Presenting a live 90-minute webinar with interactive Q&A Retail and Shopping Center Acquisitions: Negotiating the Purchase and Sales Agreement, Conducting Legal Due Diligence THURSDAY, AUGUST 18, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Corey J. Wilk, Director, Goulston & Storrs , Boston Michel P . Williams, Director, Senn Visciano Canges , Denver The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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STRUCTURING RETAIL CENTER PURCHASE AND SALES AGREEMENTS: NEGOTIATING AND DOCUMENTING TRANSACTIONS, CONDUCTING LEGAL DUE DILIGENCE Presented by Strafford Publications Corey J. Wilk, Director Michel P. Williams, Director Goulston & Storrs PC Senn Visciano Canges P.C. 400 Atlantic Avenue 1700 Lincoln St., Suite 4500 Boston, MA 02110 Denver, CO 80203
Current Market Trends for Retail/Shopping Center Sales Seller’s Market • Pre-Load Listings: • Updated title, survey • Updated Phase I • Dropbox due diligence materials • A final and best offer with PSA markups • Quick due diligence and close • Larger earnest money and increasing at end of due diligence period 6
Scenario 7
Regional Shopping Center Tenant composition: • Anchor organic national grocer – 50,000 rsf. • 20-30 inline tenants including: national, regional and local tenants • Several pad sites including FAR and one national coffee shop with drive through • Gas station with 6 pumps and underground storage tanks • Not part of sale, but within center are national big boxes on their own pad site 8
A Typical Deal • Brokers negotiate the Letter of Intent (“LOI”) • If possible, attorneys for both Buyer and Seller should participate during LOI phase to avoid issues in the Purchase and Sale Agreement (“PSA”) • Once LOI is signed, typically Seller’s counsel generates the first draft of the PSA • Issues to consider in the LOI and PSA process • Timing needs of clients • Timing needs of lenders (breakage fees and costs) • Realistic timing needs for due diligence (more to come). • We will address various key topics from the seller and buyer’s prospective. 9
D UE UE D ILIGENCE ILIGENCE : : R IGHTS IGHTS , , T IMING IMING AND AND S COPE COPE OF OF R EVIEW EVIEW • Seller • Buyer • Indemnification • No Buyer liability for pre- • Insurance existing conditions • Specific list of due • Seller to deliver all diligence deliverables property-related information • Limited period for due to Buyer prior to PSA diligence execution • Extension rights to due diligence period 10
D UE UE D ILIGENCE : C ONTINUED • Seller • Buyer • No Phase II testing without • Buyer right to conduct Phase consent I and Phase II environmental • Provide third-party reports testing to Seller • Seller to pay for copies of • Financial reports (copies third-party reports and without representation • Seller representations (more as to content) to come) 11
T IT LE AND AND S URVEY URVEY ITLE • Seller • Buyer • Select Title Company • Select Title Company • Buyer to pay for all • Seller to pay title costs (if endorsements local custom) • Survey: • Title/Survey review period • New ALTA/NSPS to commence upon receipt standards February 23, of updated title 2016 – issues updating commitment and Survey prior surveys • Seller obligated to cure all • Buyer’s cost for any encumbrances securing Table A Items payment of money 12
CCR CCR AND AND D ECLARATIO ECLARATION R EVIEW EVIEW • Seller • Buyer • Concerns regarding Buyer • Estoppels contact and access • Redevelopment issues • Cross access – REA (e.g., approvals) issues and concerns • Cross parking – REA issues and concerns • Prohibited uses 13
L EASE EASE A BSTR TING , , BSTRAC ACTIN CAM CAM AND AND E XC VE U SE SE C ON ONS XCLU LUSI SIVE ONDITI DITION • Buyer • Seller • Seller may not enter, modify • Provide only source leases or terminate any Leases after (not abstract or exclusive use Effective Date abstracts) • Seller may not enter, modify • Record of production or terminate any Contracts • PDF of any Excel after Effective Date spreadsheet of CAM report • Seller may not apply any and budget Security Deposits absent Buyer consent • Buyer pay all transaction • Buyer to receive purchase costs associated with new price credit for all outstanding leases (date of contract) TI Allowances • Buyer liability pre-close • Seller post-closing liability for commission allowances rent audits • Limit liability rent audit 14
D EALIN EALING W ITH ITH A NCHORS NCHORS AND O TH ER 800 P 800 P OUND OUND G ORI AS AND THER ORILL LLAS • Seller • Buy Buyer er • Pre-Listing negotiated • Lender’s form Estoppel Estoppel, SNDA and SNDA (incorporate in PSA) • Conditions to close • If condition of close right to • All tenants extend close • Exclusive use concerns • Smaller national tenant’s issues – Estoppels, • Restrictive covenant issues SNDAs, Timing • Carve outs in Lease not assignable, review and advise Seller • Exclusive use concerns 15
E STOPPELS STOPPELS AND AND T ENANT ENANT I NTERV IEWS NTERVIEWS • Seller • Buyer • Restrict to Lease form • Form of Estoppels – see • Percentage of Estoppels Lender’s requirements required (if below Seller • Required Estoppels / No Estoppels) • Avoid lender form Seller Estoppels • Recently acquired • Condition Precedent – blackline of prior signed provisions in Estoppels Estoppel • Buyer right to interview • Delivery to Tenant post- inspection tenants • Tenant interview with Seller’s representative post-inspection 16
S EL LER R EPRESE IONS AND AND W AR IES ELLE EPRESENT NTAT ATION ARRA RANT NTIE • Seller • Buyer • “AS IS” • Made as of Effective Date • Limit representations: and remade at Closing • Entity (authority) • Expand representations: • Litigation • Rent Roll / Tenant • Encroachment (Seller’s defaults knowledge) • Violations of law • Compliance (Seller’s • Environmental matters knowledge) • Leases (Seller’s • Survival / guaranty or knowledge) holdback • Limitation of duration • Cap on liability 17
C ON ONS P RECED ENT ONDITI DITIONS RECEDENT • Seller • Buyer • Delivery of funds – timing • Delivery of Title Policy a condition to Closing • Estoppels/SNDAs • No notices of violations of • Dry close law or leases • All representations and warranties true, including underlying facts • No adverse change in condition of Property 18
B UYER UYER ’ S L ENDER ENDER D EMA ND FOR FOR EMAND SNDA SNDA AND AND O TH ER L EN DER C ON CERNS THER ENDER ONCERNS • Seller • Buyer • Avoid SNDA as condition • Required SNDAs of close • Financing contingency or • Financial contingency Closing Date extension within due diligence period right • Filter contact with Buyer’s lender • Address Seller 1031 issues in PSA and effect extension on identified property 19
D EF TS AND AND R EMEDIES EMEDIES EFAUL AULTS • Seller • Buyer • Seller default / Buyer remedies to • Specific performance of include specific performance and Contract or termination of all other rights and remedies agreement and return of under law earnest money • Seller default / Buyer remedies to include reimbursement of all • If required, pay Buyer’s transaction costs due diligence costs with a • Buyer default limited to failure to cap close on Closing Date • Seller’s sole remedy is deposit • No obligation to deliver Buyer reports unless reimbursed costs 20
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