🏢 Commercial Real Estate
Office, Retail, Industrial & Mixed-Use Properties
Overview
Commercial real estate transactions involve properties used for business purposes: office buildings, retail centers, warehouses, industrial facilities, mixed-use developments, and multi-family buildings (5+ units). These deals are typically more complex than residential transactions, with higher stakes and more sophisticated due diligence requirements.
Elina represents buyers, sellers, landlords, and tenants in commercial transactions throughout the Chicago area. Her role includes negotiating purchase agreements and leases, conducting due diligence, reviewing zoning and environmental issues, and ensuring compliance with commercial lending requirements.
Technical Components
Due Diligence Period
Commercial contracts typically include an extensive due diligence period (30-90 days) during which the buyer investigates the property: reviewing leases, financials, environmental reports, zoning compliance, building systems, and existing contracts. Unlike residential attorney review, this period is for investigation rather than contract modification.
Environmental Assessment
Phase I Environmental Site Assessments (ESAs) are standard in commercial deals, identifying potential contamination from current or historical uses. If concerns arise, Phase II testing may be required. Environmental liability can be significant — proper assessment protects buyers from inheriting cleanup obligations.
Lease Analysis
For income-producing properties, existing leases are critical assets. Your attorney reviews tenant leases, estoppel certificates, rent rolls, and lease abstracts to verify income, understand tenant rights, and identify potential issues like below-market rents or upcoming expirations.
Entity Structuring
Commercial properties are often held in LLCs or other entities for liability protection and tax benefits. Your attorney coordinates with your accountant and advisors to ensure proper entity formation, operating agreements, and title vesting.
Zoning & Land Use
Verifying that the property”s current use — and your intended use — complies with local zoning ordinances is essential. Non-conforming uses, special permits, and variance requirements can significantly impact property value and development potential.
Real-World Examples
Example 1: The Anchor Tenant Risk
A buyer was acquiring a strip mall where the anchor tenant (40% of rental income) had only 18 months left on their lease with no renewal obligation.
Resolution: Elina negotiated a price reduction and required the seller to escrow funds against potential vacancy. She also secured a lease extension commitment from the tenant as a closing condition.
Example 2: Environmental Discovery
A Phase I assessment on an industrial property revealed the site had previously been a dry cleaner — a red flag for soil contamination.
Resolution: Phase II testing confirmed contamination. Elina negotiated an environmental indemnity from the seller and a price reduction to cover remediation costs, with cleanup completed before closing.
Example 3: Zoning Non-Compliance
A buyer planned to convert a warehouse to a craft brewery, but discovered the zoning didn”t permit alcohol manufacturing.
Resolution: Elina extended due diligence while the buyer applied for a special use permit. Once approved, the transaction closed with the new use legally established.
Frequently Asked Questions
How is commercial real estate valued differently than residential?
Commercial properties are typically valued based on income (cap rate analysis) rather than comparable sales. The formula: Net Operating Income ÷ Cap Rate = Value. Understanding local cap rates and income verification is crucial.
What”s an estoppel certificate?
A document signed by tenants confirming lease terms, rent amounts, security deposits, and any landlord obligations. Estoppels verify that the rent roll is accurate and that there are no undisclosed side agreements.
Do I need a commercial real estate attorney or can my business lawyer handle it?
Commercial real estate has specialized requirements — title issues, environmental liability, lease structures, and closing procedures — that general business attorneys may not handle regularly. Work with someone who does these deals routinely.
What”s the difference between a triple-net (NNN) and gross lease?
In a gross lease, the landlord pays operating expenses (taxes, insurance, maintenance). In a triple-net lease, the tenant pays these costs in addition to rent. NNN leases are common in commercial real estate and significantly affect property valuation.
How long do commercial transactions typically take?
60-120 days is common, depending on due diligence complexity, financing requirements, and environmental reviews. Large or complicated deals may take 6+ months.
