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The strength of the euro against the U.S. dollar, along with certain tax advantages for foreign investors, has resulted in a surge of real estate investments by European Union countries in the United States. In particular, the tax advantages of U.S. investments, coupled with an established comfort level of German investors in the United States following a long history of German bank financing here, have resulted in a marked increase in German investments in U.S. real estate. The representation of foreign investors in U.S. real property requires the same skills as domestic representation but presents different challenges in focusing those skills. In order to provide effective representation, U.S. legal counsel to foreign investors must focus on understanding their client’s business, creating a responsive team, managing client expectations and establishing a process for clear and complete communication. Counsel must create an experienced team to respond to such complex legal issues as international and domestic taxation, banking regulatory matters, antitrust issues, labor matters, successor-liability issues, foreign and domestic securities laws, foreign and domestic investment company regulations and local real estate laws. Initially, counsel should examine the client, its management structure, history of investment in the United States and other nondomestic turf and the clients’ particular (and sometimes unique) regulatory issues. By understanding the foreign investor’s business, counsel will identify the decision-making process and the issues that drive the foreign investor’s sensitivities for structuring the transaction. Such important documentation issues as limitation on liability, free transferability, reporting requirements and restrictions on related activities can only be addressed if counsel understands the client’s culture and its regulatory restrictions. A close examination of international and domestic tax issues, regulatory requirements and investment company regulations will have an impact on the details of the entity structure and documentation. For example, representation of a German investor banking affiliate may be affected by issues arising under the U.S. Bank Holding Act, as well as limitations imposed on the client by German securities laws (such as those relating to closed-end fund entities). Foreign financial entities seeking to invest in the United States might be heavily regulated in their own countries. Such clients are typically represented by business representatives and their own general counsel; U.S. practitioners are well advised to avail themselves of advice from such resources, to learn in advance about foreign legal restrictions that are operative in the particular deal at stake. Thorough awareness of the regulatory and cultural restrictions in advance of negotiations is essential to communicating a client’s position in negotiations. The impact of tax, business and investment regulations must be carefully and consistently applied to the documents. Drafting new boilerplate provisions tailored to the specific regulatory requirements can be helpful in consistently applying uniform concepts, once they are understood and accepted by the other parties. U.S. domestic legal representatives must familiarize themselves with the regulatory requirements governing the investor-client in its domicile jurisdiction. In the case of institutional foreign investors, one should not assume that the institutional restrictions are the same as, or comparable to, similar institutions in the United States. Counsel must also focus on the parent and affiliate relationships of the client to be assured that he or she is adequately addressing not only the foreign regulatory restrictions imposed on the client, but also the U.S. regulatory restrictions that may apply. Creating the team After educating oneself substantively, counsel should create a team that is acceptable to the client and addresses its needs. There may be in-house general counsel directing legal services and other existing professional relationships, and such counsel should be considered in formulating the chain of command and plans for sharing information. In a complex deal involving a foreign investor, a firm might want to draw from distinct areas of legal service. Deals of this nature require, at minimum, sophisticated joint-venture experience, tax counsel, land-use expertise, securities and investment counsel and acquisition counsel; antitrust counsel and corporate lawyers may also be needed. Efforts should be coordinated with any additional professionals regularly involved with the client, such as, for example, the client’s U.S. special counsel, accounting professionals, or a client’s separate partnership counsel. Sometimes conflicts can arise. For example, in a deal handled by the authors’ firm, the clients shared an outside international accounting firm that coincidently was also used by the seller of the property. Consequently, the authors’ clients relied significantly on the advice of legal tax counsel that was provided. When asked to provide recommendations for third-party consultants, it may be wise not to make any particular recommendations, so as to maintain impartial assessments and negotiating leverage. Instead, consider providing clients with a number of referrals to quality third-party consultants. Foreign investors are not looking to cut corners when it comes to due diligence and tend to use top-quality consultants who are known in the community. In many instances, the foreign investors will be represented by talented in-house counsel, not only expert in their own domestic regulations, but also familiar with U.S. and international regulations. Because they are seeking assistance as local counsel, in-house counsel for foreign investors frequently take the lead in business and legal negotiations. It is essential that U.S. counsel understand the appropriate level of communications with clients; in many cases it is better to be overinclusive rather than under-inclusive. Before commencing negotiations, definite distribution procedures should be established for communications with the client, its in-house counsel and third-party advisors. In order to manage expectations for foreign clients, it is essential for U.S. counsel to analyze the structure of the adverse party and its counsel. Local counsel may be required to advise the client on market conditions, customary practice and local laws. Local counsel may also be required to identify expected areas of resistance to the resolution of issues; help the client identify whether or not it is negotiating with the decision-maker for all adverse parties. Failure to identify the decision-maker may lead to unnecessary delays or loss of negotiating leverage if renegotiations are required for previously “settled” issues. Each country has a different rhythm for completing transactions and a different pattern for the due diligence and negotiating process. Foreign investors may expect a quicker or slower process, depending on their customs and experiences. The pace may also depend on the adverse party and whether one is dealing with an institutional owner or seller. For example, in the authors’ recent experience, a German investor client was quick to respond to issues and expected to negotiate, finalize and close the transaction in a quick time frame. It’s important that the foreign investor clients be direct in letting the American lawyers know their customary acquisition process. For example, assume the foreign-investor client expects to identify due diligence problems as early as possible and to resolve them promptly upon identification, in advance of completing the acquisition documentation. This process must be communicated to the adverse party, given the expectations in the U.S. market for real property investment, which delays inspection until after a purchase and sale agreement is negotiated. Customarily, the due diligence period will be used, not just for inspection of the property, but also for a renegotiation of the transaction terms, based upon items discovered during the due diligence process. It’s also critically important to educate foreign clients as to how the U.S. legal system and local laws result in the legal transfer of title, when the transactions will actually close and how money will change hands. Careful review of the method of adjusting credits and the closing statement should not be neglected, as these can easily become stumbling blocks during the final steps of the transaction. Communicating Communication, while an integral part of any relationship, can break down very quickly when dealing with foreign clients. Strategies for navigating language, custom and time-zone barriers must be set up well in advance. It is essential to establish at the outset a pattern of regular conference calls and e-mail distributions to work around the time-change difficulties. Technology can also be used to minimize communication obstacles to the negotiation, drafting and closing of these transactions, and attorneys should be up to date with their firm’s technology for document sharing, video conferencing and e-mail communications. However, the most important communications point is the most basic one: listening to the client. Frequently, U.S. counsel have a preconceived expectation of acceptable negotiating positions on standard issues, and there is a tendency to use shorthand jargon when discussing those issues, with a nod of the head in agreement. Beware of these habits; foreign investors do not take boilerplate for granted and often their issues are not the pattern issues to which American lawyers are accustomed. Accordingly, counsel must take great pains to listen carefully to all of the issues that are being presented. Careful and precise drafting can also be a powerful tool. Foreign investors tend to have a masterful command of the English language and plain-language drafting is essential. Using old boilerplate or stock provisions will not survive the scrutiny of foreign-investor clients. As a point of communications, foreign-investor clients may rely on outside counsel for negotiations as much as any U.S. client. It is not unusual to be put in the position of shuttle diplomacy, often by introducing an area of concern to make certain that the seller understands the issue and the proposed resolution, as well as by obtaining an initial response from the seller. That practice can be quite effective in vetting issues and occasionally deterring them. Not coincidentally, transactions can move much more quickly when foreign-investor clients are in town, and preparation is key. Before the client’s arrival, one should prepare an agenda for each day’s expected accomplishments and circulate the agenda to all parties. This helps focus separate groups of people on their respective documentation responsibilities and issues. It’s also important to plan carefully the logistics for meeting rooms with the necessary technology along with satellite rooms for groups to confer privately. As the euro’s value continues to rise, more E.U. investors will be looking to the United States for real estate deals, creating a ripe market for attorneys who can skillfully handle the unique challenges this situation may pose. Taking steps to understand the client’s business and developing a team to meet their specific needs lays essential groundwork for the flow of the transaction, while managing expectations and fostering communication will see the deal through to closing with minimal surprises for all parties. Elizabeth Corey is vice chairwoman of the real estate practice group of Foley & Lardner, overseeing the Chicago and Detroit offices. Wayne Osoba is a partner in the firm’s real estate practice group. Both practice in the firm’s Chicago office.

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