Subject: PSA Comments – 1450 Commerce Parkway
Seller,
Thank you for circulating the purchase agreement for 1450 Commerce Parkway. We remain interested in the transaction, but after reviewing the current draft, we need to address several business points that materially over-allocate pre-closing and post-closing risk to Buyer.
The principal items for revision are:
1. Earnest Money / Refundability
The current draft makes the $125,000 earnest money non-refundable immediately upon deposit. For a seven-tenant retail center, that is too aggressive before lease, title, survey, environmental, and contract diligence can be completed. We need the deposit to remain refundable through the due diligence, title/survey, and financing contingency periods, with hard money only after those periods expire or are affirmatively waived.
2. Due Diligence Period and Seller Deliveries
A 10-day inspection period is not workable for this asset, particularly where Seller has no obligation to deliver leases, rent roll, service contracts, or other diligence materials. We need a meaningful diligence period that runs from Seller's delivery of a complete diligence package, together with a short extension right if materials are delayed.
3. Financing
Because the agreement is expressly non-contingent as to financing, Buyer is taking full lender and capital markets risk. We need a financing contingency through a defined deadline, or at minimum a limited financing approval period and corresponding extension right.
4. Title / Survey
The current title objection framework is too compressed and gives Seller absolute discretion not to cure while forcing Buyer either to terminate quickly or waive objections entirely. We need a separate title/survey review period, mandatory cure of monetary liens and Seller-created exceptions, and termination rights for uncured material objections.
5. AS-IS / Environmental / Releases
The current AS-IS language and release are too broad, particularly the waiver of environmental claims, latent defect claims, and unknown claims. We can discuss an as-is structure, but it must be subject to Seller's express representations, fraud and concealment carve-outs, environmental carve-outs, and Buyer's right to conduct appropriate environmental review.
6. Seller Reps and Survival
The draft currently provides that any Seller representations, if any, do not survive closing. We need a customary package of Seller representations regarding authority, leases, rent roll, contracts, notices, litigation, and environmental notices, with a reasonable post-closing survival period.
7. Closing Costs
Buyer should not be responsible for all closing costs, transfer/documentary taxes, and Seller's attorneys' fees. We need a customary allocation where each side bears its own legal fees, Seller pays conveyance-related taxes and the owner's title premium, and Buyer pays its financing-related costs.
8. Default Remedies
The remedies are materially one-sided. Buyer forfeits the deposit for almost any failure to close, while Seller default only results in a return of Buyer's own money and Buyer waives specific performance and damages. We need specific performance as a Buyer remedy, together with reimbursement of documented third-party costs if Seller defaults.
9. Casualty / Condemnation
Buyer cannot agree to close at the full purchase price while Seller retains all insurance or condemnation proceeds. Buyer needs the right to terminate for a material casualty or condemnation, or alternatively receive an assignment of proceeds and an appropriate purchase price credit.
10. Leases / Estoppels / Service Contracts
For a multi-tenant shopping center, tenant estoppels are a core closing deliverable. We need estoppels from the major tenants (or a threshold percentage of rent/GLA), together with SNDAs to the extent required by the leases or lender. Buyer should also assume only those service contracts expressly approved during diligence, and security deposits should be credited in the full amounts required under the leases.
11. Assignment / SPE / 1031
Buyer needs the ability to assign to an affiliate, acquisition SPE, or 1031 exchange party without Seller consent, provided Buyer remains liable through closing. Seller should also provide customary 1031 cooperation at no cost or liability.
12. Brokerage
Brokerage responsibility should be limited to claims arising through the party that engaged the broker.
We can turn comments quickly and would like to keep the transaction moving. If helpful, we can send a clean business-point markup reflecting the revisions above.
Best,
Buyer
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