Commercial Real Estate Investment and Development

Whether you are contemplating purchase of single family rentals or development of multifamily apartment projects, office or retail space, many of the same issues must be taken into consideration. Some of the major ones are discussed below.


The FederFirm Law Office has represented developers, investors and lenders a wide range of transactions involving many different types of commercial real estate development transactions, including multifamily apartment projects, single-family subdivisions and retail, office and industrial developments. Financing mechanisms used to acquire and develop these projects have included conventional bank financing, limited partnership investments, tax-exempt bonds, SBA loans, HUD, FHA and USDA loan and grant programs (e.g., elderly and handicapped projects under Sections 202 and 811, multifamily developments under Section 221(d)), tax increment financing, federal and state housing tax credit programs, conduit (pass-through) loans and local government revolving loan programs.

Due Diligence

As with purchase of any property, but especially when engaging in commercial real estate development, it is crucial that every effort is made to examine all aspects of the project.

Many preliminary issues involve expertise that falls outside the scope of an attorney’s expertise. Depending on the level of sophistication of the buyer/developer, these matters may be addressed internally or may require retention of outside experts. Such matters include feasibility studies, market conditions, demographic trends, absorption rates, advantages and disadvantages of a given location, competition, pending urban planning or transportation changes, interest rates, credit availability, investor interest, availability of government incentives or subsidies, economic conditions, etc.

Sometimes the opportunity to obtain a crucial tract of land presents itself before even these preliminary matters can be addressed. In that case, an attorney may be helpful in advising you on how to obtain site control at the minimal risk and cost.

Even when most of the preliminary analysis has been done and the developer has decided to proceed, a well thought out Purchase and Sale Agreement should provide some protections for both parties during the due diligence process, so as to minimize sunk costs at each stage. This involves some give and take between buyer and seller, in order to arrive at an allocation of risks acceptable to each.

The Purchase and Sale Agreement must include:

A description sufficient to identify the property. As obvious as this may seem, even among experienced developers, such agreements are often signed with an insufficient description of the property to properly identify it, or with the description to be attached as an exhibit at a later time. Should a disagreement arise as to the proper description, or if a discrepancy arises at a later date, the parties may find that they do not have an enforceable agreement.

Time limits, including the time to accept or reject a purchase offer, times allowed for title, survey, environmental, structural, zoning, financial and other investigations, deadlines for notice of objections based on those investigations, times allowed to cure any objections, deadlines for the buyer to obtain financing and governmental approvals, the closing date, notice and response deadlines and the conditions for and cost of extension of any deadlines.

Names of the parties and acceptable assignments of rights.

Conditions precedent to closing. These may include some or all of the following:

  • Evidence of seller’s authority to sell
  • Clear title in the seller
  • Review and acceptance or cure of encumbrances on title
  • If an occupied building is being purchased;
    • Review of financial records and leases
    • Estoppel certificates
  • Acceptance or removal of use restrictions imposed by zoning or restrictive covenants
  • Acceptable environmental review
  • Soil and subsurface inspection
  • Structural engineering inspection
  • Procuring financing on acceptable terms
  • Satisfactory resolution of survey and boundary issues
  • Obtaining necessary consents from lenders, adjoining owners, government authorities, regulators, etc.
  • Review of Easements, existing or needed
  • Utility availability
  • Absence or resolution of building, zoning or other legal violations
  • Transfer or grant of licenses or permits

Choice of Entity

A choice of proper business entity or entities must also be made, especially if more than one person is involved in the endeavor.