USA – IOWA Law and Practice Contributed by: David M. Erickson, Christopher S. Talcott, Amy S. Montgomery and Shannon M.H. Hasse, Dentons Davis Brown PC
recording fees for the instruments conveying title, and the cost for updating the abstract post- closing to reflect the transfer and any mortgage. 2.11 Legal Restrictions on Foreign Investors While not numerous, there are some important considerations for foreign persons investing in real estate in the State of Iowa. Chief among them is an Iowa statute that generally prohibits non-resident aliens, foreign businesses, foreign governments, or an agent, trustee or fiduciary thereof from purchasing or otherwise acquir - ing agricultural land in Iowa. There are several exceptions. For example, an interest in agricultural land, not to exceed 320 acres, acquired for an immediate or pending use other than farming, is permit - ted. Pending the development of the agricultural land for a purpose other than farming, the land shall not be used for farming, except under lease to an individual, trust, corporation, partnership or other business entity. Recent changes to Committee on Foreign Investment in the United States (CFIUS) regulations have not yet had a major impact in Iowa. Sales agreements continue to include customary representations related to the Office of Foreign Assets Control (OFAC) and the Foreign Invest - ment in Real Property Tax Act (FIRPTA).
mitment letter to the potential buyer/borrower setting forth the amount, interest rate and other main terms of the loan to be made to purchase the real estate, together with the requirements that must be satisfied before the loan will be made. Such requirements would include due diligence matters, the collateral that must be provided to secure repayment of the loan, and business covenants that must be met. The loan documents to be signed at closing would reflect the requirements set forth in the loan commitment, and would typically include: • a loan agreement setting forth both the lend - er’s obligations with respect to disbursements of loan funds as well as the borrower’s cur - rent and ongoing requirements with respect to the loan; • a promissory note evidencing the debt owed to the lender; and • a mortgage encumbering the newly acquired real estate as well as other security docu - ments that might encumber the borrower’s financial accounts, equipment and inventory, or other personal property. The process for acquisition of large real estate portfolios or companies holding real estate would be the same. However, a viable option in such scenario may be to acquire ownership of the titleholding entity or entities, rather than a direct acquisition of title to the real estate. Struc - turing the transaction in this way would not trig - ger real estate transfer tax. 3.2 Typical Security Created by Commercial Investors The type of security interest required by a lender financing the acquisition and/or development of Iowa commercial real estate may vary by trans - action, but should involve the borrower grant -
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of Iowa commercial real estate are typically financed through mortgage financing offered by commercial banks. In the typical pro - cess, the lender would first issue a loan com -
1164 CHAMBERS.COM
Powered by FlippingBook