A.CRE

Bargain and Sale Deed

A bargain and sale deed guarantees that the grantor has title to the property and the right to transfer ownership, but does not guarantee that it is free of encumbrances. It also doesn’t guarantee that the title is free of any defects.

It is not uncommon for bargain and sale deeds to come with or without covenants.

Putting ‘Bargain and Sale Deed’ in Context

Background

Piedmont Legacy Investments, a generational family office investing firm, has identified an opportunistic value-add redevelopment project in Charlotte, North Carolina. The property, named Queens City Flex Park, is a 120,000-square-foot industrial flex space located in an emerging industrial corridor.

Scenario

Piedmont Legacy Investments has entered into an agreement to purchase Queens City Flex Park from a local entrepreneur who originally developed the property in the 1990s. The property is being sold through a bargain and sale deed, which guarantees that the seller has the title and the right to transfer ownership, but does not guarantee that the title is free from encumbrances or defects.

Due Diligence

Given the nature of the bargain and sale deed, which is available but less commonly used in North Carolina, Piedmont Legacy Investments must conduct thorough due diligence to uncover any potential encumbrances or title defects that could affect their redevelopment plans. The due diligence process includes:

  • Title Search: Engaging a title company to perform a comprehensive title search to identify any existing liens, easements, or covenants that might impact the property.
  • Environmental Assessment: Conducting Phase I and Phase II Environmental Site Assessments to ensure there are no environmental hazards that could complicate redevelopment.
  • Zoning and Permitting: Reviewing zoning regulations and obtaining necessary permits for the planned redevelopment.

Redevelopment Plan

The redevelopment plan for Queens City Flex Park includes modernizing the existing structures, improving site infrastructure, and leasing to a mix of industrial and office tenants. The goal is to transform the outdated property into a state-of-the-art flex space that meets the needs of contemporary businesses in Charlotte’s growing market.

Financial Overview

  • Purchase Price: $10 million
  • Redevelopment Budget: $5 million
  • Expected Stabilized NOI: $1.5 million
  • Projected Cap Rate: 6.5%
  • Expected Value After Redevelopment: $23 million

Risk Management

To mitigate the risks associated with the bargain and sale deed, Piedmont Legacy Investments has taken several steps:

  • Title Insurance: Purchasing title insurance to protect against any unforeseen title defects.
  • Legal Review: Engaging legal counsel to review all documents and identify any potential legal issues.
  • Contingency Planning: Setting aside a contingency budget within the redevelopment plan to address any unexpected challenges that arise during the process.

Conclusion

Through meticulous due diligence and strategic planning, Piedmont Legacy Investments aims to capitalize on the value-add opportunity presented by Queens City Flex Park. By understanding the implications of the bargain and sale deed, the firm is well-prepared to manage the risks and unlock the property’s potential in the vibrant Charlotte market.

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