virtual Round Table Construction & Real Estate 2014 ROUND TABLE: CONSTrUcTION & REAL ESTATE 2014

MEET THE EXPERTS

Leigh Duthie - Baker & McKenzie Chambers & Partners ranks Cleaver Fulton Rankin as a Band 1 Construction firm T: +61 3 9 617 4254 with Patrick Fleming described as a “standout performer”. Cleaver Fulton Rankin E: [email protected] is a Legal 500 top-tier ranked Construction firm described 500 as “excellent at attributing the correct level of expertise to the service requested.” eigh Duthie has over 15 years’ experience in the construction space and has acted on major domestic and cross-border construction John Lurie - Dorsey & Whitney Lclaims. Leigh is widely recognised for his construction litigation T: +44 (0) 20 7031 3784 experience and his ability to lead on major projects. His practice focuses on acting for E: [email protected] major Australian and multinational corporations in relation to complex contractual and non-contractual claims arising from infrastructure projects, defects in plant, ohn Lurie is a partner in the Construction and Design Group. and faults in heavy mining machinery. Leigh’s experience also includes serving as JHis practice focuses on risk , procurement and Baker & McKenzie’s Melbourne office Managing Partner. dispute resolution advice in connection with construction and engineering projects. Patrick Fleming - Cleaver Fulton Rankin T: +44 (0) 28 9027 1328 He represents owners, developers, contractors, investors, insurers and banks E: [email protected] involved with projects in the United Kingdom, Continental Europe, the Middle East, Africa and Asia. atrick, who heads Cleaver Fulton Rankin’s Construction and PDispute Resolution teams, specialises in both contentious and Mr Lurie drafts, negotiates and advises on building and engineering contracts, non-contentious construction which sets him apart from professional appointments, bonds, guarantees, warranties and ancillary documents. most other lawyers in this jurisdiction. Patrick’s clients include project companies, He regularly works with industry standard contracts including the FIDIC, NEC, banks, government bodies, contractors and construction professionals. JCT and ICE forms as well as bespoke forms of contract.

On the non-contentious side, Patrick has been involved in many high profile He also provides domestic and international dispute resolution advice in relation projects, for example, Patrick was the lead advisor to Titanic Quarter Limited in to adjudication, arbitration and litigation proceedings. In particular, he advises the construction of the recently completed Titanic Film Studios and he also advised on international arbitration conducted under the rules of bodies including the Harcourt Construction (NI) Limited in their construction of the £90million iconic International Chamber of Commerce (ICC), the London Court of International Titanic Belfast. Patrick has also enjoyed working on the new Lyric Theatre, the new Arbitration (LCIA) and the United Nations Commission on International Trade PRONI headquarters and the new Belfast Met campus at Titanic Quarter. Law (UNCITRAL). In respect of contentious construction, Patrick regularly represents clients in the Commercial Court however in recent years has seen his practice develop into alternative dispute resolution and therefore has extensive experience in Mediation, Adjudication and Arbitration. Patrick has enjoyed success in enforcing adjudicator’s decisions in the Commercial Court.

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MEET THE EXPERTS

Carol Santoni - Gide Loyrette Nouel A.A.R.P.I. Mark Fraser - Taylor Wessing (Middle East) LLP T: +33 (0)1 40 75 22 15 T: +971 (0)4 309 1004 E: [email protected] E: [email protected] 000 to date : Gide law firm ark Fraser is Managing Partner of Taylor Wessing (Middle - Admitted to the Paris Bar since 2001. Graduated with a East) LLP and head of its construction and dispute resolution 2post graduate in French commercial law and with a LLM in Mpractices. Mark has advised on a range of development and German Law infrastructure projects in the Middle East, Asia and Europe covering the hotel and - Advising and assisting international investors: acquisitions and arbitration involving entertainment, transportation and energy sectors. underlying real estate assets (asset deals, share deals, joint-ventures) -Advising and assisting developers and investors: projects involving asset construc- Mark has practiced in the UK, Hong Kong, Singapore, Thailand and Dubai over the tion, redevelopment or renovation past 27 years. - Advising and assisting property owners, asset management Outside of legal work Mark’s interests include football, rugby, guitar and salsa. Eriko Ozawa - Mori Hamada & Matsumoto T: +81 3 5220 1816 Diego A. Chighizola - Marval, O’ Farrell & Mairal E: [email protected] T: +54 11 4310 0100 E: [email protected] he principal practice areas of Eriko Ozawa are real estate and Tstructured finance, with particular focus on property financing, iego Chighizola specialises in banking and finance, real estate private real estate funds and real estate trusts. She advises on all types Ddevelopment and financing, capital markets, and M&A. He has of domestic and cross-border real estate related transactions, such as real estate investments drafted and negotiated domestic and cross-border agreements for and financings, acquisitions, sales and real estate fund establishment and management. structured financings, syndicated loans, derivatives, acquisitions and joint ventures. He She has been recognized by various trade publications as a leading practitioner in both real joined Marval, O’Farrell & Mairal in 2001 and became a partner in 2012. He worked in estate and structured financing, and clients have highly spoken of her “high level of skill of New York as foreign associate at Cleary, Gottlieb, Steen & Hamilton from 2004-2005. He complex deals”, “insightful business sense,” and hands-on approach to transactions. graduated in 2001 as a lawyer from the Catholic of , and obtained in 2004 a Masters in Law from Columbia University School of Law, New York and in 2007 a Masters in Finance from University of CEMA. He is admitted to the New York State Bar and is a member of the City of Bar. He currently teaches Business Law at University of San Andrés and gives presentations at University of CEMA and Austral University.

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MEET THE EXPERTS

Steven M. Charney - Peckar & Abramson leading national organization. He has often published commentary regarding issues T: +1 212 382 0909 applicable to the construction and development industries, including commentary E: [email protected] in New York Construction. He is a member of the Association of the Bar of the City of New York and served on the Construction Law Subcommittee of that association. ew York office. Mr. Charney’s practice includes ongoing He is also a member of the American Bar Association and the New York State Bar representation of contractors that are among the top ten Association. Nas reported by Engineering News Record. Mr. Charney’s background couples extensive academic and hands-on experience in the construction In view of his accomplishments, Mr. Charney has been repeatedly recognized by industry with decades of experience in litigating for and providing legal counsel to Chambers USA, as a leading attorney in the field of Construction Law in New York. contractors and developers. He has also been repeatedly named to Who’s Who of International Construction Lawyers, selected for inclusion in the publication Best Lawyers in America, and Throughout Mr. Charney’s career, he has handled numerous construction related listed in New York Magazine, as a top construction attorney in the New York, New disputes, in court, arbitration or in alternative dispute forums. Mr. Charney Jersey and Connecticut area. Mr. Charney is also a fellow in the American College frequently handles multi-million dollar delay, lien, default, equitable adjustment, of Construction Lawyers. termination and construction and design defect matters. Mr. Charney’s experience includes the representation of contractors and owners in connection with some of Mr. Charney is a graduate of Seton Hall University School of Law, where he attended the most prominent projects built throughout the United States. He represented the as an evening student while working fulltime in the construction industry. In 1983, developer of the largest private building construction project ever to take place in Mr. Charney received a Master of Science degree in construction management from New York City and represented contractors and design/builders in connection with the School of Civil Engineering at New Jersey Institute of Technology (where he also numerous professional sports facilities (such as the Arthur Ashe tennis stadium studied as an evening student while working full-time in the construction industry). and several National Football League and Major League Baseball stadiums). Mr. Mr. Charney also holds a bachelor’s degree in from Syracuse University, Charney led the Associated General Contractors of America to establish a task force with a minor in construction technologies. to study mold related issues, and then vice-chaired that task force as it drafted the industry’s first guide to understanding this problem.

Before joining Peckar & Abramson, Mr. Charney served as Eastern Division Counsel for Turner Construction Company. Mr. Charney was employed by Turner Construction Company for nearly a decade, prior to entering private legal practice, and served in a number of operations related roles, including field superintendent, cost and scheduling engineer, and manager of litigation and claims, before serving as counsel.

Mr. Charney is a member of the Associated General Contractors of America and serves on both the Contract Documents and Risk Management Committees of this

6 7 ROUND TABLE: CONSTrUcTION & REAL ESTATE 2014 Construction & Real Estate 2014

In this roundtable we spoke with eight experts from around the world to discuss the latest changes and developments in Con- struction & Real Estate. Among the highlighted topics our chosen experts outline the main opportunities and challenges cur- rently facing the industry, discuss infrastructure for Tokyo 2020 Olympics and outline regulatory changes affecting the UK through to Australia.

1. What are the main opportunities structing major public infrastructure Whilst the construction sector suffered domestic and international operators and challenges currently facing the due to rising fuel and labour costs on badly during the financial crisis, there in the energy, transport, infrastructure real estate and construction indus- top of increased land values. In addi- has been a brightening in the market and housing sectors. tries? tion, Australia’s bid costs are among the over the past year. Although output is highest in the developed world. growing slowly, the industry is far from Ozawa: The leading news for the Jap- Maher: The primary challenge is for recovered. Overseas investors have tak- anese real estate and construction in- government and industry to devel- Maguire: The real estate sector in en an extensive interest in the UK with dustries in the past year has undoubt- op new cost-saving measures that in- Northern Ireland is still facing the chal- investors from China, the Middle East, edly been Tokyo’s hosting of the 2020 crease the competitiveness of Austral- lenges arising from the downturn in the Europe and the United States assisting Summer Olympics, which is expected ia’s much-needed public infrastructure market in 2007, although we are seeing growth. to bring tremendous economic oppor- projects and attractiveness to foreign a marked increase in the volume and tunities to Japan. investors. By increasing productiv- value of residential property transac- Opportunities for the construction in- ity, greater value for money outcomes tions which is very encouraging. dustry currently lie in the residential Since before Tokyo’s winning bid, these will be achieved which can only be of market in the UK and also large infra- industries have been facing rising con- long-term benefit for the public. With We are also facing the challenges which structure projects. struction costs due to labour shortage a glut of desperately-needed public in- will arise in April 2015 from the trans- and increased cost of building materi- frastructure projects – there is plenty fer of powers to local councils. Many Although there are positive signs of als caused partly by the Tohoku earth- to keep investors and contractors alike functions will transfer to 11 new coun- recovery, the wounds of the economic quake disaster reconstruction needs. content for the foreseeable future. cils from central government depart- downturn have left significant scars on However, the upcoming Tokyo Olym- ments, including planning, roads, ur- the sector. There is still a sense of fear pics 2020 are expected to boost these Notwithstanding the opportunities, ban regeneration, community develop- and uncertainty stagnating growth. industries through construction activi- our clients are increasingly concerned ment, housing, local economic devel- ties and spending necessary to refur- about rising costs in the development opment and local tourism. The trans- Lurie: London’s ageing infrastructure bish and build infrastructure and other sector and whether the planned pro- fer will also include the delivery of the is desperately in need of a major over- urban facilities of the Great Tokyo Area. jects are adequate to meet Australia’s EU Rural Development Programme, haul. This includes, in particular, rail- anticipated growth. The Australian spot listing of buildings and greater in- ways, roads, airports, water and energy 2. Have there been any recent regula- Government Productivity Commission volvement of local government in local distribution networks. There is also tory changes or interesting devel- draft report on this issue highlights sig- sports decisions. an acute shortage of housing. Oppor- opments in your jurisdiction? nificant increases in the cost of con- tunities will continue to arise for both

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Maher: An important regulatory change them from obtaining capital allowanc- is being updated with a view to bring- area, it intends to contain soaring rent that we expect to see in the near future es. Capital allowances will only be avail- ing clarity and efficiency to the procure- prices. Some exceptions are provided is the reintroduction by the Federal able to a purchaser of second hand fix- ment process. In particular, the regime by law to take into account specific fea- Government of the Australian Build- tures if the past owner had “pooled” the will now apply to lower value contracts turing such as a garden or a balcony. ing and Construction Commission relevant expenditure for capital allow- in order to promote small business (ABCC). The ABCC was established ance purposes in a chargeable period participation in government projects. But for now, it is still not clear how the in 2005 as an industry watchdog tasked when it owned the property. Purchas- Also, the emphasis on Building Infor- reference rent will be computed and with monitoring the prevailing work- ers need to be aware that they will lose mation Modelling (BIM) continues to upon which parameters, thus leading place and to ensure that building valuable tax relief or maybe even suf- grow, with the United Kingdom gov- to an uncertainty on the rental market work was carried out fairly, efficiently fer a reduction in property value where ernment requiring all government pro- profitability. This topic is to be followed and productively. With recent reports a Vendor has not pooled expenditure. jects to utilise fully collaborative BIM by up. of corruption and criminal activity in The new challenge for Solicitors and 2016. In relation to the English courts, the construction industry, the Federal other professional advisors is that they certain refinements have been made to Chighizola: Yes, according to Law Government has flagged its reintroduc- will be more at risk than ever if they fail litigation processes including measures 26,737, enacted on 2012, foreign own- tion (it was abolished in 2012 under the to warn their clients of the impacts of to streamline litigation costs, through ership of rural land shall not exceed 15 previous Government). these changes. budgeting and electronic discovery. per cent of the total amount of “rural Much of this is directed towards fur- lands” in the Argentine territory. This However, despite the wide-ranging The UK Office of Government Com- ther enhancing England’s reputation, as percentage is to be calculated also in re- powers the ABCC possessed between merce has recommended the NEC a jurisdiction of choice, for the resolu- lation to the territory of the province or 2005 and 2012, there was criticism at 3 form of contract for all public sec- tion of both domestic and international municipality where the relevant lands the lack of actual referrals it made to tor construction projects. NEC 3 has disputes. are located. police and subsequent convictions for therefore become the standard form of criminal activity within the construc- contract for public sector procurement Santoni: Yes. The so-called “loi Alur”, In addition, ownership by the same tion industry. We expect to see any in Northern Ireland. which has already entered into force, foreign owner (i.e. foreign individuals, reincarnated ABCC to be focused on aims at regulating the problem of high- foreign entities or local entities con- avoiding similar criticism. The recent sale of the National As- level rents of residential premises in the trolled by a foreign person) shall not set Management Agency (“NAMA”) most important cities in France, which exceed 1,000 hectares of the “core area”, Maguire: From April 2014 there are Northern Ireland property loan port- has become a burden for most middle- or the “equivalent surface” determined changes to the ability of commercial folio to Cerberus Capital reportedly for class homes. according to the location of the lands. property buyers to claim Capital Al- over £1 billion is predicted to increase The Interministerial Council of Rural lowances. Changes will affect purchas- certainty and confidence in the market. Through a scheme boarding rent prices Lands (Consejo Interministerial de Tier- ers of second hand property containing with a maximum and a minimum com- ras Rurales), the enforcement agency of plant and machinery and may prevent Lurie: The public procurement regime puted from a reference rent in a bounded the new law, has defined the “equivalent

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surface” considering: (i) the propor- committee published a report encour- fixed level of rent increases which can Parties to building projects should en- tion of the “rural lands” in relation to aging the launch of J-REITs focusing on be imposed on tenants by landlords, in- sure that they have the appropriate sys- the municipality, department and prov- nursing homes and senior housing, and creased the transfer fees payable to it by tems in place to comply with the re- ince; and (ii) the potential and quality the Tokyo Stock Exchange and the As- parties to real estate sales and purchases, quirements of the Personal Property of the rural lands for their use and ex- sociation for Real Estate Securitization and may be moving towards ultimately Securities Act 2009 (Cth) in relation to ploitation. (ARES) have been working towards this prohibiting offshore companies from the registration of security interests. In end. In fact, there are several ongoing owning real estate in the Emirate; and, particular, Owners need to thoroughly Ozawa: I would pick up three things: projects to set up healthcare J-REITs or most recently, the Dubai Land Depart- analyse their rights and interests in a the amendment of the Real Estate Spec- to provide bridging funds and the mar- ment’s requirement that all real estate project to ensure they meet their ob- ified Joint Enterprise Law (the “RES- ket anticipates the initial public offering sale and purchases are to be completed ligations otherwise they will lose out JEL”), the progress towards launching of several healthcare J-REITs in 2014. using a standard form, which could be in insolvency. It is important to real- a healthcare J-REIT and the submis- considered a move to reduce parties’ ise that it is not only simple charges or sion of a bill to legalise casino gambling In December 2013, a bill on the “Act rights to contract freely. liens that must be registered, but rights within an integrated resort. on the Promotion of the Development under contract, such as step-in rights of Specified Integrated Resort Facility 3. Are there any compliance issues or that enable property seizure, as well. Effective 20 December 2013, the RES- Areas” was submitted to the Diet. Al- potential pitfalls that firms need to JEL was amended to allow a new GK- though the proposed bill only provides be cautious about? In New South Wales, proposed amend- TK structure, a typical real estate in- a framework for promoting the devel- ments to the Building and Construction vestment structure in Japan, in acquir- opment of integrated resorts, if this bill Maher: The rising cost of obtaining a Industry Security of Payment Amend- ing outright ownership of a proper- is enacted into law, this could lead to project bond has become a recent issue ment Act 2013 (NSW) require the Small ty. Before this amendment, a GK-TK large-scale development projects in ap- for local contractors. Securing finan- Business Commissioner to oversee a structure could be used only to acquire proved areas in Japan. cial guarantees from banks, of between statutory trust fund in which head con- a beneficial interest in a trust of a real 5-10 per cent of the Contract’s total tractors will be required to pay their re- property. Although this is a welcome Fraser: There have been a number of value reduces the remaining borrowing tention amounts. When disputes arise development, the new GK-TK struc- regulatory changes and developments capacity of the construction company. over releases, the Commissioner will ture will be subject to a different set of relating to real estate in the UAE and, Where bonds are called on by owners facilitate mediation between parties be- regulations and tax requirements and in particular, Dubai over the last six for the Contractor’s failures (or alleged fore the matter proceeds to arbitration. will enjoy fewer tax benefits than other months. For example, the Central Bank failures) the cost of insurance and bank- structures. Therefore, the new GK-TK of the UAE has introduced mortgage ing rises and strains the contractor’s Maguire: It is not possible in North- structure is not likely to become a first regulations which, inter alia, limit the business. As local contractors struggle ern Ireland to contract out of business option for investors. loan to value and debt to income ratio with these costs, large foreign construc- tenancies legislation, as it would be in criteria used in mortgage lending; the tion companies, whose cost of security England and Wales, and this should al- In March 2013, a government-backed government of Dubai has amended the is much lower, are moving in. ways be borne in mind when granting

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of taking a lease of commercial proper- local Public Registry of Commerce. to Question 15 below. For example, most contractors under- ty. Advice should always be taken form stand, at least in a general sense, that if a solicitor when dealing with business Another requirement to take into ac- In the Japanese market, investments in they bill for work that is inflated or not tenancy issues, so as not to miss any count is that, cross-border financings commercial real property often take the performed, they are probably violat- deadlines imposed by the legislation to Argentine residents – as a general form of a beneficial interest in a trust of ing some state/federal regulation which here. rule – carry the obligation to repatriate a real property, rather than an outright governs false claims. Few contractors and liquidate the funds into the foreign purchase of the real property. A trust have the insight to realize that these There are a number of key issues that exchange market as well as the main- beneficial interest is a “security” under downstream practices, which may seem construction professionals should be tenance for a one-year minimum term the FIEL, subjecting the activities of the benign, can create the same catastroph- aware of in order to avoid pitfalls. As and, unless an exception applies, are acquisition SPCs (i.e., TMK or GK) and ic results. construction projects are high risk, also subject to the 30 per cent manda- their asset managers to the FIEL. there are financial, infrastructural, lo- tory deposit. However, there is an ex- Contractors, for example, rarely under- gistical and ethical considerations to ception commonly used for financing, Also, most of the financing methods stand that even though the owner ap- be made at an early stage. Poor pro- i.e. the acquisition of real estate that used in a TMK or a GK-TK structure proves the initially agreed upon rates, curement strategy is a key concern in a requires the loan to have an average (such as preferred shares and speci- they may still be subject to future au- market where there is aggressive com- term (for the repayment schedule for fied bonds in a TMK structure, and dit. If that were to occur and an audit petition for the somewhat limited work principal and interests) of not less than investor’s interest under a tokumei ku- showed that profit or fee enhancement available. two years and the investment of 100 per miai agreement) qualify as “securities.” had been included in the rates, the con- cent of the proceeds in fixed assets or Therefore, all dealings with these secu- tractor could be found guilty of false Awareness and good relationship of sub- inventory. rities are subject to the FIEL. claims act violations. contractors is an important element for contractors to reduce risk. Delays and Ozawa: Investors should carefully con- Sippy: In the past five years, the major- Similarly, most contractors conceptu- disruption often have serious financial sider Japan’s Financial Instruments and ity of large construction projects that ally understand that it is ill-advised to consequences. It is therefore important Exchange Law (the “FIEL”) which reg- have actually gotten out of the ground circumvent state/federal DBE require- to have knowledge of dispute resolution ulates securities and should procure have involved state or federal dollars. ments on a publically funded project. mechanisms. the necessary registered business op- We are noticing that while contractors However, few understand that they erators because the two typical invest- often understand the general require- may be dragged into a disastrous false- Chighizola: In principle, acquisition of ment structures (i.e., TMK structure ments and restrictions that govern pro- claims mess by submitting payment real property in Argentina by a foreign and GK-TK structure) in the current jects which use public funds, many are applications that seek compensation entity (in particular, when more than Japanese real estate market involve var- not aware of the intricacies of these where a DBE entity merely serves as a one asset is being acquired) may require ious financial instruments that are cat- regulations or how their day-to-day ap- pass-through. That is to say, most pub- the registration of a branch or represen- egorised as “securities” under the FIEL. plications can create or alleviate major lic work contractors realise that a low- tation of such foreign entity before the For the typical structures, please refer problems down the road. level DBE may be making a false claim

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if it is not performing a commercially jects, including those regarding disput- a robust compliance program, periodic In addition, successive Australian gov- useful function. However, the upstream ed scope. training program, occasional internal ernments have been keen to facilitate contractor/construction manager may audits to gauge the effectiveness of the foreign investment especially in new also run into trouble if he or she sub- 2. Design defect/construction defect program, and to conduct internal in- real estate development projects. Pre- mits the invoices of the pass-through claims, often involving building enve- vestigations if you suspect malfeasance. 2008 foreign investors were limited to DBE contractor as support for a sworn lope issues such as leaks through roof Simply put, companies must foster a purchasing 50 per cent of dwelling in pay application. systems, curtain wall systems and the culture of ethical behaviour and com- new projects, however, that limit has like, although design/construction de- pliance. This can provide significant since been removed. For investors in It is clear that most contractors under- fect claims can touch any aspect of the protection if a company ever finds itself commercial real estate, all projects un- stand that their actions are subject to design and construction of a building. as the target of a regulator’s investiga- der $54 million are now exempt from a variety of rules and regulations once tion. A company will be able to show foreign review board approval. Most they accept public dollars; however, it 3. Delay and impact/inefficiency claims, that it took reasonable steps to prevent state governments offer further incen- is also clear that many contractors do often involving unanticipated subsur- problems and acted appropriately when tive by significantly reducing stamp not understand that many of the more face conditions, but also related to de- it suspected deviation from it goals. duty on off-the-plan sales. nuanced and seemingly innocuous sit- sign issues or the cumulative effects of uations could give rise to contractor li- significant numbers of changes to the However, it is important that a com- Sippy: Mediation is a low-cost process ability. scope of work of the project. pany does not merely wind up its com- that is designed to assist parties in ne- pliance plan like a watch and let it run. gotiating an early settlement and avoid 4. What are the most frequent dis- 4. Adjoining property owner disputes The company must continually revisit expensive litigation fees. The success putes in your jurisdiction? over access required to facilitate con- the plan and modify it to address pro- rate is often very high because the me- struction and/or damage caused by ject specific issues. diator can focus the attention of the de- Sippy: Not including personal inju- construction operations to adjoining cision makers on their business inter- ry lawsuits arising from job site inju- properties. 6. Can you outline the advantages and ests and facilitate a mutually agreeable ries (which are prevalent but not what disadvantages of Alternative Dis- resolution without the risk and cost of we understand to be the nature of the 5. Disputes arising from subcontractor pute Resolution (“ADR”)? litigation. inquiry);we frequently see in the New performance failures. York City area construction related dis- Maher: The Australian property market Arbitration is a similar dispute resolu- putes arising from (in no particular or- 5. What are the best methods a com- has undergone a long period of growth tion process in which a neutral party, or der): pany can employ for conflict avoid- that has increased its attraction to for- arbitrator, renders a final decision in fa- ance and dispute resolution? eign investors. Factors such as relative vour of one party. The primary advan- 1. Purely commercial, payment dis- price stability and regulatory certainty tage of arbitration is the parties’ abil- putes, often involving mechanic’s lien Sippy: From a compliance standpoint, provide broad incentives for overseas ity to select the arbitrators, assuring a claims, on both public and private pro- the best way to avoid conflict is to have investors. trusted expert as the judge. Parties may

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also design an arbitration process that . some properties has decreased almost real estate market is having a knock ef- fits the specific circumstances of their 40 per cent since foreign exchange re- fect on the rents being charged by land- dispute. With reasonable parties and Santoni: To the best of our knowledge, strictions strengthened in 2011. More- lords in the two Emirates, despite many a good arbitrator, arbitration is often the most significant change for now in over, compared to previous years and new units coming onto the market, such faster and less expensive than litigation. 2014 is the global volume of sales and other Latin American countries, for- as an estimated 28,000 units that will be rents of offices in the Ile-de-France eign investments are at a low level and completed in Dubai in 2014. The up- With that said, many believe that arbi- region (around Paris). At the end of do not play a major role whether in the turn in the real estate market in Dubai trators split the baby and fail to grant March 2014, the supply of immediately recovery or in the mitigation of the cur- is also evident from the number of new motions for summary judgment, available office has experienced a 19 per rent crisis in real estate transactions. projects being announced as well as whereas litigation offers assured proce- cent surge in one year, despite an eco- many projects which stalled during the dural protections and a rigid set of well- nomical environmental which is still Ozawa: Significant developments in Ja- economic downturn being resuscitated tested rules. not very buoying. In 2013, the volume pan in 2013 had positive effects on the by new developers and taken to com- had decreased by 24 per cent. Japanese real estate market. Among pletion. 7. How has the real estate market them are “Abenomics,” representing the changed for 2014? A particular deal around the Coeur economic policies advocated by Prime 8. Do you see urbanisation as the main Défense structure, in Paris business Minister Shinzo Abe, and the anticipa- long-term trend? Maguire: There has been a marked in- centre La Défense, which amount is tion of the upcoming Tokyo Olympics crease in the volume and value of resi- estimated around 1.3 billion Euros, 2020. The Japanese real estate market Lurie: Urbanisation is certainly an im- dential transactions which is very en- counts for most of the investment in- is continuing to become more active in portant long-term trend, especially in couraging. This is being helped by Gov- crease experienced since the beginning 2014 and to attract increasing attention many of the emerging markets. Indeed, ernment incentives for social housing, of the year. However, without consid- domestically and from abroad. In fact, the World Bank has described urbani- such as the Shared Neighbourhood Pro- ering this deal, the Parisian real estate many say that the market has become sation as the defining phenomenon of gramme, the New Build Programme, market remains stable (in investment highly competitive and it is often diffi- the century, with the locus of this de- and Improving and Maintaining Social volumes and in number of deals) com- cult to win an investment opportunity. mographic transformation in the devel- Housing. The Northern Ireland Co- pared with last year. oping world. For example, large scale Ownership Programme continues to Fraser: There was a rapid increase in urbanisation is occurring in South Asia play an important role in this jurisdic- Chighizola: Real estate transactions are real estate prices in Abu Dhabi and and Africa. In more developed econo- tion in enabling many buyers to take currently stagnated attributable to the Dubai during 2013 and this trend has mies, there is obviously less focus on the the first step on the property ladder. increasing foreign exchange restrictions continued in 2014. A number of prop- movement of populations from rural to as historically real estate transactions erty consultancies have commented urban environments. However, many It remains to be seen how the recent involving the acquisition of real prop- that real estate values in Abu Dhabi and suburbs are being targeted for more sale by NAMA of its Northern Ireland erty were denominated and paid in for- Dubai are likely to increase by 10 to 15 concentrated urban development. At loan portfolio will impact on the local eign currency. Reportedly, the value of per cent in 2014. The current buoyant the same time, appetite is growing for

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more energy efficient and liveable -ur Maguire: Northern Ireland offers many tions. In addition to rapid increases in portunities. ban environments. The development attractive incentives for those looking capital investment, landlords are tak- of “Smart Cities”, using technology to to do business in this jurisdiction, such ing advantage of the economic upturn Lurie: Investment opportunities vary enhance living standards, whilst reduc- as grants from Government bodies like in the UAE and the increase in demand significantly both within and between ing energy consumption, traffic conges- Invest NI. However, the tax regime for rental properties to maximise their construction markets. They also vary tion and environmental pollution, is in- here is the same as in the rest of the UK, income from investment properties by across different industry sectors. For creasing in both developed and emerg- and it remains to be seen if the political increasing the rent being charged to example, the oil and gas sector in South ing markets. landscape can change this to offer fur- new tenants. Rents in some areas of Sudan offers the prospect of significant ther incentives for businesses to base Abu Dhabi and Dubai have increased investment returns. But this must be 9. Where are the high growth cities? themselves in Northern Ireland. by twenty to 30 per cent in 2014 already. weighed against the major risks of po- litical and military interference. Con- Lurie: The fastest growing cities are in Chighizola: In 2012, the Government 11. Which construction markets are versely, real estate assets in London offer developing countries such as Brazil, In- created a Financing Program called currently providing the best invest- one of the safer investment alternatives. dia, China and Nigeria. However, es- “PRO.CRE.AR” (Programa Crédito Ar- ment opportunities? Clean technology and renewable forms tablished cities such as New York and gentino) aimed to grant 400.000 credits of energy production, such as wind and Tokyo are also experiencing significant in total for different purposes: (i) pur- Maguire: Whilst the construction sec- solar power, are key focus areas for more growth. In the United Kingdom, Lon- chase of land for constructing real es- tor in Northern Ireland was severely environmentally friendly forms of en- don growth continues to accelerate. tate; (ii) expansion of real estate; (iii) re- hit by the downturn, it is an attractive ergy production. In London, skyscrap- Other key centres include Manchester, pairs and finishing real estate; and (iv) place for investment. Northern Ireland er developments and mixed use office, Leeds, Birmingham, Bristol and Glas- purchase of real estate. Its main charac- has an excellent infrastructure, high- retail and residential schemes are also gow. Much of this growth is facilitated teristics include: (a) loans of up to AR$ ly educated and young workforce and providing unique investment oppor- by investment in key infrastructure and 500,000; (b) interest rates from two per competitive cost advantages. Outside tunities. Some more recent examples energy projects such as those involving cent to 14 per cent; (c) instalments not of London, Northern Ireland is attract- include the Cheesegrater building, the railways, highways, superfast broad- exceeding 40 per cent of the debtors in- ing the most inward investment in the Battersea Power Station and Royal Al- band networks, airports, power plants come; (d) loans granted trough raffles UK. Companies such as Allen & Overy bert Docks, all of which have attracted and activities involving the exploration, made ​​by the National Lottery. LLP, Seagate Technology, Bombardier significant international interest. extraction, processing and distribution Aerospace, Liberty Mutual, Citi and the of natural resources such as oil and gas. Fraser: With the current rapidly in- Allstate Corporation have all invested 12. What should be included in a creasing real estate values in Abu Dhabi in the Northern Ireland economy in re- well-drafted construction contract? 10. Can you outline the incentives for and Dubai there is the possibility for in- cent years. real estate buyers in your jurisdic- vestors to make significant capital gains Maher: Clarity over scope and respon- tion? without the same being subject to local Further afield, investors should look to sibility are key to any construction con- taxes, unlike most Western jurisdic- emerging markets for investment op- tract. Parties should ensure that both

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are appropriately detailed so that there that will be payable by the party breach- ing on the building quality, one should Progress Certificates” in consideration is little room for disagreement when ing the contract. This means parties can pay deep attention to the following: for such payments). matters start turning sour. avoid timely and complex investigations • clearly indicate which instalment of • The Performance Terms, including: (i) into questions of quantum or remote- the purchase price is to be paid to the force majeure; and (ii) subcontractors. When matters do turn sour, parties ness of damage, which can significantly builder upon each construction step The Contractor shall be responsible for should ensure that their contracts con- length court hearings. When liquidat- undertaken and completed, the non-compliance of its subcontrac- tain a clear and appropriate dispute- ed damages are thoroughly considered • organise purchase price adjustments tors. Therefore, he may not invoke any resolution process that facilitates a res- before entering a contract both parties according to the indeed built surfaces delay other than force majeure events olution fit for the parties’ needs. For have a greater understanding of the risk (i.e. compared to those sold), suffered by the subcontractors. instance, it may be wise to have pro- they assume and their maximum liabil- • set penalties in case the constructor • Civil Liability clause. The Contractor gressive determination by experts or ity. If a dispute then arises the parties does not respect the contractual dead- shall hire a (i) Civil Liability Insurance adjudicators before escalating matters are less likely to proceed to litigation. line for each part of the project, for the Owner’s account, covering per- to expensive litigation or arbitration. • set retentions of some purchase price sonal injuries and/or property damages This can significantly narrow the issues Maguire: The importance of a well- instalments so to secure the end of for any damages that may be caused in dispute and lead to much quicker drafted construction contract should the contract’s execution (i.e. lifting the in the course of execution of the work resolution. Australia has lagged be- not be underestimated. snagging items, granting of the ad- by its equipment, visitors, personnel hind other jurisdictions in incorporat- ministrative conformity documenta- assigned to the execution of the works ing dispute avoidance philosophy into The contract should clearly define the tion within an agreed period of time, and third parties in general; and a (ii) standard form contracts. The UK’s scope of the work. Incomplete or mis- etc.), Life and Occupational Risk Insur- NEC3 and the USA’s Consensus DOCS, understood plans or specifications of- • receive external securities (joint and ance (Law No. 24,557) covering all the by comparison, have developed clear- ten lead to disputes. Protective col- several bank warranty) so to secure personnel performing duties at the er language and facilitated more open lateral agreements such as warranties, the achievement of the construction works whatever the duties discharged communication between parties. Clear bonds, and guarantees should always in case of constructor’s default. and until their full completion. drafting is particularly crucial for ex- be considered. Insurances and indem- tension of time/ variation mechanisms nity clauses are extremely important as Chighizola: In a well-drafted construc- Sippy: In a contract setting, the prom- so that both parties understand how well as clauses relating to payment. tion contract, it should be included: ises that are made by one party give rise delays will be handled. • The General Project Description; to expectations in the other party and in Santoni: Many items are to be secured • A thorough description of Contrac- complex construction contracts, since A liquidated damages clause will help carefully in a construction contract. tor’s Services (scope of works; addition- there are a large number of promises both parties streamline any disputes A part from the building’s specifica- al engineering; union aid); exchanged, there can be many expecta- and reduce transaction costs for recov- tions itself (i.e. its technical description • Contractor´s Fees (if partial payments tions on both sides and much potential ery. Liquidated damages clauses stipu- that needs to be scheduled to the agree- are agreed, the contractor could be for disappointment. Generally, to max- late a specific or ascertainable amount ment) so to avoid any misunderstand- obliged to deliver the so-called “Work imise the chances that a contractual re-

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lationship will be perceived as, and will • a limitation on the general contrac- tioned on reasonable notice and an A well-drafted contract should ideally in fact be, a successful experience, it is tor’s obligation to remove liens filed opportunity to cure. provide for a tiered dispute resolution important that the promises be clearly on the Project to instances in which procedure whereby issues can be ad- and conservatively stated, while avoid- the Owner has paid for the work that Fraser: The key issues to be addressed in dressed with less confrontation during ing oversimplification, which can have is the subject of the lien; a well-drafted construction contract are the construction phase before the ulti- dire consequences for a construction • a right to change orders measured by time, quality and money. Put another mate weapons of litigation or arbitra- contract. Striking the right balance an objective standard (not based on way, the wording should seek to facili- tion can be invoked. between a simple and comprehensive the Owner’s or Architect’s opinion); tate procurement of the right building, construction contract is sometimes an • a reasonable outside limitation on at the right price, on time. Risk alloca- 13. Why is the indemnification pro- elusive goal – but should be the objec- how much work must be done be- tion is a central feature, the golden role vision such an important element tive. That said, the minimum elements fore the terms of a change are agreed of risk allocation being to allocate risk in a construction contract? of a well-drafted construction contract upon; to the party best placed to deal with or should include: • a right to an extension of time and manage that risk. Sippy: Complex construction contracts • a scope of services and work, includ- resulting costs from uncontrollable frequently exceed several hundred pag- ing a limitation on that scope to work delays; From a quality perspective, the obli- es in length and the contracts seem to shown on the plans or specifications • additional time and costs extended if gation to design and /or construct the grow exponentially in length in pro- and to work that is reasonably infera- unknown risks are forced on the gen- project should be clearly framed and portion to the complexity of the under- ble from the plans and specifications; eral contractor due to concealed con- a detailed specification should be in- lying construction project. Generally, • the absence of the assumption of ditions or hazardous materials; corporated. Scope for the contract to the contract will set forth the parties’ design risks by the general contrac- • warranties limited to one year from be changed without it being invalidat- promises and legal expectations and al- tor, unless the assignment is design- substantial completion; ed should be addressed; the contract locate and balance the risks and obliga- build; • maintenance of “All Risk Builder’s should cover how variations will be tions among the parties. These risks and • proof that the Owner has sufficient Risk” insurance by one of the parties; dealt with and how issues of loss and obligations will be negotiated so they financing to complete the Project; • a clause precluding the general con- expense will be handled. can be managed, controlled or trans- • reasonable payment terms setting tractor’s liability for consequential ferred in order to achieve a successful forth the time that payment is due damages and/or providing for liqui- Particularly where liquidated damages and profitable Project. The indemnifi- and release of retainage at substantial dated damages that are reasonable; can be levied in the event of late com- cation provision in a construction con- completion of the Project; • an indemnification provision that is pletion, the contract wording should tract presents a potential for windfall • a right to stop work if the Owner does limited to bodily injury or property provide for an extension of time mecha- or disaster. The risks and obligations not pay when payment is due and en- damage (other than to the Project) nism to ensure that the liquidated dam- so carefully negotiated in hundreds of titlement to additional costs and an and then only to the extent of the ages do not constitute a penalty and be- pages of contract can be re-ordered and extension of time resulting from any general contractor’s negligence; and come unenforceable. re-allocated by a single indemnification stoppage or slowdown of work; • an Owner’s termination right condi- provision of no more than a few inches

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in length. An overly broad indemnifi- nances the acquisition of the land and In many cases, the debt financing mech- portantly the land. cation provision can shift responsibility the construction of a building through anism for phases 1 through 3 is agreed to one party (usually the general con- debt financing and obtaining equity or upon between the investor (borrower) There is very little capital market fund- tractor) for almost anything that goes equity-like investments. and the debt financier at the beginning ing available for single projects. Even wrong during the Project. Sometimes of phase 1. for portfolio’s commercial mortgage overbroad indemnities hold the gener- I would say that there are roughly four backed security issuance remains con- al contractor responsible for damages, types of debt financing, depending on The debt financing for Phase 4 is pro- strained. claims or losses that are not even con- the phase which a property is in, as out- vided for the secondary market acqui- nected to the performance of the work lined below: sition of the completed property. The For some developments the bank mar- of the Project. A fair and reasonable interest rates applicable during this ket is supplemented by non-bank ‘mez- indemnification provision does not re- Phase 1 is the early stage of the develop- phase are usually lower than the rates zanine’ lenders. These typically provide trade the contractual negotiations, but ment, where the SPC purchases the land for phases 1 through 3 and the borrow- short term financing at relatively high rather protects the indemnitee (usually and draws up a building plan. During er is given more discretion, but the debt interest rates to bridge the gap between the Owner) from third-party claims of this phase, the debt financier often re- financier often requires various finan- the amount than can be borrowed on bodily injury or property damage to the quires the sponsor of the SPC (in most cial tests such as DSCR test or LTV test the bank market and the amount of eq- extent of the contractor’s negligence. cases, the major investor) to provide a to properly monitor the performance uity a sponsor can arrange. They typi- The potential of the indemnification credit enhancing mechanism (such as and value of the property. cally focus on residential developments. provision to reallocate the burdens and guarantee or a covenant to make addi- benefits negotiated elsewhere in the tional equity investments) benefitting Fraser: (i) Site financing, to acquire Maguire: Residential purchasers con- contract is why the indemnity is often the financier. sites with no income stream but to hold, tinue to source the usual high street the most hotly and vigorously contest- (ii)Development finance (explained be- lending. Lenders are still being seen as ed provision in the entire construction Phase 2 is the stage where the SPC ob- low), (iii)Investment property finance very cautious when it comes to financ- contract. tains building construction permits and (explained below). ing commercial property transactions. thus becomes fairly certain of the con- 14. Can you outline the different struction details and schedule. During 15. What are the most popular fi- Lurie: With business confidence im- types of finance required (i.e. ear- this phase, the financier may release the nancing methods in your jurisdic- proving in the United Kingdom, the ly stage development funding, re- credit enhancing mechanism provided tion? availability of debt financing is increas- serve-based lending through to during phase one. ing after many years of very limited ap- project finance and secondary mar- Maher: For external debt requirements petite from the banks. Equity financing ket acquisition)? Phase 3 follows the completion of the the principal financing market is the remains subdued, although the Con- building. This phase is often structured bank market under which essentially federation of British Industry suggests Ozawa: In Japan, the investment struc- to be short, as it is deemed to be a pre- project specific financing is provided that greater levels of equity investment ture in many large-scale development paratory period for selling the property. secured by the relevant assets, most im- would significantly boost economic projects involves an SPC. The SPC fi- 26 27 ROUND TABLE: CONSTrUcTION & REAL ESTATE 2014

health. Capital markets are providing extended, the registration of a mort- ally a conversion of the facility from a a useful alternative for the larger cor- gage will automatically expire 20 years GK-TK structure: development facility to an investment porates. Also, the insurance industry as from the registration date. A “GK-TK structure” involves an SPC facility with lower margins but meth- has recently stepped forward as a key as a godo kaisha (“GK”) that obtains eq- ods to collect income stream to pay in- contributor to long-term capital invest- Ozawa: There are currently two typi- uity-like financing through a tokumei terest. ment. Indeed, a number of the United cal investment structures which are kumiai (“TK”) agreement and takes out Kingdom’s major insurers have plans to called “TMK structure” and “GK-TK a loan from a third party financier. Development finance is typically for fi- invest £25 billion in United Kingdom structure,” both of which use an SPC as nancing the construction of the follow- infrastructure projects over the next acquisition vehicle. While these struc- For purely domestic transactions, it ing asset classes: residential, hotels and five years. Approximately 75 per cent of tures are favoured for their tax efficien- is easier to set up a GK-TK structure offices. infrastructure development is privately cy, the “TMK structure” is more often than a TMK structure. In our experi- financed with the remaining 25 per cent preferred by non-Japanese investors. ence, however, it is often difficult for a Investment real estate finance is aimed contributed by the government. non-Japanese investor to use a GK-TK at income producing assets where the TMK structure: structure for various reasons (includ- income stream issued to service the Chighizola: Argentina’s most popu- A “TMK” is a tokutei mokuteki kaisha, ing tax considerations and regulatory loan, including offices and hotels. lar financing methods include trusts, a corporate entity specifically designed requirements). Therefore, we tend to mortgages and loans. Loans however to issue asset-backed securities under recommend, and our non-Japanese cli- We are also seeing “last mile financ- had decreased in number since the last the Asset Liquidation Law of Japan. It ents tend to use, a TMK structure. ing”, either structured as a senior loan/ decade when foreign exchange controls finances the real property acquisition mezzanine loan (either secured or un- starting imposing restrictions on per- by issuing two types of equity interests Fraser: General development finance secured in each case) and quasi equity. sons (or entities) to borrow from for- (specified shares and preferred shares) either structured in a conventional These loans usually have a high coupon eign persons (or entities), or make pay- and taking out debt financing from a manner or a Shariah compliant manner and are purely designed to assist devel- ments of principal or interest thereto. third party in the forms of specified – using an Istisnaa structure or Paral- opers on projects where the money has Furthermore, Central Bank registra- bonds and specified loans. lel Istisnaa. The financing will include run out. tions and approvals may be necessary. tranches for site acquisition, construc- The best feature of a TMK is that, by tion costs (including materials and con- On the Islamic capital market side, we On the other hand, mortgages and trusts fulfilling certain requirements, a TMK tractor/professional team costs) and in- are seeing sukuk al ijara/sukuk al is- are the most common collateral in con- will be eligible for special favourable terest capitalisation. Sometimes there tisnaa structures to finance real estate nection with real estate. A mortgage tax treatments not available to ordinary will be an allocation for infrastructure deals. remains in full force and effect until all corporations. The downside is that a costs. For hotels and real estate assets secured amounts have been paid in full TMK is subject to various regulatory which are to be held by the developer or the mortgage is otherwise cancelled requirements and special restrictions (as opposed to being sold such as in by mutual agreement. However, unless under the Asset Liquidation Law. residential developments), there is usu-

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16. What infrastructure and con- cantly improved deprived areas of Lon- often at odds with many local customs should take a due diligence of all the ex- struction lessons can be learnt from don. in developing countries. Depending on isting leases in the building he intends the likes of Sochi Winter Olympics the location and client, checks should to acquire, and notably of their fixed- and the upcoming FIFA World Cup 17. What due diligence does an in- also be made about the impact of both term duration and net rent due to be re- in Brazil? vestor need to take when looking to current and potential trade sanctions. ceived following the acquisition, which invest in a new project? will allow him to estimate the net cash- Lurie: Hosting major sporting events, Maguire: For real estate we would al- flows generated by its investment pro- such as the Olympics and the World Maher: The immediate concern when ways advise that an investor undertakes ject. Cup, bring certain benefits to host starting due diligence is to ascertain full due diligence including a full review countries. However, perceived benefits the financial and legal status of the oth- of title, obtaining all public and local In case of presence of litigation pro- are often difficult to measure against er party. Credit checks are a necessary authority searches, although we appre- ceedings or threatens of litigations, a the significant expenditure required to step to avoid later surprises. Informa- ciate in the current climate that not all specific due diligence and a particular procure the necessary sporting facilities tion gathered at this stage will assist in budgets stretch to this. contractual treatment shall be organ- and infrastructure. It is hardly surpris- deciding whether to seek additional se- ised between the parties. ing that these events provoke heated de- curity or step-in rights to a project. For Several due diligence questions that bate over responsibility for the financial large projects it is important that due should be asked to mitigate any potential Chighizola: When looking to invest in burden. The Sochi Winter Olympics diligence is seen as a joint task and not risks in construction projects. Investors a new project, an investor should gen- reportedly cost some US$50 billion, one to be divided between different ar- should identify all those involved in the erally review: and many have questioned the justifi- eas of an organisation. Risks should be construction project including the de- cation for such expenditure. Of course, judged in relation to the project over- veloper and examine their experience, • Description, title deed and most re- some of the concern can be alleviated all and not simply in the current area of financial standing and reputation. The cent valuation of all real estate prop- where sensible decisions are taken on focus. position of planning permission and erty. planning and design. The construction the current condition of the land are • Existence of mortgage, trust, pledge of facilities that can be adapted to suit When considering investment in inter- all issues that must be considered. If or similar agreements affecting the future community needs is crucial. It is national projects due diligence efforts buildings are already constructed a full real estate property. Information on important to avoid simply catering for should consider risks associated with review of all documentation should be lease agreements on real estate prop- the Olympic moment, as was the case bribery and corrupt practices. There undertaken to get a clear picture of the erty. in Athens, a city subsequently burdened has been increased policing of trans- liabilities and protections available. • Information on any kind of agree- with many abandoned and dilapidated national bribery and corruption under ments that may affect the current or facilities. This can be contrasted with the US Foreign Corrupt Practices Act Santoni: Alongside administrative au- future use of the real estate property. London’s Olympic facility conversion and UK Bribery Act. Authorities can thorisations and potential environmen- program and complementary east end issue large penalties under these acts tal issues, which may quickly become Existence of all the easements that af- regeneration efforts which have signifi- and the principles that govern them are very costly, a buy-and-hold investor fects the Real Estate Property, and all

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the agreements, decree, orders, o judi- sition or are indispensable to operate requires careful consideration. These tion sector is on the rise in Northern cial decisions that may, in any manner, the property. Investors are advised to structures scar the skyline and have Ireland. Having officially exited reces- limit, restrict, or be related, to the use of engage the services of professionals to been left exposed to the elements for sion last October, there is a new sense of the Real Estate Property. assess and deliver reports on the prop- years with limited, if any, maintenance. optimism in the market and hopefully erty, such as an appraisal report, engi- The key factor on resuscitation is the that will be jostled by increased public The improvement advises or possible neering report, environmental report, interface between old and new design funding. improvements which, even do not exist seismic report and liquefaction report, and construction and exposure to lia- right now, can result in rates or contri- to assist in property valuation. bility is heightened by the ramifications Lurie: Construction activity will con- bution on the Real Estate Property. of Article 880 of the Civil Code which tinue to grow in most sectors as the Unit- Under current practice in Japan, it is for imposes strict liability on contractors ed Kingdom emerges from a lengthy Agreements related to the management, the investor to decide whether it wants and designers where the structural in- recession. Diminishing activity in cer- operation and maintenance of the Real a full-fledged legal due diligence exer- tegrity of the building is impaired. tain areas, such as the North Sea oil and Estate Property that need the consent cise on the property. gas fields, will be offset by increasing of a third party to execute the transac- Anyone considering investing in the re- appetite for alternative energy sourc- tion or to sell the Real Estate Property. In addition to documentary materials, suscitation of an incomplete structure es, such as shale gas, nuclear, wind and the investor should conduct face-to-face should ensure that a comprehensive solar power. Inbound investment into Ozawa: The investor should first ob- interview sessions and other question- survey of the structure is conducted London will continue with increasing tain publicly available materials from and-answer sessions with the seller or by an experienced, reputable surveyor/ competition for real estate assets. Com- the relevant registration offices. These other parties involved in the actual op- engineer and that the risks of proceed- petition from foreign construction and materials include a certified copy of the eration of the property. These sessions ing are fairly allocated to the designers, engineering companies will intensify as real estate registration, public drawings, may reveal, in particular, past and cur- contractors and investors. they target involvement with some of registered land-area survey drawings, rent disputes regarding the property. the United Kingdom’s key energy and building location drawings and build- On-site inspection of the property is 18. What key trends do you expect to infrastructure initiatives. Overall, the ing drawings. also important. The investor tends to see over the coming year? outlook for the construction industry is bring to the on-site inspection an ap- positive with a range of interesting op- The investor should ask from the sell- praiser and a property inspector who is Maguire: We expect to see a continued portunities in the year ahead. ers, and should thoroughly review, all retained to prepare the necessary prop- increase in the residential market, and contracts and other materials affect- erty-related reports. hopefully a more cautious increase in Santoni: The French government is ing the property. The review should the commercial property market, al- currently working on a law which will include a determination of whether or Fraser: Focusing on a key feature of though the sale of loan portfolios will have impacts when entering into force not those contracts may be automati- Dubai’s property market since the col- continue to impact on this. on commercial leases and on the real in- cally assigned to the purchaser of the lapse in 2008, resuscitation of incom- vestment market (so called “loi Pinel”). property concurrently with the acqui- plete structures, or “ghost buildings”, Indicators suggest that the construc- In particular, this law intends to put an

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end to the practice of the so-called “bail for the stronger party in the contractu- triple net”, which means for the land- al framework to impose unnecessarily lord (usually an institutional investor) onerous conditions on the weaker par- a net rent, i.e. the different rental charg- ty. This creates a contentious environ- es related to the maintenance and the ment from the outset, quality suffers; taxes of the estate having already been the weaker party invariably seeks to paid by the tenant. recover by making claims and disputes “blossom”. We expect that, in order to ward off the effects of a lower net rent, landlords will A more enlightened approach would be raise rent face value to achieve their ob- to adopt a more partnering approach jectives of rental profitability. This top- whereby risk is allocated so that it is ic is also to be followed up during the mitigated for the benefit of all. Em- coming months. bracing incentivisation and the use of key performance indicators is far more 19. In an ideal world what would you likely to lead to successful delivery of like to see implemented or changed? the project, if the parties actually share in any savings, benefit from early com- Fraser: In short we need to see more pletion or produce an asset that exceeds partnering and less of the “nail to the client expectations or is easier and less wall” mentality. costly to maintain than originally en- visaged. Historically, there has been a tendency

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