John I. Sanders, Charlie McCurry, and Beth Friedrich co-authored the article, “Commercial Real Estate FAQs for European Companies Considering a U.S. Presence”
Moore & Van Allen Head of International Capital Markets John I. Sanders, Corporate Senior Counsel Charlie McCurry, and Director of Public Affairs Beth Friedrich co-authored the article titled, “Commercial Real Estate FAQs for European Companies Considering a U.S. Presence.”
Many European companies have established operations in the United States for the first time in recent years. Because North Carolina offers an abundance of natural benefits, including excellent infrastructure and a skilled work force, and strong economic incentives, including grants for improvements to real estate, tax exemptions, and employee training, many foreign companies are selecting the state for its U.S. operations.
More than 1,700 foreign companies now have their U.S. base in North Carolina. Charlotte alone has attracted more than $2 billion in capital since 2022 with companies from Germany, Italy, and Austria leading the way. As U.S. trade policy under the current administration is designed to encourage greater U.S. production, we have been assisting and speaking to more European companies interested in establishing a presence in North Carolina.
A key component of establishing a presence in North Carolina is purchasing or leasing commercial real estate. Here are some frequently asked questions about those transactions and our responses:
What experts are needed to lease or purchase commercial real estate in North Carolina?
A purchaser or lessee of commercial real estate in North Carolina will need the following:
- legal counsel to review and draft the relevant documents
- if prudent or desired by the purchaser or lessee, tradesmen to physically examine the components of the property such as the heating, ventilation, and air conditioning system (“HVAC”), plumbing, roof, structure, electrical system, environmental status, etc.
- if required by lender or prudent to a purchase of real property, a surveyor to determine that the property is as described in the government register and the building does not encroach on surrounding properties
- for a purchase of real property, a title insurance company to research the conveyance of the property over time and insure the title conveyed is as represented,
- for a purchase of real property, an escrow agent to manage the flow of funds, and
- if the property has not already been identified and/or if the purchaser would like assistance in managing the transaction, including requests for proposals and analysis of market conditions and property values, a licensed real estate agent.
What is the role of legal counsel?
Legal counsel for a purchaser is responsible for preparing an initial draft of the purchase and sale agreement, a bill of sale of any equipment of other property conveyed with the real estate, and the deed, which are the central documents in the transaction, and then negotiating on behalf of the purchaser with seller’s counsel.
Similarly, legal counsel for a lessee is responsible for reviewing the lease proposal, lease agreement, and, if applicable, any option to purchase, construction plans, or lien subordination agreement.
In any transaction, clients should expect legal counsel to coordinate with all parties to deliver documents and manage any legal risk associated with the transaction.
What documents are required to purchase commercial real estate in North Carolina?
In addition to those prepared and negotiated by legal counsel, it may be necessary to obtain (i) a Phase I environmental site assessment, (ii) a survey of the property, (iii) other documents specific to the transaction (e.g., documents conveying an easement or a lease under which a third party has rights to the property). Although not required to purchase property, prudent buyers may want other agreements executed at or prior to closing. These may include permits and/or tax exemptions from the applicable governmental authorities, construction agreements, lease agreements, and property management or maintenance agreements.
Is a notarial deed required?
A public notary in North Carolina does not perform the same functions in a commercial real estate transaction as a notary performs in a commercial real estate transaction in most European jurisdictions. Instead, the public notary’s role is to confirm that the person executing certain documents have executed the documents in their presence after verifying their identity. The more substantive functions notaries perform in most European jurisdictions are performed by legal counsel and the title company.
Does our European parent company need to establish a U.S. subsidiary to lease or purchase the commercial real estate?
Although foreign companies can directly purchase commercial real estate in North Carolina, establishing a U.S. subsidiary to purchase and hold the commercial real estate can make it easier to execute the transaction. For example, the seller may appreciate the relative ease of performing due diligence on a U.S. entity and funds may flow more efficiently from a U.S. bank account in the name of a U.S. entity at closing. Establishing a U.S. entity, under the laws of North Carolina or another state, is relatively easy and inexpensive and the work can be done by the law firm representing the purchaser with the transaction.
How long does a transaction typically take?
The time from purchase offer to closing, or in a lease, from offer to lease execution is negotiable between the parties. The buyer’s lender may require a certain period for underwriting and closing preparation. The length of the transaction often varies based on the time spent negotiating the business and legal terms as well as the size of the property and any complexities requiring government involvement (e.g. environmental permitting; tax credit approvals). A simple transaction may be consummated in less than 30 days while a complex one may take months or in rare cases years.
This article is a summary prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice with respect to the laws the State of North Carolina or any other jurisdiction.
For information about the purchase or leasing of commercial real estate by international companies, government incentives for such transactions, or the financing of such transactions, contact the team at Moore & Van Allen PLLC