintiffs were offered should not change the character of the governmental action or the way that the Penn Central takings analysis is applied. Id. The court held instead that any benefits should be addressed in the determination of just compensation, not as part of the takings analysis. Id. The Supreme Court in Penn Central, 438 U.S. at 137, 98 S.Ct. 2646, clearly held that offsetting benefits must be accounted for as part of the takings analysis itself. There, in exchange for restrictions on the development of historic properties, New York City's zoning laws provided developers with the right to develop nearby parcels that the developer already owned. Id. at 113-14, 98 S.Ct. 2646. The Court explained that to the extent appellants have been denied the right to build above the [Penn Central] Terminal, it is not literally accurate to say that they have been denied all use of even those pre-existing air rights. Id. at 137, 98 S.Ct. 2646. Thus, the plaintiff's ability to use these rights has not been abrogated; they are made transferable to at least eight parcels in the vicinity of the Terminal. Id. The Court concluded that these benefits undoubtedly mitigate whatever financial burdens the law has imposed on appellants and, for that reason, are to be taken into account in considering the impact of the regulation. Id. The Court of Federal Claims did not take into account this aspect of the Penn Central decision, finding support for its holding instead in our decisions in Whitney Benefits, Inc. v. United States, 926 F.2d 1169 (Fed.Cir.1991), and Whitney Benefits, Inc. v. United States, 752 F.2d 1554 (Fed.Cir.1985). The Whitney Benefits cases provide no support for the Court of Federal Claims' approach. At issue in the Whitney Benefits cases was a statute that prevented a land owner from mining its property, but, in exchange, the Department of the Interior was authorized to agree with such [land owners] to convey the fee to, or lease in exchange, other federal land embodying coal deposits. Whitney Benefits, 752 F.2d at 1555. This court stated that the value of the new property offered in exchange for the restriction could not be considered under the takings analysis because the exchange transaction is a method of ascertaining and paying just compensation for a taking, which may be negotiated and agreed upon either before or after the taking itself, and is optional with the claimants. Whitney Benefits, 926 F.2d at 1175; see also Whitney Benefits, 752 F.2d at 1560. However, unlike in Penn Central where the benefits were tied to the property already owned by the affected parties, in Whitney Benefits the government offered those parties new properties. This case does not involve a transfer of new property to the owner as in Whitney Benefits, but rather an amelioration of the restrictions imposed on the existing property. There can be no claim here that the government compensated the owner by providing substitute property. The benefits must be considered as part of the takings analysis. [14] The Court of Federal Claims, we think, overstated the effect of the statute when it concluded that [n]one of the options available to plaintiffs permitted them to exercise their right to transfer their property to a purchaser of their choice. Cienega IX, 67 Fed.Cl. at 467. As a practical matter LIHPRHA provided owners with two alternatives: (1) the right to sell the property at its fair market value or, if there was no offer or if HUD failed to provide financial assistance to the purchasers, the right to prepay the mortgage and eliminate the regulatory restrictions; or (2) entering into a use agreement with HUD under which HUD would provide financial incentives to the owner. See 12 U.S.C. §§ 4107, 4110 (2000). With respect to the first option, the owners here do not dispute that the opportunity for a fair market value sale would eliminate any takings claim. See Florida Rock Indus., Inc. v. United States, 791 F.2d 893, 903 (Fed.Cir.1986) (if there is found to exist a solid and adequate fair market value [for the property] which [the owner] could have obtained from others for that property, that would be a sufficient remaining use of the property to forestall a determination that a taking had occurred or that any just compensation had to be paid by the government). Rather the owners complain that sale to qualified buyers was unlikely, that the sale process took time during which the rent and other restrictions remained in place, that appraisal value was not adjusted over the course of the two-year sale period, and that prepayment was not possible until the sale process was complete (and unsuccessful). However, any trouble finding a buyer only increased the probability that the owner would be able to prepay if a sale was not completed. Moreover, the sale process was not as time consuming as the plaintiffs assert. To reduce any administrative delays, LIHPRHA permitted the owners to begin the sale process by filing a notice of intent up to two years before their prepayment eligibility date. 12 U.S.C. § 4119(1)(B) (2000). The owners and HUD would then appraise the property to determine the fair market value of the housing based on the highest and best use of the property. Id. § 4103(b)(2). Upon HUD's approval of the sale, the owner would file a second notice of intent with HUD. [15] Id. § 4106(d)(1). This triggered a fifteen month period for which the owner was required to keep the offer to sell open. Id. § 4110(b)(1). First, the owner was required to make an offer to sell to a priority purchaser for twelve months. Id. § 4111(b)(1). A priority purchaser was a resident council organization or a nonprofit organization that agrees to maintain low-income affordability restrictions for the remaining useful life of the housing. Id. § 4121(a). The negotiated sale price could not exceed the appraised value of the property. Id. § 4110(b)(1). If no priority purchaser made an offer, the owner was required to hold the offer open for three additional months to any qualified purchaser. Id. § 4110(c). A qualified purchaser was any entity that agree[d] to maintain low-income affordability restrictions for the remaining useful life of the housing. Id. § 4121(b). If no sale was completed after fifteen months, the owner could then prepay the mortgage. Alternatively, if HUD failed to provide assistance to the purchasers to enable them to complete the sale, the owner also could prepay the mortgage. Id. § 4114(a)(1)(B). However, the prepaying owner could not raise the rents for any tenants who were residents when the owner filed its notice of intent to sell the property for three years. Id. §§ 4113(c)(1), 4114(a). The duration of these restrictions is an important factor in the takings analysis. The Supreme Court in Tahoe-Sierra concluded that the duration of the restriction is one of the important factors that a court must consider in the appraisal of a regulatory takings claim. 535 U.S. at 342, 122 S.Ct. 1465; see also Rose Acre Farms, Inc. v. United States, 373 F.3d 1177, 1195 (Fed. Cir.2004) (instructing the trial court to consider the temporary nature of the restrictiontwo yearson remand). Thus to the extent that owners could initiate and complete the process near the original prepayment date and sell the property for fair market value, the restriction had no practical significance beyond the three-year restriction on raising rents and the requirement that the owner pay a portion of tenants' relocation expenses. On remand, the Court of Federal Claims should assess whether the sale process prescribed by LIHPRHA provided the opportunity for a fair market value sale at or near the original prepayment date. Alternatively, an owner could enter into a use agreement. The owner was required to file a plan of action. [16] 12 U.S.C. § 4107(a) (2000). This plan of action included the types of financial incentives requested. Id. § 4107(b)(1)(A)-(F). These incentives included the right to earn higher dividends, rent increases for current tenants, repair and capital improvement loans, and second mortgages. [17] LIHPRHA required HUD to approve the plan if it was the least costly alternative that [was] consistent with the full achievement of the purposes of this title and if the owner made a binding commitment to extend the restrictions on the property, including agreeing that the housing [would] be retained as housing affordable for very low-income families or persons, low-income families or persons, and moderate-income families or persons for the remaining useful life of such housing. Id. § 4112(a)(1)(2). If HUD approved the plan but did not provide the funding incentives within fifteen months, the owner could prepay the mortgage. Id. § 4114(a)(1)(A). If the owner did prepay under this circumstance, as with a sale, the owner was still prohibited from raising rents on any existing tenants for three years following prepayment and was required to pay fifty percent of relocation expenses. Id. § 4113(b), (c)(1). The sale and use agreement options thus conferred considerable benefits on the owners. The major effect of the statute on an owner who did not elect to enter into a use agreement and wished to prepay was to keep the restrictions in place during the sale period which might expire near the prepayment date; to compel the owner to offer the property for sale at a fair market value; and, if there was no sale (and the owner prepaid the mortgage), to restrict rent increases for a three-year period. This sale option was plainly an available alternative because many owners in fact elected to sell their property. See Cienega IX, 67 Fed.Cl. at 444 (noting that of a group of 205 to 210 projects in California, 37 percent intended to sell); see also Cienega Gardens J.A. at 103174 (testimony by Richard Mandel, from the California Housing Partnership Corporation, that he was not aware of any [properties involved in the sale process] that did not receive a bona fide offer). The benefits to the owners electing to enter into use agreements were also considerable, as confirmed by the legislative history to LIHPRHA. The bill authorize[d] an array of financial incentives that [t]he Committee believe[d]. . . . [would] provide sufficient economic incentive for the vast majority of owners of eligible low income housing to retain the current use and occupancy restrictions on their projects. H.R.Rep. No. 101-559, at 76 (1990); see also 136 Cong. Rec. H6053-01 (July 31, 1990) (statement of Rep. Conte) (The provision offers a package of incentives for owners to maintain their projects as low-income housing.). When signing LIHPRHA, President Bush expressed concern that the incentives were in fact too generous: One important preservation strategy is to provide project owners with economic incentives to maintain their properties for low-income use. I am concerned, however, that the incentives in S. 566 are more generous than are necessary, providing excessive benefits over the long term that will be paid by all taxpayers. Statement on Signing the Cranston-Gonzalez Nation Affordable Housing Act, 26 Weekly Comp. Pres. Doc.1931 (Nov. 28, 1990). The President's sentiment was echoed in the hearings leading to the enactment of HOPE, where HUD's Inspector General testified that the government should [d]iscontinue paying owners windfall profits for projects that threaten to prepay their mortgages and remove the low income character of the units. Hearing Before the Subcomm. on VA, HUD, and Independent Agencies of the H. Comm. on Appropriations, 104th Cong., 1st Sess. (Jan. 24, 1995) (statement of Susan Gaffney, HUD Inspector General). In summary, we think the Court of Federal Claims erred in not considering offsetting benefits with respect to those owners who entered into use agreements and those that did not. In considering whether the owners that elected to enter into use agreements suffered a taking, available offsetting benefits must be taken into account generally, along with the particular benefits that actually were offered to the plaintiffs.
In its decision, the Court of Federal Claims did not consider the duration of the legislation. We believe existing takings law requires consideration of the duration of the legislation as part of the takings analysis. See Tahoe-Sierra, 535 U.S. at 342, 122 S.Ct. 1465. The LIHPRHA restrictions remained in effect from November 28, 1990, until the HUD appropriations statute, implementing HOPE, was enacted on April 29, 1996. [18] Four owners did not enter into use agreements and were thus relieved of the LIHPRHA restrictions in April 26, 1996, when the HOPE appropriation was enacted. [19] These owners only had their prepayment rights restricted for at most a short periodfrom nineteen to twenty-seven monthswhen the legislation was in effect. [20] The Court of Federal Claims erred in not considering the duration of the legislation in deciding whether a taking had occurred. On remand, the court must consider that the owners who did not enter into use agreements were only subjected to the legislation for a limited period of 19 to 27 months. Four of the owners elected to enter into use agreements after the enactment of LIHPRHA but before the HOPE enactment: Cienega Gardens, Del Amo Gardens, Las Lomas Gardens, and Chancellor Manor. The temporary nature of the legislation is irrelevant with respect to those who had use agreements in place when HOPE was enacted since those owners acted reasonably on the assumption that the restrictions were permanent.
Finally, the Court of Federal Claims erred in its treatment of the investment-backed expectations prong of the Penn Central analysis. See 438 U.S. at 124, 98 S.Ct. 2646. In Cienega VIII, we explained that, in determining whether the plaintiffs had a reasonable investment-backed expectation, we start with an analysis of the . . . [p]laintiffs' actual expectation because we require actual expectation of, or reliance on the government not nullifying the . . . [p]laintiffs' contractual and regulatory rights as a threshold matter. 331 F.3d at 1346. If the plaintiffs demonstrated a subjective reliance on the prepayment provision, the court was then required to determine whether a reasonable developer in the . . . [p]laintiffs' circumstances would believe that the twentieth-year prepayment right was guaranteed by the regulations and that HUD `authorized' and endorsed mortgage contracts expressly including it. Id. at 1348 (internal citation omitted). As with the other factors, the burden is on the owners to establish a reasonable investment-backed expectation in the property at the time it made the investment. Forest Props., Inc. v. United States, 177 F.3d 1360, 1367 (Fed.Cir.1999). We find no error in the Court of Federal Claims' conclusion that the owners subjectively expected to have the option to prepay their mortgages after twenty years. However, we do think the Court of Federal Claims erred in part in its analysis of the reasonableness of the plaintiffs' expectations. One important aspect of investment-backed expectations is whether, in the regulatory environment, it would be expected that the law might change to impose liability. The test in this respect was set forth at length in Commonwealth Edison Co. v. United States, 271 F.3d 1327 (Fed.Cir. 2001) (en banc). [21] There we explained that [t]he reasonable expectations test does not require that the law existing at the time of [entering into the program] would impose liability, or that liability would be imposed only with minor changes in then-existing law. The critical question is whether extension of existing law could be foreseen as reasonably possible. Id. at 1357. Conducting an analysis under Commonwealth, we explained in Cienega VIII that [w]e have no evidence that the housing programs involved here were part of such a highly regulated field that the owners' expectations were necessarily unreasonable. 331 F.3d at 1350. We concluded that the plaintiffs could not reasonably have expected the change in regulatory approach. Id. ; see also Chancellor Manor, 331 F.3d at 904. We see no basis for revisiting this issue. However, the reasonable expectations prong also requires that the expectations be investment backed, and in this regard further analysis is required. The first step of the analysis is to determine the actual investment that the general and limited partners made in the property. The second step is to determine the benefits that the owners reasonably could have expected at the time they entered into the investment. The third step is to determine what expected benefits were denied or restricted by the government action. (The latter two have been discussed earlier in this opinion.) In other words, it is impossible to determine whether the owners' expectations were reasonable without knowing the total value of the investment; its relationship to the benefits available to the owners, including any tax benefits; and the anticipated benefits that were denied or restricted by the government action. [22] Finally, the claimant must establish that it made the investment because of its reasonable expectation of receiving the benefits denied or restricted by the government action, rather than the remaining benefits. The importance of this analysis is confirmed by the cases. For example, in Penn Central, the Supreme Court explained that the takings analysis requires consideration of the extent to which the regulation has interfered with distinct investment-backed expectations. 438 U.S. at 124, 98 S.Ct. 2646. The Supreme Court noted that a taking does not lie where the restriction did not interfere with interests that were sufficiently bound up with the reasonable expectations of the claimant, id. at 125, 98 S.Ct. 2646, but that a . . . statute that substantially furthers important public policies may so frustrate distinct investment-backed expectations as to amount to a `taking.' Id. at 127, 98 S.Ct. 2646. The Court determined that the relevant investment in Penn Central was the purchase of the property before the zoning regulation was enacted and that the expectation was that it would be used as a rail terminal. Thus the New York City law [did] not interfere in any way with the present uses of the Terminal. Its designation as a landmark . . . contemplate[d] that appellants [could] continue to use the property precisely as it ha[d] been used for the past 65 years. Id. at 136, 98 S.Ct. 2646. The Court concluded that the zoning restriction did not interfere with what must be regarded as Penn Central's primary expectation concerning the use of the parcel. Id. at 136, 98 S.Ct. 2646 (emphasis added); see also MacLeod v. Santa Clara County, 749 F.2d 541, 547 (9th Cir.1984) ([I]t is clear that the denial of the permit did not interfere with MacLeod's primary `investment-backed expectation' concerning the use of the parcel.). Based on Penn Central, the government argues that a taking will not lie where multiple uses can be expected of property, but the law does not interfere with an owner's `primary' investment-backed expectation. Chancellor Manor Appellant's Br. at 56 (emphasis added). The owners disagree with the government's formulation of the reasonable investment-backed expectations test, and argue instead that an expectationeven if not the `primary' oneis nonetheless `investment-backed' if an investor would not have invested but for the expectation. Cienega Gardens Appellees' Br. at 52. While the government's view appears to be supported by Penn Central, we need not determine at this stage in the proceeding whether the reason for the investment must be the primary expectation or simply that reasonable owners would not have invested but for the expectation for as yet the owners have not established either standard. In addressing this question on remand, it is particularly important that the Court of Federal Claims first determine the precise scope of the benefits denied. The owners were not, as discussed earlier, entirely denied the right to prepay; rather that right was denied for a short period, and rents were frozen for a period after prepayment. The Court of Federal Claims must determine on remand whether the rights thus denied were the primary or but for cause of the investment. At this stage, the plaintiffs have not established that a reasonable owner's expectation of an unrestricted right of prepayment after twenty years would have satisfied either standard. The substantial benefits that the owners received, other than the absolute prepayment right, may well have been such that the absolute prepayment right might not have been either the primary or but for reason that a reasonable owner would have invested in the property. Indeed, it is not even clear that a reasonable owner would rely on any aspect of the prepayment right in making the investment, much less that a reasonable owner would rely on an unrestricted right to prepayment. In determining whether expectations of prepayment were reasonably investment backed, it is necessary to inquire as to the expectations of the industry as a whole. Here the expert testimony on this issue was conflicting and, unfortunately, was limited to the expectations as to the general prepayment right rather than the expectations as to the limited restrictions actually imposed by the statute. On one hand, at trial the government presented the expert testimony of Kenneth Malek, an expert in tax accounting and tax-advantaged investments. He testified that neither the general partners nor the limited partners considered residual value [of the property] to be a significant motivation. Chancellor Manor J.A. 102633. This was because [t]he dividends that could be paid as operating cash flow distributions to the investors were limited, and so the benefits that made a material impact on the project from the standpoint of the present value of those benefits were the tax benefits and the . . . front end cash flow to the developers. Id. at 102637. He concluded that the twenty-year prepayment right was not a material incentive. Id. at 102806. On the other hand, William Dockser, Deputy Assistant Secretary of HUD and FHA Commissioner from 1969 to 1972, testified that the ability to discuss an exit strategy in 20 years . . . was a reason why people would undertake to do these programs and a reason why people would invest in the programs. Id. at 500105. The actual contemporaneous offering memoranda appear to provide more reliable evidence of industry expectations with respect to the general prepayment right (though even those do not consider the possibility of the limited restrictions imposed by the statute). Unfortunately the record contains few examples of such memoranda. But those few that are in the record are revealing. For example, when Skyline View Gardens was syndicated, the owners circulated a prospectus that touted the tax benefits of owning the property. While the prospectus assumed that the restrictions would be lifted after twenty years, it also indicated that the owners placed little value on the right to sell the property (or in the absence of a sale, the right to prepay the mortgage). The schedules demonstrating the tax benefits were based on the assumption that the partnership would sell the property after twenty-one years for only $1. Other private placement memoranda did not even assume that the property would be sold after twenty years. For example, the private placement memorandum for Gateway Investors only states that the property is subject to a forty-year mortgage without mentioning the prepayment date. These few contemporaneous documents suggest that the owners entered the programs without relying on the ability to prepay after twenty years. The plaintiffs argue that the prospectus only described the expectations of the limited partners and not the partnership as a whole. This argument is unavailing. Under the securities laws the prospectuses were required to be truthful. See 15 U.S.C. § 77 l (a)(2). In this respect, the prospectuses are particularly reliable. Under the securities laws, the prospectus cannot contain any untrue statement of a material fact or omit[ ] . . . a material fact. Id. This includes misstatements and omissions about the general partner's interest in the properties. See Currie v. Cayman Res. Corp., 835 F.2d 780, 783 (11th Cir.1988) (finding material misrepresentations and omissions under 15 U.S.C. § 77/(a)(2) regarding a general partner's interest in a partnership). Accordingly, the prospectuses must contain any material information about both the limited and the general partners' interest in the properties, and are the most reliable indication of the relative importance of the anticipated benefits. On remand, it is important that the parties provide the Court of Federal Claims with sufficient contemporaneous documents for the court to determine the actual investment and the expectations of the industry at the time that LIHPRHA was enacted.