In this episode, co-hosts Adam Carswell and Michael Flight delve into what a Purchase and Sale Agreement (PSA) is from the business person’s standpoint. They discuss the important factors that PSAs for Triple Net (NNN) properties should have in writing, including a detailed property description, what is specifically being sold, the lease type, the purchase price, the due diligence period, and much more. Michael and Adam also explain what kind of mindset buyers should have when negotiating the PSA with sellers. They wrap up this episode with Michael sharing some key tips in evaluating the PSA, emphasizing the importance of checking that everything buyers want is specially written in the PSA and always paying close attention to time limits and dates listed to ensure a smooth close of the NNN deal.
Timestamped Shownotes:
02:07 – Hosts Adam Carswell and Michael Flight, CEO and co-founder of Liberty Real Estate, introduce the show’s topic of making a Purchase and Sale Agreement
04:32 – Why do sellers use a data room or competitive bidding process after reviewing the Letter of Intent (LOI), or Purchase Offer, with buyers?
05:33 – What mindset should buyers have when negotiating a Purchase and Sale Agreement (PSA)?
09:07 – What entities and contact information should be listed on the PSA?
10:55 – What information about the net lease property should be included in the PSA?
12:46 – Why should investors/buyers be as specific as possible in the description of the Triple Net (NNN) property?
13:12 – Why does the PSA have to specify what is being sold for Single Tenant Net Lease and NNN properties?
13:57 – Why should buyers specify that they are buying the actual lease of a Triple Net property in the description of what is being sold?
14:35 – Why is it important to review the terms and Purchase Price next in the PSA?
14:55 – Why would buyers sometimes put a smaller Earnest Money Deposit along with the total Purchase Price during the due diligence period?
16:54 – What is the Due Diligence Period, or feasibility period, for net lease investors and what actions should be taken during it?
17:47 – What are some examples of why it is important to ask for environmental studies before purchasing NNN properties?
19:50 – What are the main differences between buying Triple Net properties versus other asset classes?
21:11 – Why should buyers make sure that tenants do not have a Right of Cancellation in the PSA?
22:38 – What is an ALTA Survey and why are they essential like boundary surveys?
23:07 – Why should an investor conduct Title Searches on a net lease property?
25:04 – Why are Reciprocal Ease Agreements important to buying shopping centers?
26:49 – Why should buyers ask for indemnification in a PSA along with the sellers?
28:22 – Why should investors stipulate that they want a Right to Cancel in the PSA?
30:03 – Why should buyers specify a time limit for the due diligence period in the PSA?
30:30 – What should investors make sure they have included and reviewed in the PSA before buying a Triple Net property?
31:58 – What is a Financing Contingency?
32:48 – What does the Closing of the deal specify in the PSA?
33:18 – What are some legal issues to be aware of and have contingencies for in the PSA?
35:10 – How long does an average Triple Net investment deal take to close?
36:52 – Why should buyers note in the PSA if they have a 1031 Exchange and/or any brokers?
37:31 – Why are dates very important to note for the buyer in a PSA?
38:08 – What important tips does co-host Michael Flight, CEO of Liberty Real Estate Fund, have for net lease buyers?
41:35 – What is the Closing in the process of a Net Lease deal?
Key Points:
1. Factors of a Purchase and Sale Agreement (PSA)
2. Buyers need to specify everything they want for their Net Lease investments in writing
3. Importance of the Due Diligence Period in a Net Lease property deal
4. Always check the legality of every document for the sale of a Triple Net (NNN) property
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