R EAL E STATE O WNERSHIP FOR C OMMUNITY B ASED H EALTH C ENTERS Tom Ruge, Director- Lewis & Kappes Emily Najem, Associate-Lewis & Kappes

O UTLINE Purchase Considerations Holding Entity Purchase Process Property Tax Exemption Takeaways

R EAL E STATE P URCHASE C ONSIDERATIONS Landlord v. Tenant Financial Considerations Expansion Options Renting to Third Parties Entity that will own property Operations Hiring a Broker Comps Tax Costs

H OLDING E NTITY LLC 501(c)(2) Title Holding Company Health Center

LLC Formation Resolutions from Health Center Entity Authorize formation of LLC Operating Agreement Election of Managers Establish bank account Treated as Disregarded Entity Purchase Real Estate Lease Articles of Incorporation Operating Agreement Single Member Purpose-to operate for the sole benefit of the sole member by holding title to the property for the benefit of the sole member Operation-intent to operate the LLC as a single member entity; treated as disregarded entity Managers Positions within sole member board Maintain Separate Legal Entity Single purpose entity Only asset is the real estate Separate bank accounts Separate meetings of governing body

LLC Benefits Reduce risk Property Injuries Mortgage Debt Environmental Risks Only LLC’s assets at risk Additional layer of protection Costs Maintain corporate formalities Filing costs

501( C )(2) T ITLE H OLDING C OMPANY Provides a tax exemption for title holding companies Formation Articles of Incorporation Bylaws Lease Qualifications Owned and controlled by exempt organization Exclusive purpose is to hold title to property, collect income from the property and remit entire amount of income minus expenses to exempt organization. Prohibited from engaging in any other business Benefits Assists with real estate exemption Reduces risk Costs Must apply to IRS for exemption Lengthy process Formation Costs

P URCHASE P ROCESS Letter of Intent Purchase Agreement Due Diligence Period Funding Closing

LOI AND P URCHASE A GREEMENT Board Approval Buyer Resolutions Seller Operating Agreement/Bylaws Purchase Agreement Terms Earnest Money Due Diligence Period and Review Request Due Diligence Items from Seller Seller Covenants Property Taxes Occupancy Broker Commission Warranties Financing Contingency

D UE D ILIGENCE More than 30 days Appraisal Inspection Phase I Survey Zoning Letter All tenants Seller Account Receivables Tenant Leases Estoppels Seller searches Judgement and Lien Searches UCC searches

F UNDING S OURCE Bank Review Commitment Letter Items Required Purchase Agreement Organizational Documents EIN number Bank account Payoff letter Resolutions Insurance Loan Documents Review carefully Hazardous Substance Guaranties Limited Assume Loan Grant Source and use requirements

T ITLE & C LOSING Title Insurance Endorsements Remove standard exceptions Payoff Letters Upon payment release liens Settlement Statement Security deposit(s) Pro-rate rent Pro-rate taxes Seller Resolutions Insurance Utilities Assignment of Leases Personal Property Purchase Bill of Sale Vehicle Titles

P ROPERTY T AX E XEMPTION A PPLICATION Owner entity to apply Deadline: May 15 th Supporting documentation and analysis Entity formation documents Exempt entity documents Financials Analysis of exempt purpose and qualifications Issues related to third party tenants Municipal, charitable, educational or religious purpose? Percentage of exemption

T AKEAWAY T IPS Tight Purchase Agreement Due Diligence Picking a bank Timeline Budgeting

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