Anybody who thinks Closing a commercial real estate transaction is a clean, easy, stress-free undertaking never closed a commercial real estate transaction. Expect the unexpected, and anticipate to handle it.

I've been closing commercial real estate transactions for pretty much 30 years. I spent my youth available real estate business.

My father was a "land guy ".He assembled land, put in infrastructure and sold it for a profit. His mantra: "Buy by the acre, sell by the square foot." From an earlier age, he drilled into my head the need to "be a deal maker; not a deal breaker." This is always in conjunction with the admonition: "If the deal doesn't close, no body is happy." His theory was that attorneys sometimes "kill tough deals" since they don't desire to be blamed if something goes wrong.

Over time I learned that commercial real estate Closings require far more than mere casual attention. A typically complex commercial real estate Closing is a very intense undertaking requiring disciplined and creative problem solving to adjust to ever changing circumstances. In many cases, only focused and persistent focus on every detail can lead to a fruitful Closing. Commercial real estate Closings are, in a word, "messy ".

A key point to know is that commercial real estate Closings don't "just happen"; they are created to happen. There is a time-proven method for successfully Closing commercial real estate transactions. That method requires adherence to the four KEYS TO CLOSING outlined below:

KEYS TO CLOSING

1. Have a Plan: This sounds obvious, but it is remarkable how often no specific Plan for Closing is developed. It is not a sufficient Plan to merely say: "I such as for instance a particular bit of property; I want to own it." That's not a Plan. That may be a goal, but that's not a Plan.

A Plan takes a clear and detailed vision of what, specifically, you intend to accomplish, and how you want to accomplish it. As an example, if the objective is to acquire a big warehouse/light manufacturing facility with the intent to convert it to a combined use development with first floor retail, a multi-deck parking garage and upper level condominiums or apartments, the transaction Plan must include all steps necessary to obtain from where you are today to where you must be to fulfill your objective. If the intent, instead, is to demolish the building and build a strip shopping center, the Plan will need an alternative approach. If the intent is to simply continue steadily to utilize the facility for warehousing and light manufacturing, a Plan is still required, but it could be substantially less complex.

In each case, developing the transaction Plan should begin when the transaction is first conceived and should concentrate on the requirements for successfully Closing upon conditions that'll achieve the Plan objective. The Plan must guide contract negotiations, so that the Purchase Agreement reflects the Plan and the steps necessary for Closing and post-Closing use. If Plan implementation requires particular zoning requirements, or creation of easements, or termination of party wall rights, or confirmation of structural elements of a building, or accessibility to utilities, or accessibility to municipal entitlements, or environmental remediation and regulatory clearance, or other identifiable requirements, the Plan and the Purchase Agreement must address those issues and include those requirements as conditions to Closing.

If it's unclear at the time of negotiating and entering to the Purchase Agreement whether all necessary conditions exists, the Plan must include a suitable period to conduct a focused and diligent investigation of all issues material to fulfilling the Plan. Not merely must the Plan include a period of time for investigation, the investigation must actually take place with all due diligence.

 

Published by Whitney Morgan