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NEW BOOK – Illinois Commercial Real Estate

I’m happy to announce that the website for my new book, Illinois Commercial Real Estate is now live.  Visit www.Illinois-CRE.com for a book excerpt.

illinois-commercial-real-estate-book-coverIllinois Commercial Real Estate, Due Diligence to Closing, with Checklists, is intended as a practical handbook for investors, developers, brokers, lenders, attorneys and others interested in commercial real estate projects in Illinois. This book zeros-in on commercial real estate due diligence, and walks the reader through the due diligence process, from conception to closing, with a focus on making sure the commercial real estate project functions as intended after closing.  Checklists are provided as an aid to commercial real estate professionals to assist on evaluation of the property and the transaction on the path toward successful closing. As people in the real estate industry understand, if the deal doesn’t close, it doesn’t count.

I’d like to extend Special Thanks to:

My clients, whose passion for creative commercial development I share;

My partners and staff at Robbins, Salomon and Patt, Ltd., who work with me tirelessly to earn our client’s business every day.

Catherine A. Cooke and Emily C. Kaminski, attorneys at Robbins, Salomon & Patt, Ltd. who provided legal research, advice, counseling, and technical editing;

James M. Mainzer, tax partner at Robbins, Salomon & Patt, Ltd., for his insights and assistance on tax matters;

The editing staff at the Illinois Institute for Continuing Legal Education, for editing early versions of chapters 11, 12, 25, 27 and 28, which were first published in IICLE Practice Handbooks;

Dale V. Weaver, Illinois licensed surveyor, who was kind enough to convert my rough draft drawings into the diagrams included at chapter 25;

. . . and, of course, my friend and valuable resource, Linda Day Harrison, founder of theBrokerList, for her ongoing encouragement and support.

If you are buying, developing, financing, selling, leasing or otherwise dealing with commercial real estate in Illinois, I hope you will find Illinois Commercial Real Estate, Due Diligence to Closing, with Checklists to be a useful resource.

ENJOY!!!

R. Kymn Harp

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AIR RIGHTS DEVELOPMENT – Chicago, Illinois

WHY DEVELOP AIR RIGHTS?

Prime commercial land is limited. Prices per square foot can be astronomical. Demand for efficiency to maximize return on investment is growing. No wonder developers and property owners are looking to the sky, with varying degrees of success, to capture all the value they can from each urban parcel. Air rights development may be the solution you are looking for.

 

http://www.dreamstime.com/stock-image-chicago-skyline-image2898031Owners and developers, and people in general, are conditioned to think of potential development sites as flat surfaces with essentially two dimensions: north/south and east/west. They see only the surface of the land, and envision the building they will construct for the particular purpose they have in mind; a bank, a drugstore, a restaurant, a strip mall, a parking garage, an office building. If the parcel is larger than they need, they may envision subdividing the parcel to make two or more lots. In most cases, however, they think primarily in terms of land coverage for the type of building they need. They visualize only the two dimensional space depicted on their Site Plan or Plat of Survey.

 

In 30 out of 50 states, including Illinois and all other Mid-Western states, the “Rectangular Survey System” is in effect. The Rectangular Survey System was adopted in 1785 to meet the needs of the Federal Government as it faced the challenge of dividing vast areas of undeveloped land lying west of the original 13 colonies. The system, developed under the direction of Thomas Jefferson, essentially divides the United States into rectangles, measured in relation to lines known as Meridians and Base Lines.

 

Development lots are instinctively viewed as the two-dimensional surface of land visually representing a potential development parcel. Descriptions of a parcel typically refer to “a parcel of land X feet by Y feet” located in relation to an intersection or other identifiable landmark.

 

Once a parcel is “developed”, or designated for development, by construction of improvements on the land, it is natural to think of the parcel as being unavailable for further development (unless the existing improvements are to be demolished).

 

Classic examples of this are single story commercial buildings at prime commercial locations, a multi-deck parking garage or mid-rise building in a downtown development area, railroad tracks or spurs cutting across valuable urban land and, in some cases, roadways and alleys.

 

Each of these situations represent, potentially, under-utilization of valuable real estate. Finding a way to develop the “air” above these existing or planned improvements maximizes the economic utility of these parcels and can be like creating “money from thin air.”

 

The practice of finding ways to utilize the “space above” is often referred to as “air rights development”. Air rights development requires thinking in three dimensions, and requires serious design consideration and legal planning but, when land values are at a premium and zoning permits, the economic return may be dramatic.

 

Though often overlooked, virtually all of Chicago’s downtown business district is a “city in the air“. People tend to think of streets and street level entrances to buildings in the downtown Chicago “loop” as being at “ground level”. This is simply not the case. Most of what is thought of in the Chicago Loop as being at “ground level” is located 12 to 22 feet above the earth’s surface. This explains the vast network of “lower” streets and passageways in downtown Chicago, such as “Lower Wacker Drive”, “Lower Dearborn Street”, “Lower State Street”, etc. which most people seldom traverse. It also explains why, in 1992, the Chicago Loop business district was virtually shut down by “the Great Loop Flood of ’92”, but few people got wet or even saw any water as office and retail buildings were closed and workers were sent home because of “flooding”.

 

The point of these observations is to reveal that “development of air rights” is not new. It is also not “. . . some exotic legal manipulation of doubtful efficacy dreamed up by big city lawyers for use only in big cities”. Development of so-called “air rights” is little more than efficient use of a limited resource when use becomes economically feasible and beneficial.

 

WHAT ARE “AIR RIGHTS”?

“Air rights” are part of the “bundle of rights” constituting fee simple title to real estate. The term “air rights” generally refers to the right of the owner of fee simple title of a parcel of land to use the space above the land. If this right did not exist, it would not be possible to (more…)

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Due Diligence Basics – Commercial Real Estate

Due diligence is essential when investing in, developing or financing commercial real estate. You must know the right questions to ask, and where to find the answers. The object is not simply to get to closing, but to assure that the project will function as intended after closing.

R. Kymn Harp Robbins, Salomon & Patt, Ltd.

R. Kymn Harp
Robbins, Salomon & Patt, Ltd.

Due diligence is a standard of conduct. It is the amount of diligent inquiry due under the circumstances of your particular transaction. It requires that you determine, confirm and answer “yes” to every question required to be answered in the affirmative, and that you determine, confirm and answer “no” to every question required to be answered in the negative, for your project to proceed to closing and function as intended after closing.

 

In commercial real estate transactions, there are two layers of due diligence:

  1. Transaction due diligence; and
  2. Property due diligence.

 

TRANSACTION DUE DILIGENCE

In any commercial transaction, transaction due diligence requires that we ask and know the answers to fundamental questions in seven particular areas of concern. These areas of concern include the six elements of every story-line, plus authority of the parties to act.  Transaction due diligence requires that you determine, confirm and know the answers to each of the following:

  1.  Who are the parties to the transaction?

a.  Seller

b. Buyer

c. Lender

d. Tenants

e. Other

2. What property is included?

a. Real estate

b. Personal property

c. Franchise agreements or rights

d. Other

3. Where is the property located?

4. Why is the property being acquired? – Intended use?

5. When must it Close? And other critical dates?

a. Due diligence period

b. Title delivery deadline

c. Survey delivery deadline

d. Financing deadlines

e. Section 1031 identification period and replacement property acquisition deadlines

f. Other critical dates

6. How will the transaction be structured?

a. Sale

b. Lease

c. Section 1031 exchange

d. Seller financing

e. Other transaction structure issues

7. By what authority are the parties acting?

a. Board approval, if necessary

b. Shareholder approval, if necessary

c. Governmental approvals, if necessary

d. Manager authority under LLC Operating Agreement

e. LLC member consent, if necessary

f. Landlord consent, if necessary

g. Lender consent, if necessary

h. Any other required consents or approvals or other sources of authority

When the “what” of Transaction Due Diligence is commercial or industrial real estate, the next step is to conduct an investigation of the property using all appropriate due diligence. Property due diligence is describes below.

PROPERTY DUE DILIGENCE

Property due diligence has four additional areas of concern. As discussed below, the four major areas of concern for property due diligence are market demand, access, use and finances. All of the questions concerning the property that need to be asked and answered when investing in, developing or financing commercial or industrial real estate fall within one or more of these four major areas of concern.

 

Property due diligence requires that you determine, confirm and know the answers to each of the following:

 

 1. Market Demand

a. How will the property be used?

b. Who are the intended users?

c. Is there a need – and more importantly, will there be a need at the time the project is completed?

2. Access

a. How will users get to the property?

b. Are there adequate traffic controls, stoplights, stop signs, etc.?

c. Adequate drives for customers and deliveries?

d. Sufficient roadway stacking room at nearby intersections?

e. Lawful curb-cuts?

f. Full access vs. right-turn only?

g. Adequate parking for business needs (which may be more than zoning requirements)?

h. ADA compliant/handicap accessible?

i. Any other access requirements or impediments?

3. Use

a. Any private land use controls/restrictions on use?

b. Proper zoning?

c. Sufficient parking as required by zoning?

d. Sufficient occupancy capacity?

e. Adequate utility service?

f. If buyer is acquiring the property for its own use, are there any existing tenants or users that must be terminated or removed? Can they be lawfully  removed?

g. Environmental issues? (which may be as much a finance issue as a use issue)

h. Other use requirements or issues?

4. Finances

a. Financing

i.   Appraised value?

ii.  Loan to value – equity requirement?

iii. Terms of financing?

iv.  Lender required due diligence expenses?

v.  Lease subordination required?

x. Subordination Non-Disturbance and Attornment (SNDA) Agreements?

y. Tenant Estoppel Certificates?

vi.  Other lender requirements?

b. Financial Metrics

i.  Real estate taxes and special assessments?

ii. Rehab/repair costs?

iii. User fees and recapture costs?

iv.  Environmental remediation costs?

v.   Leases?

1.  Lease income?

2. Security deposits?

3. Rental abatement?

4. CAM and operating expense reconciliations?

5. Landlord obligations to Tenants for build-out, etc.?

vi.  Other financial benefits and burdens affecting the property?

RESOURCES

Many of the white papers and posts on this blog delve more deeply into due diligence issues and concerns.   You may find particularly useful my post Due Diligence Checklists: for Commercial Real Estate Transactions.

Should you need assistance, we have a number of attorneys at Robbins Salomon & Patt, Ltd. who are experienced commercial real estate practitioners and can help. Do not hesitate to reach out to us. We are always looking for new clients with interesting or challenging projects.

Enjoy!

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Illinois Condominium Deconversion

RSP_LogoHD (3)Condominium deconversion is growing in popularity to enhance the value of busted condominium projects. It is not unusual for condominium projects that entered the market in the bubble years immediately before the Great Recession to have ended up as a “busted condo” project. This is a term commonly used to described condominium projects that failed when developers were unable to sell a substantial portion of the condominium units.

 

In many cases this resulted in development loans going into default and foreclosure, with bulk purchasers acquiring the developer’s units and renting them out as individual rental units.  Other times, the developers themselves were able to modify their development financing and continue to hold and rent the units themselves.

 

In either case, with residential apartment projects becoming a favored investment vehicle for some investors, finding a way to deconvert busted condo projects by terminating their status as “condominiums” and turning the whole project into a single-owner apartment project has come into favor.  This often results in a substantial increase in value to investors.

 

Section 16 of the Illinois Condominium Property Act 765 ILCS 605/16 provides the mechanism for removing a condominium project from the provisions of the act, a term colloquially referred to as “condominium deconversion”.

 

A principal challenge for condominium deconversion is that, by statute, condominium deconversion requires action by all the unit owners and the consent of the holders of all liens affecting any of the units.   765 ILCS 605/16.  In any sizable condominium project, this is a difficult hurdle to overcome.

 

Fortunately, for bulk-owners of a substantial percentage of condominium units, getting to 100% participation by all units owners is not as difficult as it may at first seem. Instead of trying to convince 100% of all unit owners to go along, or trying to purchase units from hold-out unit owners who may demand a substantial premium over the objective fair market value of their unit, there is another alternative. Bulk-owners of a substantial percentage of units may chose, instead, to undertake a two-step process to enable condominium deconversion in a much more efficient way.

 

Two-Step Process to Condominium Deconversion:

 

1.     The first step is to acquire a sufficient number of condominium units in the project to be able to implement the “forced-sale” provisions of Section 15 of the Condominium Property Act. 765 ILCS 605/15. Unless the condominium declaration or bylaws require a greater percentage (which they seldom do in residential condominium projects), this means acquiring or gaining control of only 75% of the condominium units. Since many bulk-owners already own a substantial percentage of units, and sometimes have access to additional units at bargain prices through short-sale purchases or otherwise, getting to the 75% ownership threshold may not be an insurmountable challenge.

 

Once a bulk-owner owns or controls 75% of the units (unless a greater number is required by the declaration or bylaws), the bulk-owner can vote at a meeting of unit owners called for such purpose, to sell the property as a whole.  Pursuant to Section 15, such action is binding on all unit owners, and it is thereafter the duty of all unit owners to execute and deliver such instruments and to perform all acts necessary to effect the sale; provided that a unit owner that did not vote to approve the sale has the right, for 20 days, to file a written objection. If this occurs, the objecting unit owner is still obligated to execute all documents and take all actions to effect the sale, but will be entitled to receive an amount equivalent to the value of the unit owner’s interest as determined by fair appraisal, less any unpaid assessments or charges due from such unit owner. 765 ILCS 605/15.

 

2.     Upon satisfaction of the 75% threshold for approval to convey the entire property, and conveyance of the entire property to a single identified buyer, that buyer alone – provided it has the consent of all lienholders (which, in theory should be only the buyer’s mortgagee), has the power to elect to remove the property from the provisions of the Illinois Condominium Property Act pursuant to Section 16 of Act. 765 ILCS 605/16 – a so-called condominium deconversion.

 

The forced sale provision in Section 15 of the Act establishes a mandatory legal duty for all unit owners to participate in the conveyance and execute all instruments and take all actions to accomplish the conveyance. Still, it may be reasonable to expect that some unit owners may resist – particularly if the unit is their home, and/or if the mortgage indebtedness encumbering the unit exceeds the fair market value of the unit.  In light of this practical risk, when proceeding with a condominium deconversion through forced sale, it makes sense to budget for litigation expenses, and – though not legally required – to establish a settlement reserve to fund settlement buyouts when doing so makes practical business sense.

 

Condominium deconversion and sale is growing in popularity as a substantial value-add proposition for many busted condominium projects.  It can be tricky at times, but in the right circumstance, sophisticated investors are finding the financial rewards worth the added effort.

 

Do not hesitate to contact me if I can be of assistance.

 

Thanks for listening!

Kymn

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NEW: ALTA Land Title Survey Standards

NEW ALTA LAND TITLE SURVEY STANDARDS effective February 23, 2016.

UPDATE:  Effective February 23, 2016, new minimum standard detail requirements for ALTA Land Title Surveys went into effect, replacing the previously existing 2011 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys.

 

Note that the National Society of Professional Surveyors (NSPS) is the legal successor organization to the American Congress of Surveying and Mapping (ACSM). Accordingly, the new survey standards will be cited as the “2016 Minimum Standard Detail requirements for ALTA/NSPS Land Title Surveys.

 

Several substantive changes have been made in the updated 2016 land title survey standards. A comparison of the 2016 standards to the previous 2011 standards is highlighted on the Red-lined version (click here) showing the changes made. Among the notable changes are changes to the Table A list of Optional Survey Responsibilities and Specifications. The modifications to Table A are largely a result of the 2016 Land Title Survey standards making certain requirements mandatory instead of optional. Additional changes involve reassigned responsibilities (or at least a clarification of responsibilities) for obtaining certain information for use by surveyors in preparing a 2016 ALTA/NSPS Land Title Survey.

 

RSP_LogoHD (3)Update Purchase Agreements to Require Surveys compliant with NEW 2016 ALTA Land Title Survey Standards

 

Especially for commercial or industrial real estate purchase agreements (and financing commitments) requiring ALTA Surveys  prepared after February 23, 2016, be sure to contractually require that they be prepared in accordance the the 2016 Minimum Standard Detail requirements for ALTA/NSPS Land Title Surveys.  Be sure, also, to modify your existing contracts as they pertain to the Table A Optional Survey Responsibilities and Specifications to address the new Table A instead of the version associated with the former 2011 standards.

 

Purchasers should check with their lenders, and with the title insurance company engaged to insure title, to be certain everyone is on the same page, and that all parties understand their respective responsibilities for obtaining documents and information necessary for use by the Surveyor. Lenders and their counsel should do likewise.

 

2016 should be an interesting year for commercial real estate. Best of luck for a prosperous year!

 

Thanks,

Kymn

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COMMERCIAL LANDLORD-TENANT: Duty to Repair – Illinois Law

When something breaks in a commercial space, who is obligated to make the repair?

 

R. Kymn Harp Robbins, Salomon & Patt, Ltd.

R. Kymn Harp
Robbins, Salomon & Patt, Ltd.

Catherine Cooke Robbins, Salomon & Patt, Ltd.

Catherine Cooke
Robbins, Salomon & Patt, Ltd.

Absent a covenant in a lease obligating the landlord to make repairs, a landlord generally has no obligation to repair the leased premises, unless the landlord has actual knowledge of a defect at the time of entering into the lease and fraudulently conceals it. Baxter v. Illinois Police Federation, 63 Ill.App.3d 819, 380 N.E.2d 832, 835, 20 Ill.Dec. 623 (1st Dist. 1978); Elizondo v. Perez, 42 Ill.App.3d 313, 356 N.E.2d 112, 113, 1 Ill.Dec. 112 (1st Dist. 1976).

 

 

It is clear, however, that when a lease provides express covenants assigning responsibilities between landlord and tenant for repair and maintenance of leased property, those covenants will supersede any implied or common-law covenants and shall determine the responsibilities and liability of the respective parties. McGann v. Murray, 75 Ill.App.3d 697, 393 N.E.2d 1339, 1342, 31 Ill.Dec. 32 (3d Dist. 1979); Hardy v. Montgomery Ward & Co., 131 Ill.App.2d 1038, 267 N.E.2d 748, 751 (5th Dist. 1971). An express covenant to repair will not be enlarged by construction. Kaufman v. Shoe Corporation of America, 24 Ill.App.2d 431, 164 N.E.2d 617, 620 (3d Dist. 1960). The ordinary meaning of the word “repair” is to fix, mend, or put together that which is torn or broken. It involves the idea of something preexisting that has been affected by decay. Sandelman v. Buckeye Realty, Inc., 216 Ill.App.3d 226, 576 N.E.2d 1038, 1040, 160 Ill.Dec. 84 (1st Dist. 1991).

 

A general covenant of a tenant to keep the premises in repair merely binds the tenant to make only ordinary repairs reasonably required to keep the premises in good condition. Quincy Mall, Inc. v. Kerasotes Showplace Theatres, LLC, 388 Ill.App.3d 820, 903 N.E.2d 887, 230, 328 Ill.Dec. 227 (4th Dist. 2009); Sandelman, supra, 576 N.E.2d at 1040. It does not make the tenant responsible for making structural repairs. Kaufman, supra, 164 N.E.2d at 620; Expert Corp. v LaSalle National Bank, 145 Ill.App.3d 665, 496 N.E.2d 3, 5, 99 Ill.Dec. 657 (1st Dist. 1986); Mandelke v. International House of Pancakes, Inc., 131 Ill.App.3d 1076, 477 N.E.2d 9, 12, 87 Ill.Dec. 408 (1st Dist. 1985).

 

Alterations or additions of a structural or substantial nature that are made necessary by extraordinary or unforeseen future events not within the contemplation of the parties at the time of lease execution are ordinarily the responsibility of the landlord. Expert Corp., supra, 496 N.E.2d at 5. Likewise, renewals or replacements that would last a lifetime rather than maintain the condition of the premises are extraordinary repairs outside the scope of a tenant’s obligations under a general covenant of repair. Sandelman, supra, 576 N.E.2d at 1040; Schultz Bros. v. Osram Sylvania Products, Inc., No. 10 C 2995, 2011 WL 4585237 at *3 (N.D.Ill. Sept. 30, 2011). When a deficiency is so substantial and unforeseen that it would be unreasonable to expect the tenant to make repairs that basically benefit not the tenant but the landlord, those repairs may be deemed structural. Baxter, supra, 380 N.E.2d at 835.

 

In order to shift to the tenant the responsibility to make structural or extraordinary repairs to the leased premises, a lease must (more…)

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Keys to Closing A Commercial Real Estate Transaction

Commercial Real Estate Closings

Anyone who thinks closing a commercial real estate transaction is a clean, easy, stress-free undertaking has never closed a commercial real estate transaction. Expect the unexpected, and be prepared to deal with it.

Harp Author Photo PID 732110I’ve been closing commercial real estate transactions for over 35 years. I grew up in the commercial 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 early age, he drilled into my head the need to “be a deal maker; not a deal breaker.” This was always coupled with the admonition: “If the deal doesn’t close, no one is happy.” His theory was that attorneys sometimes “kill tough deals” simply because they don’t want to be blamed if something goes wrong.

A key point to understand is that commercial real estate Closings do not “just happen”; they are made 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: (more…)

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Illinois Commercial Condominiums – The Inactive Association Challenge

RESALE DISCLOSURE CHALLENGES – When the Commercial Condominium Association is “Inactive”

  • Section 18.3 of the Illinois Condominium Property Act provides that a unit owners’ association will be responsible for the overall administration of the property through its duly elected board of managers. 765 ILCS 605/18.3.
  • Section 19 of the Illinois Condominium Property Act sets forth a specific set of records that the board of managers of every association is required to maintain. 765 ILCS 605/19.
  • Section 22.1 of the Illinois Condominium Property Act provides that “in the event of any resale of a condominium unit by a unit owner other than the developer such owner shall obtain from the board of managers and shall make available for inspection to the prospective purchaser, upon demand . . .” a fairly comprehensive list of condominium instruments, and other documents and information, concerning the makeup and financial condition of the owners association, insurance coverage, litigation, reserves, assessments, and the like.  765 ILCS 605/22.1.

 

RSP_LogoHD (3)Remarkably, perhaps as an aftermath of the Great Recession during which resales of commercial condominiums were infrequent, it is not rare to find that the owners association for a commercial condominium has become inactive or only slightly active. Record keeping and budgeting may have become ‘streamlined”, addressing little more than collecting minimal assessments to pay insurance premiums on common elements. The owner’s association may have no formal budget, no capital reserves, extreme deferred maintenance, scant, if any, record of meetings of the board of managers, and no centralized or organized record keeping system beyond a box in a filing cabinet in the back-office of one of the unit owners.

 

Because of the infrequency of unit transfers in recent years, and the possible inexperience of a record-keeper who may have gotten the record-keeping job by default – when the last remaining board member left following foreclosure of his or her unit during the Great Recession – obtaining and providing the resale disclosure documents and information required by §22.1 can be a challenge.

 

This challenge presents practical problems for the unit seller, unit buyer and the unit buyer’s proposed mortgagee when attempting to resell a commercial condominium unit. Not the least of these problems is delay and frustration in moving toward closing – which may ultimately sour a prospective buyer and its lender, and lead the buyer to back away from acquiring the unit at all.

 

Deferred maintenance of common elements affecting any unit in the condominium association could have an adverse financial impact on all unit owners.  For example, if a commercial or industrial condominium association is comprised of multiple commercial/industrial buildings, a required roof replacement, foundation repair, or other structural repair for any of the buildings, or a recognized environmental condition in the common areas, could be expensive, with the cost shared among all unit owners. Accordingly, when investigating the condition of a commercial/industrial condominium unit being considered for acquisition, due diligence may require having all common elements in the association inspected, rather than merely looking at the unit being considered for acquisition. This may be more expensive and may take more time than might ordinarily be expected when purchasing a stand-alone building that is not a condominium unit.

 

PRACTICE TIP

Consider when drafting a purchase agreement under these circumstances, who should bear the cost of inspecting all common elements in the association? Ordinarily the cost of “due diligence” is a buyer’s expense. But if extraordinary inspections of association common elements beyond the specific unit being acquired is required in the exercise of due diligence because the selling unit owner did not demand that the owners’ association be operated by a board of managers in compliance with the Illinois Condominium Property Act, should the buyer bear this extraordinary expense, or should the seller?

 

There is no easy solution for this challenge, especially for a buyer planning to purchase a unit in one of these inactive associations. The best advice may be to become proactive – whether as an existing unit owner or upon becoming a new unit owner, to reactivate and invigorate the owners’ association and its board of managers, and to take steps to run the owners association in a businesslike manner, in compliance with the Illinois Condominium Property Act.

 

Generally speaking, owners of commercial condominiums are business people. They should demand that the association be run like they would run any business or investment property they invest in, if they expect to be successful.

 

If you have a viable solution to this challenge, please comment with your insights and practical suggestions.

 

Thank you in advance for participating in this discussion.

 

Kymn

 

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COOL PROJECTS – Real Estate

COOL PROJECTS
Real Estate Projects I Love to Work On.

I love cool real estate projects. Cool projects are why I became a lawyer. Cool projects are why I come to the office each day. Cool real estate projects are why I did not become an astrophysicist (well, one reason – although, that might have been cool too). Cool projects are the reason I live, smile, dance, breath, scour the earth for new deals, jump for joy.

And by “cool”, I don’t mean in a thermal sense – but rather in a “this project is so cool” sense. I am referring to real estate projects that are awesome. Real estate projects that are fun. Real estate projects that make you say “Wow – what a cool project!

R. Kymn Harp Robbins, Salomon & Patt, Ltd.

R. Kymn Harp
Robbins, Salomon & Patt, Ltd.

Cool projects don’t need to be costly projects in major urban centers – although those can be cool too. I’m talking about projects that are creative. Projects that require vision and imagination. Projects that take something mundane and turn it into something special.

Some people think I only like huge projects. To be honest, I do like huge projects, but largely because the huge projects I have worked on also happened to be cool projects.

Redevelopment of the commercial portions of Marina City in downtown Chicago was a cool project. Ground-up development of Sears Centre Arena in Hoffman Estates, Illinois was a cool project. Work on various mixed-use projects around the Midwest and upstate New York have been cool projects. But so has been the much smaller development of an 8,000 square foot microbrewery in the historic Motor Row District of Chicago using TIF financing; development of countless restaurant and entertainment venues throughout the Midwest; conversion of a multi-story industrial building into a high-tech office center; conversion of an outdated office building into a stylish, luxury hotel; adaptive reuse of outdated retail strip centers, bank buildings, city and suburban office buildings, bowling alleys, warehouses, industrial buildings, gas stations, and various small to medium sized special purpose buildings into modern, fully functional jewels – reinvented to provide much needed retail and service amenities for local neighborhoods and communities. It is not the size of the project that makes it cool – or the cost – it is the concept, imagination and creative challenge involved that makes the difference. At least for me.

Cool Projects Test

Here’s a test [call it the “Cool Projects Test”, if you will]:

Which of the following projects is more likely to end up on Kymn Harp’s list of cool projects? (more…)

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“SMALL DEAL” DUE DILIGENCE

A misconception abounds in commercial real estate. I am partly to blame. I didn’t mean to add to this false belief, but I recognize that I have.

RSP_LogoHD (3)While writing articles and presenting seminars on due diligence for commercial real estate transactions, my colleagues and I who focus on due diligence as a topic of continuing education tend to overstate the case as it applies to any single transaction. We tend to make our hypothetical project or transaction so complex and so filled with due diligence potholes that we can sometimes obscure what really happens in most commercial real estate transactions. Our audience – whether they be readers or live seminar attendees – can understandably find their eyes glazing over and may conclude that the scenario being addressed has no connection to their life or their deals. They have never seen a project or transaction so convoluted or complex, and don’t expect that they ever will.

In truth – no one does. In practice, commercial real estate due diligence is not that hard. It is not that complex. It need not be that expensive.

I have been asked to discuss “small deal due diligence”. I generally try to avoid using the term “small deal” when describing commercial real estate projects or transactions, because to our clients no deal is small when it involves their money or business. To some, (more…)

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