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Long Beach Business & Commercial Law Blog

Foreign investors sue companies for failed hotel project

According to news sources, a lawsuit was recently filed in California by a group of 60 Chinese investors against the developers and managers of the SLS Las Vegas Hotel project. In the complaint, the investors allege that they were defrauded out of their money to fund the project because they did not receive green cards that they claim were promised to them.

The investors reportedly each paid $545,000 to the developers and managers. In exchange, they claim they were told that they would receive green cards within 30 months of making their investments. The investments were made through the EB-5 investment visa program, which requires investments that result in at least 10 U.S. jobs and that are sustained.

Disney sues Redbox over digital download dispute

People in California often turn to Redbox kiosks for fast, convenient movie and game rentals. These kiosks are found everywhere from grocery stores to gas stations, and they offer on-site rentals and returns through automation. However, a dispute with Disney may cause the company some problems.

Disney has filed suit against Redbox claiming that the rental service is doing more than just renting out Disney's movies. The issue that Disney has raised pertains to its combo packs and their included digital download codes. Each combo pack includes a DVD copy, Blu-Ray copy and digital download code, allowing the purchaser a number of options to view the combo pack's content.

Domestic CRE investors find opportunities in secondary markets

Foreign investors have been bidding up the price of commercial real estate, especially in the large gateway cities of California. Los Angeles and San Francisco have been the scene of large influxes of foreign money for industrial properties, accounting for a large portion of the $61 billion spent by foreign real estate investors in the United States since 2010. The competition created by deep foreign pockets and large institutional investors has often priced high-net-worth individuals and families out of these markets. However, opportunities still exist for smaller players in the secondary and tertiary markets away from the high-profile urban centers.

One real estate financier recommended that high-net-worth investors seek out multifamily properties that cost below $10 million in smaller markets that need remodeling. As value-added properties, they tend to not attract as much attention from larger investors that hesitate to take on the remodeling or redevelopment that smaller properties require. The chair of a real estate law firm noted that foreign investors generally want to stay in the major cities with which they are familiar.

Breaking a commercial lease in California

Business owners in California and around the country sometimes find themselves committed to commercial lease agreements that no longer fit their needs. Entrepreneurs may wish to break their leases because their businesses have grown and need more space, or they may be seeking an exit due to an unexpected downturn and a pressing need to reduce costs. Breaking a commercial lease can be straightforward or difficult based on the landlord involved, the market conditions and the state of the economy.

Commercial property landlords could be willing to terminate lease agreements early when the economy is thriving and the demand for space is fierce, but they may act more belligerently when finding a new tenant could be difficult. However, leases may still be terminated early in these situations as long as landlords feel that they are being adequately compensated. Landlords may be more willing to negotiate when tenants who wish to break their leases have made improvements to the property or offer to help find a replacement tenant.

How commercial real estate debt financing has evolved

Nearly a decade after the Great Recession, commercial real estate investors in California and elsewhere should know that banks are making loans. If banks are not making loans in a given area, alternate loan opportunities may exist. Banks are largely lending because of foreign demand as well as a demand for apartment space. Low interest rates are also playing a key role in their willingness to make loans.

Alternative lenders may play a role in helping investors get financing until a bank is willing to lend to them. They are no longer seen as shady or not worth working with like they were in the past. A mezzanine or bridge loan can come with a relatively high loan-to-value, and lenders aren't as conservative as a bank may be. Some lenders are transitioning from development deals to debt deals as the market becomes more lucrative.

Economists predict commercial real estate outcomes

Commercial real estate trends in 2018 may influence how California residents or others choose to invest their money. According to the chief economist for the National Association of Realtors, the overall outlook for commercial real estate in 2018 is positive. However, there may be a bit of a deadlock between buyers and sellers in some cities. This is because landlords and sellers will want higher rents or purchase prices because of the economy's overall health.

Conversely, buyers may note that rising interest rates may make it harder to justify those prices. Another economist mentioned that tax cuts alone may not necessarily do much for economic growth. While there may be a short-term boost from lower taxes, it could create a longer term drag on the economy. That may eventually play a role in commercial real estate prices. It was noted that adding workers and increasing productivity generally do more for economic growth than tax policy alone.

Rising sea levels could influence commercial lending

The effects of climate change, such as rising sea levels, are likely to have a significant impact on the way people in California live and do business in coming decades. As sea levels continue to slowly rise, commercial real estate investors and developers could face new challenges when trying to obtain financing for projects in areas that may become at risk for flooding.

This is important because significant portions of California's land area fit for commercial real estate development, as well its largest population centers, are located at relatively low elevations. In the future, the potential difficulties in accessing the financial capital to pursue projects in markets where they can become profitable could force many developers out of business. Furthermore, the combined environmental and economic impact of rising sea levels due to climate change would likely ignite a political frenzy and possibly new legislation and regulations to address it. Not surprisingly, the way governments respond to rising sea levels through new laws, regulations or infrastructure spending could influence the way commercial lenders provide funding for commercial real estate developers.

Pop-up shops bring seasonal sales to malls

Indoor shopping malls in California and across the United States can experience tough times when retailers close. Even in bustling areas and popular districts, malls could have empty spaces that last for months as contracts with large retailers can take months to complete.

During some periods of time, specialty holiday stores can help commercial real estate owners to fill in the gaps in their visible shopping repertoire. Stores like Spirit Halloween or other shops themed around Christmas or popular holidays can fill in a lease for a few months, bringing holiday decorations, costumes and other gear to the local mall.

Curated data sets helping the commercial real estate industry

Stakeholders in the California commercial real estate industry have long been about adopting technology. Despite the slowness of commercial real estate brokers to embrace technology, some are now starting to understand the value of using what it can offer.

In the past, commercial real estate brokerages that had more data had competitive edges. Brokers would spend hours combing through information to uncover the data. With the advent of data analytics firms, this is no longer necessary, freeing brokers to attend to more important tasks. Today, technology has helped to increase transparency so that data is more readily accessible. While people understand the value of data sharing, some are hesitant to do so because of past experiences.

Changes made by the AIA to its forms

In the California construction industry, it is not uncommon for disputes to arise. It is important for stakeholders to be aware of changes that the American Institute of Architects has issued to the A201 general conditions document that is used in the industry for dispute resolution procedures.

The AIA issues revisions once every decade to its documents. In section 15.1.1 of the A201 document, contract time change requests are now included under claims. This means that they are subject to the same timing and notice requirements of other types of claims.

Creative Solutions for Complex Legal Issues

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Long Beach, CA 90802-4306

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