10 Things Every Buyer Needs – To Close A Commercial Real Estate Loan

For nearly 30 years, I have represented borrowers and lenders in commercial real estate transactions. During this time it has become apparent that many Buyers do not have a clear understanding of what is required to document a commercial real estate loan. Unless the basics are understood, the likelihood of success in closing a commercial real estate transaction is greatly reduced.Throughout the process of negotiating the sale contract, all parties must keep their eye on what the Buyer’s lender will reasonably require as a condition to financing the purchase. This may not be what the parties want to focus on, but if this aspect of the transaction is ignored, the deal may not close at all.Sellers and their agents often express the attitude that the Buyer’s financing is the Buyer’s problem, not theirs. Perhaps, but facilitating Buyer’s financing should certainly be of interest to Sellers. How many sale transactions will close if the Buyer cannot get financing?This is not to suggest that Sellers should intrude upon the relationship between the Buyer and its lender, or become actively involved in obtaining Buyer’s financing. It does mean, however, that the Seller should understand what information concerning the property the Buyer will need to produce to its lender to obtain financing, and that Seller should be prepared to fully cooperate with the Buyer in all reasonable respects to produce that information.Basic Lending CriteriaLenders actively involved in making loans secured by commercial real estate typically have the same or similar documentation requirements. Unless these requirements can be satisfied, the loan will not be funded. If the loan is not funded, the sale transaction will not likely close.For Lenders, the object, always, is to establish two basic lending criteria:1. The ability of the borrower to repay the loan; and2. The ability of the lender to recover the full amount of the loan, including outstanding principal, accrued and unpaid interest, and all reasonable costs of collection, in the event the borrower fails to repay the loan.In nearly every loan of every type, these two lending criteria form the basis of the lender’s willingness to make the loan. Virtually all documentation in the loan closing process points to satisfying these two criteria. There are other legal requirements and regulations requiring lender compliance, but these two basic lending criteria represent, for the lender, what the loan closing process seeks to establish. They are also a primary focus of bank regulators, such as the FDIC, in verifying that the lender is following safe and sound lending practices.Few lenders engaged in commercial real estate lending are interested in making loans without collateral sufficient to assure repayment of the entire loan, including outstanding principal, accrued and unpaid interest, and all reasonable costs of collection, even where the borrower’s independent ability to repay is substantial. As we have seen time and again, changes in economic conditions, whether occurring from ordinary economic cycles, changes in technology, natural disasters, divorce, death, and even terrorist attack or war, can change the “ability” of a borrower to pay. Prudent lending practices require adequate security for any loan of substance.Documenting The LoanThere is no magic to documenting a commercial real estate loan. There are issues to resolve and documents to draft, but all can be managed efficiently and effectively if all parties to the transaction recognize the legitimate needs of the lender and plan the transaction and the contract requirements with a view toward satisfying those needs within the framework of the sale transaction.While the credit decision to issue a loan commitment focuses primarily on the ability of the borrower to repay the loan; the loan closing process focuses primarily on verification and documentation of the second stated criteria: confirmation that the collateral is sufficient to assure repayment of the loan, including all principal, accrued and unpaid interest, late fees, attorneys fees and other costs of collection, in the event the borrower fails to voluntarily repay the loan.With this in mind, most commercial real estate lenders approach commercial real estate closings by viewing themselves as potential “back-up buyers”. They are always testing their collateral position against the possibility that the Buyer/Borrower will default, with the lender being forced to foreclose and become the owner of the property. Their documentation requirements are designed to place the lender, after foreclosure, in as good a position as they would require at closing if they were a sophisticated direct buyer of the property; with the expectation that the lender may need to sell the property to a future sophisticated buyer to recover repayment of their loan.Top 10 Lender DeliveriesIn documenting a commercial real estate loan, the parties must recognize that virtually all commercial real estate lenders will require, among other things, delivery of the following “property documents”:1. Operating Statements for the past 3 years reflecting income and expenses of operations, including cost and timing of scheduled capital improvements;2. Certified copies of all Leases;3. A Certified Rent Roll as of the date of the Purchase Contract, and again as of a date within 2 or 3 days prior to closing;4. Estoppel Certificates signed by each tenant (or, typically, tenants representing 90% of the leased GLA in the project) dated within 15 days prior to closing;5. Subordination, Non-Disturbance and Attornment (“SNDA”) Agreements signed by each tenant;6. An ALTA lender’s title insurance policy with required endorsements, including, among others, an ALTA 3.1 Zoning Endorsement (modified to include parking), ALTA Endorsement No. 4 (Contiguity Endorsement insuring the mortgaged property constitutes a single parcel with no gaps or gores), and an Access Endorsement (insuring that the mortgaged property has access to public streets and ways for vehicular and pedestrian traffic);7. Copies of all documents of record which are to remain as encumbrances following closing, including all easements, restrictions, party wall agreements and other similar items;8. A current Plat of Survey prepared in accordance with 2011 Minimum Standard Detail for ALTA/ACSM Land Title Surveys, certified to the lender, Buyer and the title insurer;9. A satisfactory Environmental Site Assessment Report (Phase I Audit) and, if appropriate under the circumstances, a Phase 2 Audit, to demonstrate the property is not burdened with any recognized environmental defect; and10. A Site Improvements Inspection Report to evaluate the structural integrity of improvements.To be sure, there will be other requirements and deliveries the Buyer will be expected to satisfy as a condition to obtaining funding of the purchase money loan, but the items listed above are virtually universal. If the parties do not draft the purchase contract to accommodate timely delivery of these items to lender, the chances of closing the transaction are greatly reduced.Planning for Closing CostsThe closing process for commercial real estate transactions can be expensive. In addition to drafting the Purchase Contract to accommodate the documentary requirements of the Buyer’s lender, the Buyer and his advisors need to consider and adequately plan for the high cost of bringing a commercial real estate transaction from contract to closing.If competent Buyer’s counsel and competent lender’s counsel work together, each understanding what is required to be done to get the transaction closed, the cost of closing can be kept to a minimum, though it will undoubtedly remain substantial. It is not unusual for closing costs for a commercial real estate transaction with even typical closing issues to run thousands of dollars. Buyers must understand this and be prepared to accept it as a cost of doing business.Sophisticated Buyers understand the costs involved in documenting and closing a commercial real estate transaction and factor them into the overall cost of the transaction, just as they do costs such as the agreed upon purchase price, real estate brokerage commissions, loan brokerage fees, loan commitment fees and the like.Closing costs can constitute significant transaction expenses and must be factored into the Buyer’s business decision-making process in determining whether to proceed with a commercial real estate transaction. They are inescapable expenditures that add to Buyer’s cost of acquiring commercial real estate. They must be taken into account to determine the “true purchase price” to be paid by the Buyer to acquire any given project and to accurately calculate the anticipated yield on investment.Some closing costs may be shifted to the Seller through custom or effective contract negotiation, but many will unavoidably fall on the Buyer. These can easily total tens of thousands of dollars in an even moderately sized commercial real estate transaction in the $1,000,000 to $5,000,000 price range.Costs often overlooked, but ever present, include title insurance with required lender endorsements, an ALTA Survey, environmental audit(s), a Site Improvements Inspection Report and, somewhat surprisingly, Buyers attorney’s fees.For reasons that escape me, inexperienced Buyers of commercial real estate, and even some experienced Buyers, nearly always underestimate attorneys fees required in any given transaction. This is not because they are unpredictable, since the combined fees a Buyer must pay to its own attorney and to the Lender’s attorney typically aggregate around 1% of the Purchase Price. Perhaps it stems from wishful thinking associated with the customarily low attorneys fees charged by attorneys handling residential real estate closings. In reality, the level of sophistication and the amount of specialized work required to fully investigate and document a transaction for a Buyer of commercial real estate makes comparisons with residential real estate transactions inappropriate. Sophisticated commercial real estate investors understand this. Less sophisticated commercial real estate buyers must learn how to properly budget this cost.ConclusionConcluding negotiations for the sale/purchase of a substantial commercial real estate project is a thrilling experience but, until the transaction closes, it is only ink on paper. To get to closing, the contract must anticipate the documentation the Buyer will be required to deliver to its lender to obtain purchase money financing. The Buyer must also be aware of the substantial costs to be incurred in preparing for closing so that Buyer may reasonably plan its cash requirements for closing. With a clear understanding of what is required, and advanced planning to satisfy those requirements, the likelihood of successfully closing will be greatly enhanced.

Electronic And Electric Equipment Usage In Swaziland

Like all other developing countries, Swaziland consumers are attracted to items imported from across the globe. The trends observed elsewhere can also be observed in Swaziland.In a research study conducted by Knotell, a marketing company based in the kingdom of Swaziland the results showed that overall 21.1% of the +18 years survey respondents said they bought at least one electronic equipment within a thirty day period. A majority of these buyers bought a home theatre (or just a DVD player), followed by those who bought a hot plate, a microwave, a hairdryer and a computer respectively.In terms of marital status, singles seemed to have mainly bought a microwave, a hot plate and home theatre more than married consumers. This trend is in line with expected consumer patterns as most singles are just starting out in life and are buying the basic necessities while at the same time are regarded as fast adopters of latest product offerings.The trends show a sustained increase on home theatre and PC buying across all consumers. Consequently there has been a slight decrease on sales for video players (VHS) across the country as people are shifting their interests to the latest electronics.Shopping areas for these itemsIn the survey conducted by Knotell, six shops stood out as having the highest market share. These are Best Electric, Lewis, Bradlows, Clicks, Cash Crusaders, and Diskom. These shops can be found in the two cities of Swaziland, Manzini and Mbabane. At the time of writing Cash Crusaders is available only in Manzini.Men seemed to have bought their electric equipment mainly from Diskom while a majority of the women reported to have bought them from Lewis stores.About the survey processThe information in this article is based on the Knotell Omnibus Survey conducted within the Manzini-Mbabane Corridor in the kingdom of Swaziland. The Knotell Omnibus Survey has three Swaziland designated survey areas that form the basis for developing the sampling design.1. The Corridor Survey Area (CSA), which covers the Ngwenya – Manzini Corridor and areas within 20km from the main highway. (This is known to be the economically active part of Swaziland).2. The Key Towns and Cities Survey Area (KTC), which covers the two cities (Mbabane and Manzini) and major towns in Swaziland. The standard areas include Mbabane, Piggs-peak, Manzini, Mankayane, Siteki, Big-bend, Nhlangano and Hlathikhulu.3. The National Survey Area (NSA), which divides the four administrative districts of Swaziland (Hhohho, Manzini, Shiselweni and Lubombo) into urban, semi-urban and rural areas.

Online Schools of Nursing – Getting a Nursing Degree

Earning a nursing degree from online schools of nursing is becoming more and more popular. The flexibility and versatility these online nursing schools offer poses a lot of benefits. Those looking to get a nursing degree can definitely take advantage of all the benefits online schools of nursing have to offer.When earning a nursing degree online, you basically complete the non-clinical courses because clinical and laboratory classes must be completed in person at a medical facility also operated by the online school of nursing. It is important to know that there are no online nursing programs that allow you to fully complete the degree online. Nevertheless, it is one good way to become a registered or practical nurse.To find online nursing schools such as online practical nursing schools, you need to do a little research online. There are many websites offering online nursing courses. In fact, even online nursing PHD programs are available on the Internet. On Google or even on other reliable search engines, type the keywords that will help you find the online nursing schools you would like to attend. At the very least, you can type the words “online nursing degree” or “nursing degree online”. You may also type the name of your city or state that you would like your nursing program to be in. The search engine will show you results with links to many online nursing schools. Check out some of these sites to see in detail what they offer and find out if their offerings match what you are looking for. There are some things that you consider when choosing the online school to attend to.First and foremost, find out if the nursing program allows you to work at your own pace or the one that follows the school’s schedule. A program that allows you to work at your own pace will allow you to finish or complete the work at a schedule or pace that suits you. However, there are many nursing programs structured like a traditional school or college. You should also find out the date when you can start. Some online schools for nursing have rolling enrollment which means that you can start at any date you prefer. Others designate a starting date.You should also check if the online school has an academic advisor. It is a good idea to settle for one that assigns an academic advisor for each student because the advisor will help and work with students closely to help in planning out the course of study. An academic advisor also helps students keep on tract, connects with the students online, and coordinates with the students’ clinical classes.You should also check the costs of the nursing program because not all schools have the same charges. A thorough search of programs will help you land on the most affordable yet right online school for you. It is also good if you can find out if the school offers financial assistance. Many online nursing programs offer assistance and it is a good idea to take advantage of this financial help.Once you have completed your research, you can narrow your choices of online schools of nursing down to a few until you land on the best one.