REAL ESTATE OWNERSHIP FOR COMMUNITY BASED HEALTH CENTERS

Tom Ruge , Director- Lewis & Kappes

Emily Najem, Associate-Lewis & Kappes

317-639-1210

www.lewis-kappes.com

OUTLINE

Purchase Considerations Holding Entity Purchase Process Property Tax Exemption Takeaways

REAL ESTATE PURCHASE CONSIDERATIONS

Landlord v. Tenant Financial Considerations Expansion Options Renting to Third Parties Entity that will own property Operations Hiring a Broker Comps Tax Costs

HOLDING ENTITY

LLC 501(c)(2) Title Holding Company Health Center

LLC Formation

Resolutions from Health Center Entity Authorize formation of LLC Operating Agreement Election of Managers Establish bank account Treated as Disregarded Entity Purchase Real Estate Lease

Articles of Incorporation Operating Agreement

Single Member Purpose-to operate for the sole benefit of the sole member by holding title to the

property for the benefit of the sole member Operation-intent to operate the LLC as a single member entity; treated as

disregarded entity Managers

Positions within sole member board

Maintain Separate Legal Entity Single purpose entity

Only asset is the real estate Separate bank accounts Separate meetings of governing body

LLC

Benefits Reduce risk

Property Injuries Mortgage Debt Environmental Risks

Only LLC’s assets at risk Additional layer of protection

Costs Maintain corporate formalities Filing costs

501(C)(2) TITLE HOLDING COMPANY Provides a tax exemption for title holding companies Formation

Articles of Incorporation Bylaws Lease

Qualifications Owned and controlled by exempt organization Exclusive purpose is to hold title to property, collect income from the

property and remit entire amount of income minus expenses to exempt organization.

Prohibited from engaging in any other business Benefits

Assists with real estate exemption Reduces risk

Costs Must apply to IRS for exemption Lengthy process Formation Costs

PURCHASE PROCESS

Letter of Intent Purchase Agreement Due Diligence Period Funding Closing

LOI AND PURCHASE AGREEMENT

Board Approval Buyer Resolutions Seller Operating Agreement/Bylaws Purchase Agreement Terms

Earnest Money Due Diligence Period and Review Request Due Diligence Items from Seller Seller Covenants Property Taxes Occupancy Broker Commission Warranties Financing Contingency

DUE DILIGENCE

More than 30 days Appraisal Inspection Phase I Survey Zoning Letter

All tenants Seller Account Receivables Tenant Leases

Estoppels Seller searches

Judgement and Lien Searches UCC searches

FUNDING SOURCE Bank

Review Commitment Letter Items Required

Purchase Agreement Organizational Documents EIN number Bank account Payoff letter Resolutions Insurance

Loan Documents Review carefully Hazardous Substance

Guaranties Limited

Assume Loan Grant

Source and use requirements

TITLE & CLOSING Title Insurance

Endorsements Remove standard exceptions

Payoff Letters Upon payment release liens

Settlement Statement Security deposit(s) Pro-rate rent Pro-rate taxes

Seller Resolutions Insurance Utilities Assignment of Leases Personal Property Purchase

Bill of Sale Vehicle Titles

PROPERTY TAX EXEMPTION APPLICATION

Owner entity to apply Deadline: May 15th Supporting documentation and analysis

Entity formation documents Exempt entity documents Financials Analysis of exempt purpose and qualifications

Issues related to third party tenants Municipal, charitable, educational or religious

purpose? Percentage of exemption

TAKEAWAY TIPS

Tight Purchase Agreement Due Diligence Picking a bank Timeline Budgeting

QUESTIONS

317-639-1210 www.lewis-kappes.com