How Do Realtors Benefit from Understanding and Using Real Estate IRAs?

When purchasing a hotel, counsel must advise clients that the due diligence must include analysis of the physical assets associated with the property (i.e., the hotel structures, parking, systems, equipment, and inventories), as well as the operating business conducted at the hotel facility and the relevant markets and environment. When developing a proposed acquisition price, the buyer must make assumptions about future market conditions and the hotel's performance within that market. A discounted cash flow on stabilized operating projections will reflect these assumptions. Thus, a preliminary business plan must reflect assumptions as to physical facilities and condition, management, affiliation, and other factors to assess the potential acquisition realistically. In today's market, the time allotted for due diligence, deposits going non-refundable, and closing has been significantly compressed. All sophisticated buyers know they must act quickly. Counsel should assist in coordinating the due diligence team and start the process as soon as possible. Counsel should also coordinate with clients to prioritize and push critical areas of due diligence to identify and evaluate potential deal-breakers early. Many buyers do not focus enough on seller representations and warranties--even with significant disclaimers in the purchase agreement. Diligent preparation can flush out critical physical and operational hotel issues that only a seller or its management company would understand. Even if the seller is unwilling to make a specific representation and warranty on a particular condition, focusing on the issue upfront will help frame the buyer's post-signing due diligence. Likewise, indemnification clauses are not a haven for buyers. The language is typically inadequate to protect a buyer from additional costs avoidable with proper due diligence. Indemnification generally applies only for breaches of representations and warranties, and if the seller limits or qualifies its representations and warranties, the indemnification provision may not be triggered. Listen as our authoritative panel discusses the legal concerns in hotel acquisition and due diligence, conducting a proper investigation, and evaluating the data to provide the buyer with more alternatives, lower costs, and negotiating power to deal with the issues.

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Real Estate has historically been a very stable and largely predictable sector that has benefited from the extraordinary economic growth that has taken place globally. However, this is about to change as the way we live, shop and work is evolving, new economies are emerging and new technologies are disrupting the status quo. We have proven concepts underpinning our decision-making when dealing with issues such as how we evaluate our assets and how we decide where to allocate our capital, but these are often siloed and take a long time to refine. We are having to make decisions in shorter timescales taking more and more variables into account in order to stay relevant and ahead of our competitors.

The importance of drafting CC&Rs in mixed-use projects cannot be overstated. CC&Rs create complex contractual rights and obligations and property rights and obligations that impact the owners' ability to use, sell, and finance the property. A significant component of CC&Rs is creating easements that impact daily business operations and other users of the property subject to the document. Properly drafted easements will address critical business issues such as access, construction, shared parking, signage, and maintenance. Counsel must avoid pitfalls and conflicts to minimize owner disputes and operational problems when drafting or amending CC&Rs. Using boilerplate language is ineffective at best and, at worst, is a risky means of dealing with the specific needs and demands of a developer or business owner. Listen as our authoritative panel provides practitioners with a clear understanding of how to draft effective CC&Rs for mixed-use projects, avoid common pitfalls, and amend existing documents.