Dore Law Group - December 2021

Dore Law Group - December 2021

THE D or É R eport

D ore L aw . com

DECEMBER 2021

REFRESHER ON REAL ESTATE TERMINOLOGY

Our real estate lawyers are often asked to explain terminology used by the commercial and residential real estate industries. The following is a brief refresher with simple explanations. Deed of Trust v. Mortgage – Both terms refer to the security interest a lender takes in your real estate to ensure payment. Some states (including Texas) use a Deed of Trust in which a Trustee is granted title to the property. Typically, the Trustee has a "power of sale" that allows the real estate to be sold without a court being involved (non-judicial foreclosure) if the loan is not repaid or a default occurs. Assignment of Lease – Rents paid by the tenants of a rental property are extra security for a lender, usually in addition to the property itself. UCC Financing Statement – Other personal or business property assets located on the real estate property and owned by the borrower is more security for the lender. Common examples are machinery, equipment, and accounts. Environmental Indemnity – The borrower agrees to protect the lender against any environmental legal claims that any other person or a governmental entity may bring against the real estate. SNDA clause – Subordination/Non- Disturbance/Attornment is a clause protecting tenants if the lender forecloses on rental real estate by allowing the leases to stay in place. Estoppel Certification – A statement from a tenant confirming the terms and status of the lease. This is often used when a building owner sells to a new buyer, and that buyer

wants to make sure there are any claims by existing tenants.

financing and documented with a Subordination Agreement.

Guaranty – A promise made by a person or business in addition to the borrower that the loan will be repaid.

Participation Loan – Multiple lenders often join together to make a loan. It is important to define which lender has rights to enforce the loan terms.

SPE – Single or Special Purpose Entity sometimes created simply to own the real estate and limit exposure to 3rd party claims due to activities on the real estate. A common example is an LLC created to own the real estate, and hopefully, insulate it from a business bankruptcy.

Mezzanine Financing – A loan typically made to a business secured by assets other than the real estate.

Fixture – Personal property that becomes permanently attached to the real estate, and therefore, is legally treated as part of the real estate. Perfection – The legal steps required by law to create an enforceable security interest for a creditor in designated property. One of the most common requirements is filing in public records to give notice to others.

Non-recourse Loan – Only the real estate secures the loan, and the borrower cannot personally be sued for a default. Often, such loans have "carve-out" clauses that do not protect bad-boy acts such as misappropriation of funds or failure to insure the property. Fee Mortgage v. Leasehold Mortgage – The lender’s security may be either real estate owned by the borrower (fee simple interest) or only rights granted to the borrower leasing the real estate (leasehold interest).

Underwriting – The procedure used by a lender to evaluate a possible loan.

EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization is a commonly used measure of the "cash flow" value of rental real estate. The written documents signed in a real estate transaction are all intended to share the legal rights of the parties. It is important that your advisors have experience in reviewing and negotiating the agreements before signing. Otherwise, you may find out too late about your rights if there is a problem later.

Sub-mortgage – A lender pledges a mortgage as security for another loan.

Lien – A property interest in favor of a creditor until the owner of the property fulfills all legal duties such as payment for services received. Junior Liens – Security interests on the real estate that are inferior (subordinate) in payment priority to the Senior Lien. These liens are commonly seen in secondary

-Carl Doré Jr.

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ENGAGE MORE CUSTOMERS IN 2022

HOW THIS BOOKSTORE BECAME A HUB FOR ITS COMMUNITY

3. Finally, they got involved . If you’re going to talk the talk,

In the age of Amazon, investing in a brick-and-mortar bookstore might seem ludicrous. But that’s exactly what Christin Evans and her husband Praveen Madan did in 2007, and since then, they have turned two historic San Francisco bookstores into community pillars and social movements. Their not-so-little print-based business is faring much better than one would expect in this digital world, and their secret is right in their community.

then you have to walk the walk! Customer engagement should also include what you can do for your community — not just what your community can do for you. So, Christin and Praveen founded Kepler’s Literacy

HOW DID THEY DO IT?

Foundation, which is focused on creating and promoting literacy programs, and bought GiftLit, a subscription-based book gifting company. By doing both of these things, Christin and Praveen are encouraging readership, engagement, and local advocacy. They are essentially generating customers (and doing some good, too)!

The couple purchased The Booksmith in 2007, and Christin left a corporate job to oversee the daily operations of the store. From the very beginning, she knew they had to engage with their customers and encourage them to actually visit The Booksmith. As a result, the couple was able to purchase another bookseller, Kepler’s Books & Magazines. 1. They started with the space. Christin knew her store had something that big booksellers or online retailers didn’t have: a community. The Booksmith and Kepler’s could tailor their customer experience to what locals wanted and turn their bookstores into miniature community centers. It helped the community view their stores as essential rather than just available. 2. Then, they hosted events. There is something for everyone at the store. Those who love happy hour but want to read can enjoy Silent Reads, where participants simply come to the store, read, and enjoy cocktails. Other events include mom groups, music nights, and — of course — book clubs. The community always has a reason to visit The Booksmith and Kepler’s because it invites them to stay engaged.

NOW, IT’S YOUR TURN!

You may not be battling Amazon or promoting literacy, but you can use the ideas that made The Booksmith and Kepler’s essential to their communities and transform the way you engage your customers. For instance, a dentist can host a workshop for young parents who are concerned about how to teach their children best oral health practices and also create a curriculum for classrooms across the region to promote oral wellness. In doing so, they create an active community around their business as more than just a dental office — they become more essential to the next generation of oral health.

Don’t wait for customers to engage with you in 2022. Collaborate with your team and go to the customers instead.

SUPPLY CHAIN PROBLEMS

What Does It Mean for the Energy Industry

At Doré Rothberg McKay, we sometimes feel like our law firm is the “canary in the coal mine” when it comes to predicting the future based on the ebbs and flows of the work needed by our clients. Two industry sectors are being particularly impacted by the effect of the pandemic and the economics driving the changes. Lately, we have received a significant increase in requests to review Master Service Agreements and advise on proposed merger and acquisition activities. For the oil and gas sector, we see two indications of activity: (No. 1) an increased demand for title attorneys and (No. 2) an increase in service company pricing driven by lack of availability of experienced personnel and equipment. The increase in work ranges from leasing new acreage to oilfield service companies seeing many new jobs to drill, jobs to complete, and wells to maintain. A possible wrinkle in all the good news may be, “How will the problems in the worldwide supply chain affect the ability of the energy industry sector to operate?” From one source we learned of a major offshore

soil. Lesser versions of this story are happening all around the oil and gas landscape.

The media has recently had a lot of stories about possible shortages of toys for Christmas along with expected price increases on various consumer goods that are in short supply. Less natural gas (to generate electricity) or motor fuels (for transportation) would be much more important to the economy than a shortage of new toys. There is much in the media about the lack of capital availability to invest in new drilling and production. But this is not necessarily the whole story. There is not so much about the decisions of the major oil companies to decrease their capital production budgets during this period of high prices and increased cash flow. Instead, the majors are using the new cash for share buybacks. As one example, Chevron generated the most free cash flow in its 142-year history during the third quarter 2021 but intends to keep capital spending 20% below pre-COVID-19 levels next year while increasing share buybacks. Higher product prices are presently giving the oil and gas industry much-needed relief after several bad years. The prospect of growing demand for energy as the world recovers from the pandemic is promising. Let’s hope that supply chain problems in the industry don’t prove to be the “fly in the ointment.”

E&P operation that was only days away from shutting down operations because certain drilling fluids could not be found — at any price. The crisis was avoided only by purchasing the supplies from halfway around the world, then moving heaven and earth to get them to U.S.

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OUR FORECASTS FOR 2022

Many respected sources have begun to cut economic targets for 2022. Delays in the expected recovery of consumer spending, combined with less fiscal support (government spending), have led economists to trim original forecasts of 6% GDP growth closer to 4%, or one-third less growth than first expected. Another factor worrying those who predict how the U.S. is likely to fair in the future is the supply chain problem and its potential to hurt businesses. Recent government reports on monthly GDP, unemployment, and inflation have done little to inspire confidence as business managers plan for next year. While the forecasts for 2023 remain rosy, let’s not forget the optimistic outlook for the economy in 2021 as the year began. The pandemic and all the problems that have resulted from businesses being disrupted or closed are proving to be hard to predict. The Law of Unintended Consequences will continue to wreak havoc on most plans for the future, but plan we must. Most businesses are likely to keep their options as flexible as possible. So, plan for some growth in 2022 but don’t “bet the farm” just yet.

BRAIN BREAK

SLOPPY JOES Inspired by JoCooks.com

Opt for a little comfort food this December!

INGREDIENTS

1 lb ground beef

1 cup tomato sauce 1 tbsp brown sugar 1 tsp yellow mustard

• • • • • •

• • • •

1 tbsp butter

1/2 onion, chopped

1/2 green pepper, chopped 3 cloves garlic, minced

2 tsp Worcestershire sauce

1 tsp Italian seasoning

•

1/2 cup ketchup

Salt and pepper, to taste

•

DIRECTIONS

1. In a large skillet, melt butter and brown meat over medium heat.

CANDLES CELEBRATION JINGLE JOLLY MISTLETOE ORNAMENT

PRESENT SANTA SLEIGH STOCKING

2. Add onion and pepper, stirring occasionally. Cook for 4 minutes and add garlic.

3. Mix in remaining ingredients, then bring mixture to a boil.

4. Reduce heat and simmer for 20 minutes, stirring occasionally.

WASSAIL WREATH

5. Serve on your choice of bun!

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Important Real Estate Terminology

3 Steps to Engaging More Customers in 2022 How Supply Chain Problems Affect the Energy Industry

Our Forecasts for 2022

Sloppy Joes

4 Steps to a Better Lead Nurture Campaign

SEE SALES GROWWITH 4 LEAD NURTURE MUST-DO’S IN 2022! People want to do business with people they trust, and you can’t form a strong relationship after just one interaction. It takes time to build a connection with potential and current clients, and the more you put into these relationships, the more you will get out of them. When lead nurture is one of your top sales priorities, you land consumers’ hands. This constant drip ensures you are always communicating with your leads without much effort. Be Consistent: Far too many businesses give up after three or four lead generation tactics because they “haven’t seen a You also have to target them with direct mail, phone calls, and freebies. Hit them on multiple levels, allowing your business to stand out from the crowd.

Track: Once you make a sale, ask the customer what motivated them to buy from you. How did they hear about you? What platforms did they enjoy? This information can help you track what’s working and what isn’t, allowing you to invest properly in your lead generation campaign. Furthermore, track open rates, responses, and phone calls after you release a lead nurture message. This >Page 1 Page 2 Page 3 Page 4

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