ASSIGNMENT OF A REAL ESTATE PROJECT. CASE STUDY: RETAIL PARK MAGNOLIA- WESTHILL/LEWIS CHARLES

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Dayna Gordon
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1 ASSIGNMENT OF A REAL ESTATE PROJECT. CASE STUDY: RETAIL PARK MAGNOLIA- WESTHILL/LEWIS CHARLES Cincinnati Cleveland Columbus Houston Los Angeles Miami New York Palo Alto Phoenix San Francisco Tallahassee Tampa Tysons Corner Washington DC West Palm Beach Bratislava Brussels Bucharest Budapest Dublin Frankfurt Kyiv London Milan Moscow Prague Warsaw Beijing Hong Kong Shanghai Tokyo Buenos Aires Caracas Rio de Janeiro Santiago Santo Domingo Riyadh

2 Preliminary considerations The real estate market trend: Acquisition of the land or execution of a promissory sale and purchase agreement; Building or performing the necessary procedures for building on the land (development of the project); Total or partial lease depending on the potential success of the project; Selling the real estate project assignment of the company s shares ( share deal ), a more favorable fiscal alternative.

3 General terms and conditions: Westhill-Lewis Charles Westhill, the seller was the beneficiary of the promissory rights over a land with an approximate surface of 10 ha, for a 9 moths period; Memorandum of understanding between Westhill and Lewis Charles contemplating the terms and conditions of the assignment, under the following terms: Admission of Lewis Charles fund to the AIM market on London Stock Exchange; Establishment of a limited liability company controlled by Westhill and the assignment of the promissory agreement; Execution of a development management agreement whereby Westhill is appointed as developer of the project; Execution of the sale and purchase agreement over the plot of land.

4 General phases of the project assignment Execution of a preliminary agreement (i.e. Head of terms, Memorandum of Understanding) by the parties setting forth the general terms and conditions; Performance of a legal and technical due diligence over the plot of land and/or the company; Conditions precedent for the assignment; Post-closing conditions.

5 The preliminary agreement Comprises: The structure of the transaction; General terms and conditions of the transaction; Dead lines for accomplishing the relevant procedures; Rights and undertakings of the parties; Liability of the parties; Costs entailed by the preliminary procedures, etc. The binding or non-binding effect of the agreement.

6 Due Diligence Due diligence of the land: The ownership history of the plot of land; Urbanism aspects, construction permit; Utilities; Infrastructure. Due diligence of the company: General rule: the real estate project is held by a company newly established for the purpose of developing such project.

7 Due diligence in case of Westhill- Lewis Charles transaction The legal due diligence over the plot of land implied the supplementing of the documents already provided to Westhill by the initial owners; Analyze of the documents procured by Westhill upon the obligations undertaken under the promissory sale and purchase agreement introducing the plot of land inside the build-up area and obtaining the construction permit; Issuance of a legal opinion with respect to the project; Identification of the conditions precedent provided for the project assignment.

8 Conditions precedent of the transaction Upon the results of the Due Diligence and the particularities of each project, the number and the nature of the conditions precedent may be very diversified: Conditions precedent for the seller: Internal approvals and/or assignments to new companies; Procurement of authorizations, permits, etc relevant to the plot of land; Execution of specific agreements, etc; Conditions precedent for the purchaser: Usually these are seldom used. For instance: internal approvals or approval of the regulatory authorities, assignment of agreements, anticipated payment, etc.

9 Conditions precedent for Westhill- Lewis Charles transaction Admission on the AIM market at the London Stock exchange and raising of minimum 25 millions pounds; Assignment of the promissory sale and purchase agreement towards the newly established entity - Retail Magnolia Park S.R.L. and registration of the assignment with the relevant Land Book; Execution of a development management agreement with respect to the project, whereby Westhill undertakes to further administrate the project, obtain the necessary authorizations, execute any services agreements in relation thereto, etc.

10 Post closing conditions In addition to the legal obligation to guarantee the purchaser for eviction and flaws, based upon the type of the envisaged transaction, there can be obligations entailing continuous effects, especially when the seller remains engaged in the project. Case study: after the transfer of the project, Retail Park Magnolia executed the sale and purchase agreement for the land, while the land joining was performed by Westhill.

11 Conclusions Advantages for the purchaser of a real estate project delivery on full completion of the project, implying the higher costs disadvantage; Questions & Answers Session

12 Contact Daniel Voicu: Mugur Filipescu: Roxana Negutu:

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