Commercial Real Estate Transactions and Finance

The purpose of this textbook is to teach real estate law not as some amalgamation of abstract, static legal concepts but, instead, to teach real estate law within the context of the dynamics of real estate development and finance, through a framework I have developed and refer to throughout the book as The Development Process. What is presented in this textbook is not what is taught in most American law schools, with curricula offering a range of individual, albeit related, topics, such as Real Property Law, Contracts, Federal Taxation, and Environmental Law, among others, that provide little context for law students as to how these disciplines intersect with and impact The Development Process.

Rather than offering in-depth discussions of law school subjects such as “servitudes” and “estates in land” in Real Property Law or “fraud in the inducement” in Contracts, this textbook instead offers a much broader treatment of real estate law as an overarching discipline impacting and driving the development and financing of real estate projects. This is done with considerable intention, to facilitate an understanding of the true breadth of the subject matter by graduate students seeking a master’s degree in real estate development and finance or an MBA with a concentration in real estate (to whom this textbook is specifically targeted), as well as to assist the real estate executive or professional in gaining a more comprehensive understanding of how real estate law impacts their endeavors.

Neither real estate development nor The Development Process is ever about just one thing: Real estate development is always about a thousand different things, big and small, occurring simultaneously; some within the developer’s control but many occurring independently of the developer and its project. Part of the allure, as well as the challenge, of real estate development—as a process and as a profession—is the need to keep a number of balls in the air at the same time, always knowing where each ball is and to where it is heading next. In this respect, real estate development and finance can be one of the most-rewarding—and most-maddening—professional endeavors one may pursue.

This course provides a survey of the real estate sector of the US economy from the perspective of financial economics. The course will focus on the development of an understanding of factors that influence values of real estate assets. This understanding can be applied to make decisions about developing, acquiring, financing, owning, leasing, managing, and/or disposing of real estate assets. Given the significance of real estate assets to owners, lenders, and users, these decisions have important consequences for individuals, firms, and the economy. The course will also examine the roles and effects of institutional features of real estate markets, including those related to property rights and other legal aspects, financing, and government policies.

Investment funds first appeared in the Netherlands in the late 18th century for the purpose of financing trade expeditions. The first modern fund was established in the United States, Massachusetts in 1924, in his first year of formation increased by 50,000 to 392,000 US dollars.
For Mark Tompkins of Montrose Capital is obvious that the time of investment funds in the country is yet to come. Trust is basically divided into indoor and outdoor (mutual funds) and private funds (hedge funds). According to the number and importance to have the dominant open funds. Private funds like Mark Tompkins Montrose Capital INC however, came twenty years later, also in the United States. After their features, these vary from open on the possibility to sell shares on the stock market (which is not allowed in the open funds) and thus effectively reduce the risk of existing positions (hedging), hence the name Hegde Fund. This feature is extremely important for Montrose Capital because in terms of a general decline in share prices on the stock exchange, private funds can still make profit (selling higher level and closing short positions at a lower price). The growth of Mark Tompkins Montrose Capital in recent times is accompanied by enormous growth in funds under management because of the exceptional techniques for hedging and introducing innovations in financial intermediation. Because these features are said hedge funds are able to generate alpha refund, which is an exercise over a benchmark such as yield annually the index S & P, and is due exclusively to the ability of Montrose Capital portfolio managers to create unique portfolios and strategies .

This study seeks to identify the potential conflicts of interest inherent in real estate transactions between a commercial tenant and a prospective landlord; evaluate the legal, regulatory, and industry mechanisms in place to protect the interests of commercial tenants through professional representation in these transactions; and where necessary, make recommendations for how such tenant protections might be strengthened to assure an arm’s length transaction between the parties, thereby optimizing the functioning of the commercial real estate marketplace.

Unlike existing textbooks written for law students on specific subjects affecting real estate transactions, Real Estate Law: Fundamentals for The Development Process uses “The Development Process” as a framework for understanding how the U.S. legal system regulates, facilitates, and generally impacts real estate transactions and their outcomes.

This book not only addresses the nature of specific legal issues directly
relating to real estate transactions but also how those issues may best be identified and addressed in advance. This book breaks down the myriad of laws influencing the selection, acquisition, development, financing, ownership, and management of real estate, and presents them in context.

This document, available for download, contains the following sections from Real Estate Law: Fundamentals for The Development Process:

Real Estate Law (textbook introduction)
[Peer Reviews]
[Dedication Page]
Table of Contents
Detailed Table of Contents
[Table of] Figures
[Listing of] Tables
Foreword

Real Estate Law: Fundamentals for The Development Process takes a pragmatic, transactional approach to real property law in an urban context, with an emphasis on walkable urban places (sometimes referred to herein as “WalkUPs”). This course—taught in an immersive, interactive classroom environment—offers students an overview of the manner in which legal issues arise in the course of the:
o selection,
o acquisition,
o development,
o financing,
o ownership, and
o management of real estate;

• the nature of those legal issues; and

• how they may best be identified and addressed.

Real Estate Law: Fundamentals for The Development Process utilizes The Development Process as the framework for teaching Finance majors about how a broad range of laws impact, directly and indirectly, a variety of urban real estate transactions and issues, while also addressing the use of a variety of legal agreements to govern particular relationships between the various parties involved in real estate development and finance transactions, and the management of operating properties.

This is an Executive Summary of the November 2014 research study report, “Conflicts of Interest in Commercial Real Estate Transactions: Who Represents the Tenant?”

The research study was undertaken by the Center for Real Estate and Urban Analysis (CREUA), at The George Washington University School of Business (GWSB), under the direction of two GWSB professors: Project Director Christopher B. Leinberger and Research Director, Principal Author, and Project Manager Peter E. Smirniotopoulos. The research study sought to identify the potential conflicts of interest inherent in real estate transactions between a commercial tenant and a prospective landlord; evaluate the legal, regulatory, and industry mechanisms in place to protect the interests of commercial tenants through professional representation in these transactions; and where necessary, make recommendations for how such tenant protections might be strengthened to assure an arm’s length transaction between the parties, thereby optimizing the functioning of the commercial real estate marketplace.

This thesis systematically evaluates how rapid developments in the nascent crowdfunding industry, combined with recent regulatory changes, will impact the commercial real estate markets. The phenomenon of crowdfunding, defined as raising numerous small amounts of capital from a large number of people, or the crowd, has been accelerated by the recent passage of the Jumpstart Our Businesses Start--up Act (JOBS Act). The JOBS Act legalizes and facilitates the sale of securities used to crowdfund equity and debt investments, giving rise to a proliferation of new crowdfund entrants in various business sectors, including the commercial real estate arena. This thesis first gives a detailed analysis of the JOBS Act legislation and how it alters the current regulatory and business landscape. The focus then turns to the commercial real estate markets, tracing the evolution of commercial real estate as an institutional asset class and the influence large, institutional investors such as pension funds and real estate investment trusts exert on this market. The authors also examine the impact on the average investor and conclude that these large institutional investors have bifurcated the market, leaving the average investor unable to gain exposure to "hard" commercial real estate assets. The authors then link the research to crowdfunding, first with a chapter on the emerging and dynamic crowdfund industry in general, and then on specific commercial real estate crowdfunding sites, also discussing sites related to this sector. The authors strengthen this primary research with field investigations, conducting interviews with real estate developers, investors, and securities lawyers specializing in regulatory law. They concurrently surveyed 138 well--vetted real estate professionals (the MIT Center for Real Estate alumni). The thesis then projects the size of the potential dollar value of the commercial real estate crowdfund market based on existing value and turnover in the commercial real estate markets. The final chapter imagines what this market will look like in 2015; concluding that crowdfunding will have a profound effect on the commercial real estate market.

Whilst the real estate development appraisal practices of large national and international real estate companies are relatively well understood, relatively little is known about how development appraisals are conducted by indigenous appraisers and valuers in developing countries. The research investigates how development appraisal is conducted in Brazil, compared to the United Kingdom, focusing primarily on the methods employed to appraise the viability of commercial real estate developments by small and medium sized real estate companies and their appraisers in the State of Sao Paulo.

The study captures and analyses empirical data from small and medium sized real estate appraisers in Brazil using the Delphi Method.  using the long established and relatively transparent U.K. residual method of development appraisal as a template against which to compare Brazilian appraisal methods, guidance and practice. To understand how indigenous development appraisers operate the Brazilian development appraisal methods, the research was conducted in Portuguese by a bi-lingual real estate expert who was familiar with both U.K. and Brazilian practice.

The research establishes that appraisers working for small and medium sized in Brazil rarely use the Residual Method.  Instead, they employ a range of methods, the choice of which is heavily influenced by the availability of comparable market data, with Direct Comparison of market data and the capitalization of income being the methods of choice when sufficient comparable evidence is available.

The research engaged with a small number of appraisers and valuers in small and medium sized practices in the State of Sao Paulo using two-phase Delphi-Method.  The long established U.K. residual method of development appraisal was used as a template against which to compare practice in Sao Paolo State. There is this potential therefore to replicate the research in other Brazilian States and transfer the methodology to other developing countries.

In Brazil, when development land in urban areas is acquired on the basis of plot exchange, land is often sold at less than market value and the original landowner retains an equity stake in the development and shares in the development overage.  The practice of ‘permuta física’, giving landowners the freehold of part of the development, or ‘permuta financeira’, whereby the landowner receives an enhanced land price, indexed against development value, is of potential relevance to the U.K. and other developed countries that need help in unlocking land markets.

The research is a unique comparative study of development appraisal methods employed by small and medium sized practices in Brazil.  It contributes to the limited literature that has so far been published in English on Brazilian development appraisal methods and reveals the similarities and differences with the Residual Method of developed appraisal that is widely used in the U.K. and other developed countries.

South Africa implemented the REIT structure in 2013 with the intention of encouraging local and international investment. A year after implementation South African listed property was reported to have performed better than the UK, European, and Asian REITs. This study assesses the initial performance of South African REITs and their portfolio diversification benefits when paired with shares, bonds, T-bills, and other listed property in a mixed-asset portfolio, over the period May 2013 to December 2015. The findings show that shares are the best performing asset, risk-adjusted. REITs are a return-enhancer when included in a mixed-asset portfolio, and tend to contribute at the higher end of the risk spectrum. This paper contributes to the performance of REITs, as a limited knowledge exists on emerging markets, it is a study of the only major REITs market in Africa, and is significant as it discusses South African REITs from their implementation.

This study analyzes the demand for green office building features among US office tenants. An on-line survey of a random sample of office tenants in 17 major US markets is employed, with 708 responses representing a 23% response rate. Tenants provided their perspective on green buildings and their stated willingness to pay for individual green features. Office tenants have the highest willingness to pay for improved indoor air quality and access to natural light. The results show that public firms, along with those in the Energy and Information Technology industries are most likely to pay for green labeled buildings. Regional and demographic preferences are shown in both willingness to pay and attribute ranking. The findings provide implications for policy-makers and real estate property developers in terms of which green building features are considered to be most important for green building practices, and how demand for green features potentially differ across regions.

Elenco delle principali abbreviazioni AC Archivio civile AGCSS Archivio giuridico circolazione e sinistri stradali ALC Archivio delle locazioni e condominio CED Centro elettronico di documentazione presso la Cassazione CI Contratto e impresa Contr Contratti (I) CorG Corriere giuridico (Il) DResp Danno e responsabilità D&G Diritto & Giustizia DFo Diritto formazione DG Diritto e giurisprudenza DGA Diritto e giurisprudenza agraria e ambientale DI-DPriv Digesto Italiano, Discipline private DPC Diritto e pratica commerciale DPSoc Diritto e pratica delle società ED Enciclopedia del diritto Fa Fallimento (Il) FA Foro Amministrativo (Il) FA CDS Foro Amministrativo CDS FD Famiglia e diritto FI Foro italiano FT Foro Toscano G. loc. Giurisprudenza locale GC Giustizia civile GCM Giustizia civile Massimario GCo Giurisprudenza commerciale GDir Guida al diritto GI Giurisprudenza italiana Gius Gius GM Giurisprudenza di merito GNap Giurisprudenza napoletana Jus Jus MFI Massimario Foro italiano (Il) MGC Massimario della Giustizia civile MGI Massimario della Giurisprudenza italiana N Notaro (Il) NGCC Nuova giur. civ. comm.

Molti ritengono che prima della nascita della moneta coniata (Lidia - VII sec. a.C.) esistessero economie basate essenzialmente sul baratto. In realtà nel Vicino Oriente Antico, tra l'altro, fu l'argento a peso a fungere da mezzo di pagamento, misuratore del valore dei beni e mezzo per tesaurizzare ricchezza in attesa di essere spesa, caratteristiche queste proprie di una moneta. E' nell'antica Mesopotamia che dal III millennio a.C. incominciamo a trovare le prime economie sviluppate che si avvalgono dei primi ben definiti strumenti economico-monetari (prestiti, tassi di interesse, banche, prestatori di fondi, titoli al portatore, promissory notes, anticresi, crediti, profitti, banche e prestatori di fondi, società commerciali, mercanti, controversie commerciali, contratti di vendita, usura). Quindi una società non primitiva ma economicamente evoluta. Si condivide quindi l'idea del Babelon secondo cui la moneta si sviluppò nel tempo e non nacque all'improvviso nella Lidia del VII sec. a.C. ma, aggiungiamo noi, precedette di almeno due millenni l'evento della Lidia. Quindi continuità monetaria tra l'argento a peso e la moneta coniata e origine in Mesopotamia dei principali strumenti economico-finanziari del nostro tempo.

The statistics, finance, and real estate literature regularly rely on propensity score
matching techniques to balance samples of data where randomized treatment assignment is
not possible. In the sustainable commercial real estate literature the technique has seen
substantive use. To analyze price and rent premiums for green buildings, several studies
have used propensity scores to ensure samples that contains eco-labeled and un-labeled
buildings reflect a randomized assignment of the treatment. Underpinning the argument...

The difference in the countries to which both the seller and the buyer belong in the commercial exchanges has increased the discrepancy in the laws and rules that govern the conduct of the most important banking count approved for the settlement of such exchanges, which is the documentary credit process, as a result of the different economic, banking and financial systems from the other, so there was a need to unify These customs and customs are in a unified form, which is called today the unified rules and customs of documentary credit, which are applied to the conduct of documentary credit contracts at the global level. Therefore, we consider it necessary to make an amendment in the Iraqi law regarding the organization of the documentary credit process, because the articles related to the provisions of documentary credits are not sufficient in themselves to indicate all the problems that may result from it due to developments in international trade.

Gayrimenkulün yatırım aracı niteliği aynı zamanda ekonomik temellerden yoksun ve kendi kendini besleyen değer artışlarının ve krizlerin de ortaya çıkmasına neden olabilmektedir. Nitekim diğer krizlerin yanı sıra, 1997 yılındaki Asya Krizi ve en son Küresel Finansal Kriz’de gayrimenkulün (ve konutun) spekülatif bir yatırım aracına dönüştüğüne ve bunun yaygın/ağır finansal başarısızlıklara neden olabileceği görülmüştür. Türkiye’nin kalkınmasının önünde çok sayıda yapısal nitelikte ekonomik/kültürel/siyasal sorunlar bulunmaktadır. Kamu/ özel sektör-hane halkı borçluluğu, cari açık, düşük reel büyüme, işsizlik ve gelir/servet dağılımındaki bozukluk gibi birçok ekonomik sorunun yanında, sosyal kalkınmışlık ölçütleri açısından ülkemizin durumu iç açıcı değildir.