Part 2: Are You Buying A Shopping Center? If So, Look Here:

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A few weeks ago, in response to a constant, but small, stream of requests for suggested language,” we posted a set of possible representations and warranties and a set on conditions precedent a buyer might want to consider for inclusion in a purchase agreement to acquire a leased property. We got a number of “thank you” messages following our doing so. Now, since Ruminations is not immune to adulation, we thought we’d put a lid on the topic by sharing another set of provisions a buyer might want to see in that same purchase agreement. If this pleases you, then savor today’s because it is unlikely that we’ll be taking Ruminations on this kind of detour very soon again. As always, if any reader has any suggested language to share with the many, many other readers who suffer through our postings each week, please add your contribution as a comment to today’s posting.

1. Sale of Property. Subject to all the terms and conditions… Seller will also execute and deliver an Assignment and Assumption of Leases in the form of Exhibit “1,” together with the original Leases and an Assignment of miscellaneous rights and contracts (including the name of the Property and the good-will associated therewith, trademarks, logos, vendor’s warranties and Schedule A agreements) in the form of Exhibit “2,” together with the originals of the Schedule A agreements and an Assignment of Warranties, Deposits, and Intangibles in the form of Exhibit “3.”

2. Adjustments. A.

B. Prepaid rents, including without limitation, prepaid fixed rents, prepaid percentage rents and all items of prepaid additional rents (such as common area maintenance charges, real estate taxes, merchants association dues, insurance, etc.), will be adjusted and apportioned as of the Closing Date. Such adjustment and apportionment to be made at the Closing will be made only in respect to the amount of such items actually collected.

C. With respect to any arrearages of rents or additional rents, the Seller will furnish the Buyer at Closing with a statement of such arrearages. Any sums received after Closing Date from tenants in arrears of rent or additional rent as of the Closing Date will be first applied to any rents due after the Closing Date to the Buyer. If, and when such tenant is current with the Buyer, any rents or additional rents for the period prior to the Closing Date received thereafter will be paid over to Seller.

D. To the extent that items of additional rent or percentage rent cannot be determined at Closing (or even if determined or determinable, to the extent said items have not been collected), the amount thereof for the period ending on the Closing Date and accountings showing a calculation thereof, will be paid and furnished to Seller by Buyer if, as and when received by the Buyer after the Closing. The apportionment will be made on a calendar basis so that the Seller will receive a share thereof based upon the fraction of which the numerator is the number of days of the year elapsing to the Closing Date and the denominator is 365 days (subject however, if any such rent is collected on other than a calendar basis, such as a lease year basis, the calculations will be made upon such lease year basis).

E. If at Closing or after Closing it is discovered by Buyer that Seller (i) collected from any tenant any prepaid rents or additional rents not adjusted at Closing or (ii) any estimated payment of additional rents which aggregate an amount in excess of the tenant’s actual additional rent, Buyer will give notice to Seller of this fact setting forth the computation and Seller will promptly reimburse Buyer for the amount of such prepaid rents or additional rents applicable to the period subsequent to Closing and such excess estimated payments and rent within 10 days after demand.

F. Seller, at Buyer’s option, will turn over to Buyer or give Buyer a credit against the Purchase Price for security deposits held under the Leases (as hereinafter defined).

3. Deliveries by Seller at or Before Closing.

I. At Closing, Seller will deliver or cause to be delivered to Buyer the following:

A.

B.

C. An assignment of Warranties in the form of Exhibit “3” as required under Article 19;

D. True copies of all sales reports from each tenant at the Property as contained in Seller’s files;

E. Duly executed and witnessed Assignment and Assumption of Leases in the form of Exhibit “1”; together with the original Leases;

F. Duly executed and witnessed Assignment of miscellaneous rights and contracts (including the name of the Property and the good-will associated therewith, trademarks, logos, vendor’s warranties and the Schedule 1 agreements) in the form of Exhibit “2,” together with the originals of the Schedule A agreements;

G. Duly executed and witnessed assignment of any unasserted or unbooked claims of Seller against known or unknown parties with respect to Property, if same are not added to the form of assignment attached as Exhibit “3.”

H. A letter addressed to each of the tenants covered by the Leases advising them that the Property has been sold to Buyer and that all future communications and rents should be directed to Buyer;

I. A certified statement of rent arrearages, if any;

J. Releases from each of the brokers referred to in Subparagraph (???);

K. A termination of all property management agreements, if any, affecting the property;

L. All Leases (executed originals) affecting the Property, including all amendments, supplements, exhibits or schedules thereto, or notices relating to the same;

M. All Contracts (executed originals) affecting the Property, including all amendments, supplements, exhibits or schedules thereto, or notices relating to the same;

N. Copies of the most recent property tax bills, and copies of the most recent utility bills, together with evidence of payment thereof; and

O. Such other and further documents as may be reasonably required by the terms of this Agreement or may be reasonably necessary or incidental to consummating the transaction contemplated hereby.

II. At least 5 days before the date of Closing, Seller will execute and deliver or cause to be executed and delivered to Buyer:

A. Duly executed and witnessed Estoppel Certificates from each of the tenants referred to in Article (???) as well as any new tenants entering into leases subsequent to the date hereof, which Estoppel Certificates will be substantially in the form of Exhibit “4” attached.

B. Updated schedules of the Personal Property, Leases, and the Contracts, certifying that to the extent the same contain changes in the schedules appended to this Agreement such changes were made as expressly permitted hereunder with the prior written consent of Buyer.

4. Deliveries by Buyer at Closing. At Closing Buyer will deliver or cause to be delivered to Seller the following:

A.

B. Duly executed and witnessed Assignment and Assumption of Leases, in the form of Exhibit “1”;

C. Duly executed and witnessed Assignment of miscellaneous rights and contracts (including the name of the Property and the good-will associated therewith, trademarks, logos, vendor’s warranties and the Schedule A agreements) in the form of Exhibit “2,” together with the originals of the Schedule A agreements;

D. Such other and further documentation as may be reasonably necessary or incidental to consummating the transaction contemplated hereby.

5. Further Assurances. Seller and Buyer each agree to execute and deliver all other instruments and take all other action as the other party may reasonably request from time to time, before or after Closing, in order to effectuate the transactions provided for herein.

6. Condition of the Property. Seller agrees to maintain the Property in good order and condition through the Closing Date, including without limitation, periodic and seasonal maintenance (such as maintenance of lawns, shrubbery, walks, parking areas and other common areas) in the usual and customary manner.

7. Possession. Except for the tenants referred to in the Leases, Buyer will be entitled to possession of the Property as of the Closing Date, free and clear of all tenants and rights of possession, and Buyer will be entitled to take the rents, issues and profits as of the Closing Date.

8. Warranties. Seller agrees to assign at Closing to Buyer any and all of its right, title and interest to any bonds, warranties or guarantees covering the roof, heating system, fixtures, equipment or any other part of the Property and will deliver an Assignment of Warranties in the form of Exhibit “3.”

9. Due Diligence period. There will be a period of time… . This period will be called the “Due Diligence Period.” It will begin upon the happening of both delivery of fully executed copies of the Agreement to both Buyer and Seller and the delivery to Buyer of either the consents of Lenders pursuant to Article (???) or a certification by Seller that no such consent or consents are required, and will end the later of 30 days thereafter or 30 days after Seller has delivered the following to Buyer:

a) Exhibits “4” and “5” to this Agreement which will then be attached hereto and made a part hereof; and

b) Schedule A to this Agreement which will then be attached hereto and made a part hereof; and

c) Schedule B to this Agreement which will then be attached hereto and made a part hereof; and

d) Schedule C to this Agreement which will then be attached hereto and made a part hereof; and

e) Copies of all tenant leases affecting the Property together with all supplements, amendments and exhibits thereto; and

f) A financial statement from the Seller, certified to Buyer by a duly authorized officer of Seller, setting forth the [year] income and expenses, on a cash basis, for the Property. The financial statements must fairly present the results of operations (on a cash basis) of the shopping center; and

g) Sales reports from each of the tenants in possession of the Property on the date of this Agreement covering at least the three years prior to the date of this Agreement. Seller will certify that each of these reports is a true and accurate copy of the report furnished to Seller by tenant and will represent and warrant that Seller has no knowledge that the information contained in each report is materially incorrect; and

h) Copies of all contracts, for maintenance or otherwise, affecting the Property together with all supplements, amendments and exhibits thereto; and …

Within 10 days after the start of the Due Diligence Period, Seller will furnish to Buyer all of the documents listed above in subparagraphs a) through i).

10. Seller Covenants. Seller covenants and agrees during the term of this Agreement as follows:

A. …

B. …

C. To operate the Property in the ordinary course of business.

D. To maintain good relationships with all tenants and occupants of the Property,

E. Not to disparage Buyer.

F. Not to enter into any new leases or any amendments, modifications, extensions or other change or renewal of any Leases or permit anyone to occupy the Property (or any portion thereof) without the prior written consent of Buyer.

G. Not to terminate any lease other than for a material breach of the lease and not to accept any surrender of a lease without the prior written consent of Buyer.

11. Estoppel Certificates from Tenant. Seller agrees to use its best efforts to obtain an estoppel certificate (“Estoppel Certificate”) in the form of Exhibit “4” from each of the tenants under the Leases. Such Estoppel Certificates will be completed by Seller and forwarded to Buyer’s attorney for review prior to mailing to each of the tenants. In the event the Estoppel Certificates are not received from any of the tenants, or in the event that an Estoppel Certificate is received with information different than contained in this Agreement, or in the event the Estoppel Certificate reveals a default of the Seller, as landlord, Buyer will have the following options:

A. Buyer may terminate this Agreement by notice to Seller in which event the Contract Deposit together with interest will immediately be returned to Buyer and Seller will reimburse Buyer for all title and survey costs and this Agreement will be null and void and of no further force and effect without further action of the parties;

B. Buyer may escrow with Buyer’s attorney a portion of the Purchase Price as may be necessary to cure any default of Seller, as landlord, revealed in such Estoppel Certificates, and Seller will immediately cure such default, failing which Buyer may use the escrow monies to cure same;

C. With respect to the failure to obtain an Estoppel Certificate from any tenant, Buyer may at its option elect to accept an Affidavit from Seller containing the information provided in the Estoppel Certificate and such Affidavit will also include the indemnification provision contained at the end of Article (???) of this Agreement [and will be covered by the director’s and shareholder’s resolution in Subparagraph (???)].

All Estoppel Certificates will be delivered to Buyer’s attorney no later than 5 before the Closing Date. No Estoppel Certificates may be dated earlier than 30 days before the Closing Date.

12. Access to Property and Information. Seller will, prior to the date of Closing, permit Buyer the following access and provide Buyer the following information:

(a) Seller will allow Buyer and its agents and consultants, from and after the date of this Agreement (including the time after the date of Closing), continuing access during business hours to: (i) the books, tax returns and records of Seller (including information concerning capital expenditures to the Property); and (ii) the Property, for the purpose of conducting inspections or to verify Seller’s compliance with the Agreement. Such access will be exercised by Buyer at such times as deemed reasonably necessary to Buyer, may be exercised by Buyer or by agents of or consultants to Buyer on Buyer’s behalf, and will be at the risk of Buyer.

(b) Seller and its agents will allow (and Seller hereby authorizes) Buyer to contact any or all of (i) the tenants under the Leases, (ii) the contracting parties under the Contracts, (iii) the holder of any Existing Mortgages or (iv) the parties to the equipment leases or conditional sale contracts, if any, of the Personal Property, with respect to determining and verifying the precise terms and nature of their tenancies and contract rights, as the case may be, and Seller will cooperate and lend friendly assistance to Buyer in making any such contact and in obtaining such information.

(c) Seller will in whatever manner reasonably necessary allow and assist the personnel of Buyer or its agents in the observation and communication with the property manager of the Property, if any, for the purpose of affording the opportunity to Buyer to gain familiarity with the operations and procedures for the operations of the Property.

(d) Seller will, upon request of Buyer, promptly make available to Buyer for inspection all plans, specifications, drawings, surveys and the like (or copies thereof) pertaining to the Property of which Seller has possession or control, it being understood that in the event Closing does not occur, such documents (or copies) will be returned to Seller.

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