Navigating Commercial Real Estate Closings (Part 2) (With Forms) Dorothea W. Dickerman Dorothea W. Dickerman, a partner with McGuireWoods, LLP, in Washington, D.C., has more than 25 years of experience in commercial real estate law and real estate finance. he represents lenders, local and national developers, individual businesses, and REIT. Typical transactions include development projects, acquisitions and dispositions, leases, debt and equity financings, workouts, foreclosures, and restructurings. he regularly provides counsel to developers, investors, and lending institutions on the sale, acquisition, and financing of undeveloped and improved land, including sophisticated mixed-use projects and green and sustainable development, from inception of the transaction through closing. he advises several major hotel owners on their acquisitions, workouts, and financings. he often works with clients on residential and commercial condominium projects. he can be reached at ddickerman@mcguirewoods.com. If closings are like rowboats, the forms are the oars. PART 1 of this article discussed the on-again, off-again dynamic of commercial closings and the many steps that must be taken on both sides to move the process along. It takes a lot of cooperation to make a commercial closing happen, and a handy visual metaphor is a group of people in a rowboat. To take it a little farther, it helps to think of the forms presented in this article as the oars of the boat no matter how much the people in the boat may cooperate, they won t get anywhere without the oars. This part of the article presents for review some of the forms that move the closing along. Appendixes 1, 2, and 3 are examples of three styles of closing checklist that might be prepared for a transaction. While there is no hard-and-fast rule that the purchaser s attorney must prepare the checklist, it is often easier for him or her to do so because the purchaser will be looking for delivery of studies and materials from the seller early on in the due diligence process and will want to keep track of them during the due diligence period. The purchaser s attorney will also likely be the person coordinating the loan to purchase the property. Of the three examples attached, 1, entitled Purchase and Loan Closing Checklist, is for the purchase of an industrial property in a transaction which assumes that there is a single large industrial tenant in the property. Appendix 2, entitled Primary Closing Agenda, is for the
sale/purchase of a tenanted office building in downtown Washington, D.C. with a very complex ownership structure, and multiple tenants (reduced to three for the sake of brevity). Appendix 2 deals only with purchase and sale; it does not address a loan. Appendix 3, entitled First Deed of Trust Loan to Purchaser from Lender, is a lender s checklist for a first deed of trust loan to a purchaser. (Provided that conflict clears, the lender s counsel s first job is to review the term sheet or commitment letter and proceed to draft her own checklist which might look similar to Appendix 3.) If you were to take Appendix 2 and Appendix 3 and combine them, you would cover the same issues as Appendix 1 alone. Your checklist for any deal may have more or fewer or different items than these samples. Generally, these samples contain most of the items you will need. APPENDIX 1 PURCHAE AND LOAN CLOING CHECKLIT $ PURCHAE OF INDUTRIAL LAND BY (PURCHAER) FROM (ELLER) Closing Date: P/B = Purchaser/Borrower P/BC = Purchaser/Borrower s Counsel Attention: = eller
C = eller s Counsel Attention: Email: L = Lender _ Attention: LC = Lender s Counsel _ Attention: T.Co.= Title Company, Attention: Primary tatus I. Purchase Documents A. Letter of Intent /P Executed
Primary tatus B. Earnest Money Escrow Instructions Executed C. Real Estate Purchase Agreement C/P/BC Executed D. Payment of Initial Deposit P/B Paid E. Assignment of Purchase Agreement to LLC P/BC II. Entity Documents A. P/B Entities LLCs to be formed P/BC B. Authorization/Incumbency Certificates /P/BC C. Organization Documents /P/BC D. Good tanding Certificates /P/BC E. Borrowing (elling) Resolution /P/BC III. Real Estate Due Diligence/tudy Period A. Title Commitment T.Co./P/BC Ordered B. urvey P/BC Ordered C. Environmental Report P/BC Ordered
Primary tatus D. Lease BC Received E. Tenant Estoppel C F. Lease Review P/BC and P/B IV. Financial Information A. Income & Operating tatement for the Property B. YTD Operating tatement C. Tax Return for the Owner s Entity D. Tax Bills E. Evidence of Insurance P/B F. Appraisal (Name of Appraiser) P/B V. Loan Documents A. Loan Commitment/Application L/P/B B. Deed of Trust LC C. Note LC D. Assignment of Leases and Rents LC