Construction Deals And “Combination” Deals

Moshe Shorer & Co. has a large network which includes land owners, contractors and developers. Those contacts enable the firm to advise and carry out both construction deals and “combination” deals (A classic “combination” deal is a deal where the landlord sells part of his property in return for construction on the remaining part) and maximize the clients’ profits from their property.

Our firm advises on wide range of aspects relating to those deals including the business planning aspect, the tax structure aspect, architectural guidance, accompanying the tenders for contractors and for other suppliers, financial guidance, building contractors, condominium registration, and the sale of the resident units or other units on behalf of the land owners.

Our firm gives comprehensive service that spares the owner from dealing with the different suppliers, authorities and contractors. The “making” of the transaction, which is mostly complex, is handled efficiently and professionally, while ensuring the client’s interests and rights.

Both construction deals and “combination” deals are more complicated than ordinary real estate transactions. The complexities are found in the duration of these transactions: the negotiations process, the “closing” which is lengthier and the overall duration of the execution which is long. The duration of those deals has significant importance in planning the different issues and especially the required securities. Therefore, the agreement has to be rigid and clear and to include protection and appropriate guarantees to both parties.

The securities and the guarantees in those agreements are the cornerstones for the success of the deal. They enable the realization of the transaction and its completion. In the absence of appropriate securities and guarantees the land owners’ interest and thus, the entire transaction, would be at risk.

The tax aspects of these transactions vary from those applying to a common transaction and have to be planned very carefully, taking account of all details. Wrong tax planning might create a burdensome tax duty which could transform the transaction unprofitable. Therefore, before the beginning of the negotiations, a detailed tax review has to be performed. This ensures the viability of the transaction. Such a review can reveal that for the benefit of the owners, it is better to perform a different type of transaction. For example, while planning combination transaction we may discover that a construction deal will be more profitable or we may even conclude that the sale of whole property is the best option.

There are no strict rules nor guidance as to which kind of deal the owner should conclude as the factors that have to be taken into consideration are various (e.g. the period of holding of the land, the type of land, the land building rights, the market conditions, the interest rates, the expected construction costs, the property’s market value, etc).

Due to the aforegoing, each transaction requires thorough due diligence and analysis prior to the beginning of the negotiations. In this due diligence we examine also the other party’s capability and capacities. This is done in order to ensure that it is a suitable partner to such a transaction. Furthermore, during the negotiations it is important to agree upon appropriate guarantees to ensure the completion of the transaction, to set clear timetables and an appropriate compensation scheme in case of breach of the contract.

At Moshe Shorer & Co,. we keep tracking the transaction after the agreement has been signed in order to assure its execution in accordance with the various contractual undertakings. This is done in order to prevent the smallest breach of the contract which can turn into a significant breach of contract.

Finally, we believe and it must be said that the most important thing in order to achieve a successful deal is choosing the right counter-party. Your contractual partner ought to have high integrity and proven financial strength.