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Articles Posted in Sales and Acquisitions

The use of the limited liability company (“LLC”) corporate structure has become very common in the real estate industry. It is the go to structure for the acquisition and development of properties by parties joining together behind a venture.  LLCs are governed by operating agreements among the members. These agreements are akin to the shareholder agreements among the shareholders of closely held corporations, and they govern many aspects of the operations of the venture.  One element in these operating agreements that bears close scrutiny by all of the members is the enforcement mechanisms that they put in place should any members fail to honor their obligations to fund future capital calls.

In truth, many LLC operating agreements contain inadequate payment enforcement provisions, making them potentially problematic and inequitable for the company itself and the members who honor their obligations and make future capital calls on a timely basis.  For example, if a member fails to meet their financial obligations, it is fairly common for these agreements to provide that the other members of the LLC may contribute the missing funds and treat them as a loan to the non-funding member.  Often times, the agreements provide that the loan will then be repaid to the funding members, with interest, once the LLC is in a position to make future distributions to its members, with no further enforcement methodology.

Such arrangements provide an unmerited level of flexibility to the non-funding member, as it enables them to weigh the pros and cons of making their required contributions or taking a loan from their partners to avoid any additional loss risk exposure in the endeavor.

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ORivera2014For the third time this week, an article by one of our firm’s attorneys was featured as the “Board of Contributors” guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  Today’s article, which is authored by shareholder Oscar R. Rivera, is titled “Appellate Court Strictly Construes FAR-BAR ‘As Is’ Residential Sales Contract.”  It focuses on a recent appellate ruling that affirmed an $850,000 award for legal fees and costs in a dispute over a $2.85 million residential sale gone awry.  Oscar’s article reads:

The ruling by the Third District Court of Appeal in Diaz v. Kosch, is certainly drawing quite a bit of industry attention, and there are a number of important takeaways from it for buyers, sellers and the professionals who work on their behalf.

The case stems from the sale of a Coral Gables home in 2012 for $2.85 million. After the sales contract was executed and the initial $50,000 deposit had been made, the buyers, who are identified in the ruling as both being “attorneys with substantial experience with real estate transactions and title matters,” notified their broker on the penultimate day of the 10-day inspection period about potential permitting issues with the property. On the following day, the buyers sent an email to the sellers accusing them of “active misrepresentations” and threatening “legal fees and litigation.”

dbr-logo-1-300x57Nonetheless, on the same date, the buyers made the second deposit of $235,000, stating it was “with full rights reserved.” A week and a half later, they emailed a notice of termination to the sellers, who were amendable to it and responded by imposing no conditions on the return of the buyers’ full deposit. However, apparently due to demands for a release from legal liability by the buyers’ own broker (who also served as the escrow agent), the deposit was not returned by the escrow agent.

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Oscar R. Rivera

Oscar R. Rivera

The Daily Business Review, South Florida’s only business daily and official court newspaper, chronicles in its weekly “Dealmakers” column the work of South Florida professionals in putting together and finalizing many of the area’s largest real estate transactions.  The firm’s Oscar R. Rivera was the featured Dealmakers in this week’s column, which appeared in today’s edition of the newspaper.  The article, which is titled “Attorneys for Buyer Closed $74M Office Deal with Bonus Acre to Develop,” focused on his work in representing the buyer of the Doral Costa office park in a $73.75 million acquisition.  It reads:

The reasons an affiliate of Triarch Investment Group wanted to acquire the 17.8-acre Doral Costa Office Park are clear.

The three Class A office buildings are 96 percent leased in a strong submarket. Tenants include Allstate Corp., HSBC Bank and Samsung. The property has nearly an acre of developable land.

“The Doral area is a very attractive area. Developable land in the heart of an office complex was very attractive to this buyer group,” said Oscar Rivera, a shareholder with Siegfried Rivera, who represented buyer Doral Costa Capital LLC.

“These buildings are anchored by a significant and well-established group of tenants,” Rivera added. “It was a very solid investment for the buyer group.”

But completing the $73.75 million transaction with the seller, an affiliate of Boston-based TA Associates Realty, required fast work.

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OscarRivera2014.jpgThe firm’s Oscar R. Rivera wrote an article that appeared today in the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which was titled “Best Practices for Buyouts of Unit Owners at Older Condos,” discusses recent changes in the Florida condominium termination law and important considerations for developers in these property acquisitions. Oscar’s article reads:

OscarRivera2014.jpgThe firm’s Oscar R. Rivera contributed a guest column that appeared in today’s edition of the Daily Business Review, South Florida’s only business daily and official court newspaper, about the recent decision by the First District Court of Appeal in the case of Thomas I. Bowman v. Jon Michael Barker et al. His article reads:

OscarRivera2014.jpgFirm partner Oscar R. Rivera wrote an article that appeared in today’s edition of the Daily Business Review, South Florida’s only business daily and official court newspaper, about the recent decision by the Third District Court of Appeal in the case of Blue Lagoon Development v. Maury and Leon Medical Centers. His article reads:

Oscar Rivera photo FINAL.jpgThe firm’s Oscar Rivera recently represented the owner and developer of the 220 Alhambra Circle office tower in the sale of the property for $75 million to Mercantil Commercebank, the building’s largest tenant. His critical role in this transaction, which was in the works for nearly three years, was the subject of the lead “Dealmakers” feature in today’s Daily Business Review.

For years, the prevailing view has been that brokers were permitted to lien the proceeds from the sale of a property to secure their commission, but not the property itself. However, a decision by the Third District Court of Appeal in July has effectively expanded the rights of real estate brokers to protect their commissions in commercial real estate transactions. In the case of J. Milton Dadeland, LLC v. Abala, Inc., the appellate panel found that a broker is permitted to lien the property in a commercial real estate transaction while the transaction remains pending in order to protect its commission.

In a deal that was more than two years in the making, I recently represented the owner and developer of 220 Alhambra Circle in the sale of the office tower to Mercantil Commercebank for $75 million. Mercantil has been the largest tenant in the building for more than 15 years.

Sometimes we are approached by clients who inquire about purchasing the entity that owns the property instead of buying the property itself. This is not very common but there are a series of reasons why this might make sense that I discuss below. Nevertheless, the purchase of an entity brings about a whole different set of requirements along with significant differences in the contract drafting and the due diligence that needs to take place.