Real Estate Council of Ontario (RECO) - Humber Real Estate - Simulation Session 2 - (Day 1 - Day 4) (2023) [3.x ed.]

Table of contents :
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Sims2_PW_Day3_V3.6
Sims2_PW_Day4_V3.5
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Sims2_Comm-Real-Est_Act-Plan-Workbk_v1.0
How to Use This Workbook

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Simulation Session 2

PARTICIPANT WORKBOOK

SIMULATION SESSION 2 COMMERCIAL REAL ESTATE DAY 1

Real Estate Salesperson Program © 2022 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

Contents How to Use This Workbook .........................................................................................................ii About Simulation Session 2 – Commercial Real Estate ..............................................................iii Session Agenda ...........................................................................................................................vi Session Activities – Day 1 ............................................................................................................ 1 Meet the Participants ..........................................................................................................................................1 Welcome to the Simulation Session ....................................................................................................................2 Introduction to Commercial Properties ...............................................................................................................3 Office Buyer Storyline Beginning .........................................................................................................................7 Gathering and Verifying Information for Office Properties .................................................................................8 Clauses to Include for an Office Property ..........................................................................................................12 Write a Custom Condition for an Office Property ..............................................................................................17 Leasehold Improvements ...................................................................................................................................24 Office Buyer Storyline Bridge .............................................................................................................................27 Office Property Financial Analysis ......................................................................................................................28 Office Buyer Storyline Conclusion ......................................................................................................................35 Transition from Office to Retail Properties ........................................................................................................36 Introduction to Retail Properties .......................................................................................................................36 Retail Buyer Storyline Beginning ........................................................................................................................37 Day 1 Summary ..................................................................................................................................................38 Day 1 Action Planning ........................................................................................................................................39

Appendix ................................................................................................................................... 40

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SIMULATION SESSION 2: INTRODUCTION

How to Use This Workbook This workbook is intended for use by a Simulation Session 2 – Commercial Real Estate salesperson learner only. Once the session has begun, use the workbook to: • Record your own notes (see blank lines provided) o These notes can be anything you wish to record, (e.g., reflections you have during an activity or goals you set for yourself) • Record answers to direct questions • Complete math calculations/work with formulas • Refer to the activity performance checklists • Follow along with the flow of each day Session activities are presented sequentially and your facilitator(s) will provide guidance on their execution. This workbook works in tandem with any additional support materials that will be provided to you during the simulation session (e.g., visual presentations, Action Planning Booklet, Forms Booklet).

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SIMULATION SESSION 2: INTRODUCTION

About Simulation Session 2 – Commercial Real Estate Curriculum Overview The diagram below illustrates your progression during the Pre-Registration phase and where simulations fit into that curriculum stream. Simulation Session 2 wraps up the commercial real estate transaction components of your course of study. Upon its successful completion you may move on to Course 5. Delivery Modes Course Number & Title (in order of sequence) 1 2

3

Sim 1

4

Sim 2

5

eLearn

Real Estate Essentials Proctored Exam Residential Real Estate Transactions Facilitated Review Session Proctored Exam

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Additional Residential Real Estate Transactions Facilitated Review Session Proctored Exam Residential Real Estate Transactions

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Proctored Exam Remediation Day & Exam Rewrite Commercial Real Estate Transactions Facilitated Review Session Proctored Exam Commercial Real Estate Transactions Proctored Exam Remediation Day & Exam Rewrite Getting Started

InClass

Virtual

Exam Centre ✘*

Virtual Optional Exam ✘

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If needed

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If needed

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* Temporarily suspended till further notice.

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SIMULATION SESSION 2: INTRODUCTION

Session Overview and Objectives This is your session! You are the only person responsible for the level of effort you put into your learning journey. In other words, what you gain from this opportunity will be equal to the effort you put into it. Please take every advantage of this opportunity to enhance your success as a real estate salesperson. The primary objective of this session is to: • Facilitate opportunities for you to demonstrate the knowledge and skills that are needed to be practice-ready as a REBBA-compliant real estate salesperson. In a simulation session, you are placed in a situation—highly procedural—that resembles onthe-job circumstances. Its purpose is to: • Facilitate practice and feedback in a safe classroom environment • Promote self-discovery • Illustrate real-world circumstances Simulation Session 2 – Commercial Real Estate is not: • A content review o The FRS/vFRS sessions are intended for this purpose • A teaching session where new content is introduced • A remediation session o A remediation day is required for any learner who fails the Simulation Session 2 assessment Remember that this simulation session focuses on some of the most important aspects of the real estate salesperson role in order to ensure that you get good exposure to some of the more crucial tasks you will encounter on the job.

Providing Peer Feedback As in Simulation Session 1, Simulation Session 2 – Commercial Real Estate includes a series of small group role plays. To recap, in each role play you will take a turn at playing the: 1. Salesperson (you, playing yourself) 2. Buyer or Seller (depending on the scenario) 3. Observer (passively listening to the other role players) After each role play, the observer will provide feedback to the salesperson. All feedback will be based on the activity performance checklist (see sample that follows) for that activity and intended in the spirit of making you aware of your own areas of skill strength and areas that could benefit from remediation. The simulation sessions are intended to allow for practice and feedback to be given in a safe, non-judgmental environment.

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SIMULATION SESSION 2: INTRODUCTION Activity performance checklists set out the predetermined standards for behaviours required in the real estate scenarios you will be practising and allow one to accurately measure whether a practice performance meets those standards. They can also help you prepare for your Simulation Session 2 assessments by reinforcing your understanding of the activity topics. The session facilitator will review the function and use of performance checklists on the first day of the simulation. Criteria Points to Observe

Observed None/Few

Observed Some

Observed All

Explain the different concepts of agency relationships, including client versus customer. Explained agency relationships • Between the brokerage and the seller • Salesperson works with seller on behalf of the    brokerage • Representation agreement used to put the relationship in writing Explained what it means to be a client • Brokerage represents seller • Brokerage has an obligation to exercise full duty of care and best interests of seller    • Brokerage must give competent advice during the transaction • Seller will have obligations to the brokerage • Seller gives brokerage permission to act on their behalf Simulation Session 1 – Residential Real Estate, Performance Checklist Sample

Session Assessment Simulation Session 2 – Commercial Real Estate requires you to successfully complete one written assessment. When and how this assessment is conducted depends on the course delivery method you are enrolled in (e.g. in-class or virtual/online). Each is described in more detail below. Your Simulation Session 2 – Commercial Real Estate session assessment results will be sent to you a few days after the session ends. If you are unsuccessful in achieving a passing score, you will be required to attend a Remediation Day where you will retake the assessment after a facilitator led review of the session content. If required, you will register for the Remediation Day on the Humber LMS as you have for all your other courses/sessions.

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SIMULATION SESSION 2: INTRODUCTION In-Class Delivery: Your assessment will be taken on Day 4 and will be paper based. Virtual/On-Line Delivery: Your assessment will be conducted on Day 4. This assessment will be written on-line using a virtual proctoring service. Refer to the email sent to you for instructions on how to set up access to the service in advance of the assessment day. This must be done before the assessment day. You cannot take the assessment if you have not completed this step.

Session Agenda Day 1 PURPOSE/TOPIC Meet the Participants Welcome to the Simulation Session Introduction to Commercial Properties Office Buyer Storyline Beginning Gathering and Verifying Information for Office Properties Clauses to Include for an Office Property Lunch Write a Custom Condition for an Office Property Leasehold Improvements Office Buyer Storyline Bridge Office Property Financial Analysis Office Buyer Storyline Conclusion Transition from Office to Retail Properties Introduction to Retail Properties Retail Buyer Storyline Beginning Day 1 Summary Day 1 Action Planning

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SIMULATION SESSION 2: DAY 1

Session Activities – Day 1 Meet the Participants Discuss the following in your group: • Why you chose real estate • The types of commercial properties you have noticed around in the real world ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Welcome to the Simulation Session Write notes on the Simulation Session here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ How I receive credit for this Simulation Session. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Introduction to Commercial Properties Activity Instructions 1. You will be divided into groups of three. 2. As a group, you will brainstorm to answer the question, “What is different, for you as a salesperson, when working with commercial transactions?” 3. Write your answers on the whiteboard or flip chart provided to you. 4. You will have 15 minutes to complete this activity. Write some of the differences between commercial and residential transactions here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ How does the agreement of purchase and sale for a commercial property differ from an agreement for a residential property (look at HST section 7 as well as signature section)? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Wrap-Up Points of discussion during the class debrief around Introduction to Commercial Properties included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Why is it important to understand the differences between residential and commercial properties? Considerations on why it is important to understand the differences between residential and commercial properties include: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points A salesperson must: • Know the differences between commercial and retail properties • Understand that buyers and sellers of commercial properties may have unique considerations Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Self-Reflection Reflect on your response to the question, “How might you prepare to become more comfortable with the differences between residential and commercial properties?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Office Buyer Storyline Beginning Scenario Background Information • • • • • •

You are a salesperson working at a local commercial brokerage that deals with all types of commercial properties, including office, retail, industrial, development land, sales, and leasing. You are working in the office properties division. A residential salesperson from a residential brokerage has referred you to a buyer who is looking to purchase an office building. The residential salesperson had previously sold this buyer multi-family properties, but now the buyer is looking to expand into other types of properties for investment purposes, specifically office buildings. The buyer is looking to buy a small office building in the central business district of Anycity, Ontario. The buyer is looking for your expertise to advise them on the purchase.

Write any additional notes on the scenario background information here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Gathering and Verifying Information for Office Properties Salesperson: Your objectives in this activity are: • Determine the requirements of the buyer for the purchase • Gather all the relevant information required for the property • Access the appropriate sources to verify the information Activity Instructions 1. You will be divided into groups of three. 2. Answer the questions in the Participant Workbook by discussing as a group. 3. You will have 10 minutes to complete this activity. What questions would you ask the client about their needs? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What information would you, as a salesperson, be required to gather and/or verify to perform due diligence? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Why does this information matter? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Where would you find this information? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Wrap-Up Points of discussion during the class debrief: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Why Is This Important? Considerations on why it is important for a salesperson to gather and/or verify information when representing a buyer looking to purchase an office property: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points The salesperson will: • Determine the requirements of the buyer • Gather all the relevant information • Access the appropriate sources to gather and/or verify the information Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Self-Reflection Reflect on your response to the question, “Which information do you think will be challenging to gather and/or verify?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Clauses to Include for an Office Property The next activity will work a little differently. In this activity, for the given scenario and objectives, you will independently decide on a course of action and then discuss your decisions with your group. When identifying issues that might prompt the need for certain clauses to be included in an agreement of purchase and sale, it is important to consider all the information you have available to you about the property. Scenario Background Information This buyer has never bought an office property before and you as a salesperson are helping them do so. They have only bought multi-family properties. You need to be aware of any issues regarding office properties that may be relevant to the buyer. Salesperson: Your objective are: • Identify issues that may require the inclusion of clauses in the agreement of purchase and sale for an office property • Determine why these issues may require the inclusion of clauses Activity Instructions Part A 1. Independently read the information in your Participant Workbook. 2. Decide which issues may require the inclusion of clauses in the offer. 3. You have 10 minutes to complete this part of the activity. Part B 1. Discuss your choices as a group. Which issues did you select, and why? 2. Come to a consensus on which issues may require clauses and write them down. 3. You will have 10 minutes to complete this part of the activity.

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SIMULATION SESSION 2: DAY 1 Write your own notes on the instructions here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Identify issues that may require clauses in the table on the next page.

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SIMULATION SESSION 2: DAY 1 Issue

Rationale

Zoning Financing Energy efficiency Parking Building condition Telecommunication systems Building permit Severance Environmental Tarion warranty Demographics Service contracts Leases Financials Legal advice

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SIMULATION SESSION 2: DAY 1 Wrap-Up Points of discussion during the class debrief around Clauses to Include for an Office Property included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important to identify potential issues that may require the inclusion of clauses in an agreement of purchase and sale: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Summary of Key Points When identifying issues: • Consider o Property details o Surrounding area o Buyer’s concerns • Protect buyer’s best interests Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “How comfortable would you be identifying relevant issues?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Write a Custom Condition for an Office Property What are the different types of conditions? ______________________________________________________________________________ ______________________________________________________________________________ What is the difference between these types conditions? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What are the key components of a conditional clause (“W” steps)? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ During the Activity Your objectives during this activity are to be able to write a condition: • That addresses the buyer’s specific requirements • That promotes and protects the best interests of the buyer • That is accurate and complete • By using the “W” steps for reference

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SIMULATION SESSION 2: DAY 1 Activity Instructions 1. Independently review the scenario background information in your Participant Workbook. 2. Create a custom condition. 3. Review and discuss your custom condition with your partner. Try to identify the 6 “W”s in your partner’s custom condition and discuss any errors with them. Scenario Background Information During your conversation with the buyer, they mention they’d like to give the property more exposure by erecting a pylon sign. This requires you to create a custom clause (condition precedent) to address the buyer’s concern. You will need to write a custom condition to determine if a pylon sign can be erected on the property in the desired location and size.

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SIMULATION SESSION 2: DAY 1 Write a Custom Condition for an Office Property – Performance Checklist Criteria to Observe

Observed None/Few

Observed Some

Observed All

Write a custom condition using the "W" steps and appropriate language to promote and protect the best interests of your buyer. Created an accurate custom condition • •

The wording is clear and precise The wording is complete and accurate

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Used the “W” steps when writing a custom condition • • • • •

•

Who is to do it? – The buyer Who is to pay for it? – The buyer What is to be done? – Determine if a pylon sign can be installed on the subject property Within what time limit? – Placeholder date and time What is to happen in the event it is not done? – The offer shall become null and void and the deposit returned to the buyer in full without deduction That it may be waived – Condition is inserted for the benefit of the buyer and may be waived at their sole option

Included wording to fully protect the buyer by: • • •

•

Stating that the size and location should be suitable to the buyer Stating that the determination should be at the sole and absolute discretion of the buyer Ensuring that the time period is long enough to fulfill the condition Including a waiver provision in the condition in case the buyer wishes to proceed with the transaction if the buyer is unable to fulfill the condition

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SIMULATION SESSION 2: DAY 1 In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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My Peers’ Performance

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SIMULATION SESSION 2: DAY 1 Write a Custom Condition Based on the Activity Objectives, Activity Instructions, and Scenario Background Information, create a custom condition. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Review and Discuss Work with Partner Review and discuss your condition with your partner, designating your partner as the peer to review your work. Using the Performance Checklist and the example condition, evaluate and discuss your own and partner’s custom condition. Discuss your observations about your partner’s custom condition with them. Discuss the following: • Was the language in your condition similar to the language in your partner’s condition? What about the example? • Were there any components missing from your condition? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Using the Performance Checklist and the example custom condition, do corrections to your custom condition and assess your own performance in the writing a custom condition activity. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Why Is This Important? Considerations on why it is important to practise writing custom conditions: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points Remember: • Rely on the “W” steps when drafting custom conditions and use clear, precise wording • The ability to draft accurate and complete conditions will result from continual practice • Ask the manager or broker of record for assistance when necessary Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Leasehold Improvements Salesperson: Your objectives in this activity are to: • • •

Understand what leasehold improvements are Be able to explain leasehold improvements to the buyer Be able to explain the ownership aspects of leasehold improvements

Activity Instructions 1. You will be divided into groups of three. 2. Answer as many of the questions as possible by discussing as a group. 3. You will have 10 minutes to complete this activity. Who will pay for leasehold improvements? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Who owns leasehold improvements? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 What happens to the leasehold improvements upon lease expiry? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Wrap-Up Points of discussion during the class debrief: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important for a salesperson to understand and be able to explain leasehold improvements: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Summary of Key Points A salesperson should be able to: • Explain what leasehold improvements are, who owns them, and who is responsible for them • Understand what happens to the leasehold improvements at the end of tenancy Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “Which aspects of leasehold improvements do you think would be the most important to focus on when advising your buyer?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Office Buyer Storyline Bridge • • • • •

After preparing the offer, you as a salesperson explain the full offer including the clauses to the buyer. The buyer signs the offer, which is then presented to seller for acceptance. After negotiations, the offer is conditionally accepted by the seller. The seller provides the required documentation (e.g., financial statements, leases, contracts, etc.). You then refer the buyer to third-party professionals where required.

Write any additional notes on what has happened since the last activity here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Office Property Financial Analysis When reviewing the financials for a buyer of an office property, it will be your duty as a salesperson to properly interpret and calculate the financials concerning a property. Scenario Background Information – Class Practice A buyer is looking at purchasing a small three-storey office building with a total of 21 units: 19 leased and two vacant. The potential rental income for the building is $302,000 with a vacancy and credit loss of 3%. There is no other income attached to the building. Total expenses for the building are $120,000. The buyer would like a Capitalization Rate (Cap Rate) of 8%. What purchase price would the buyer offer to achieve their Cap Rate? CASH FLOW WORKSHEET – Class Practice

Potential Rental Income

____________________________________

(-) Vacancy & Credit Loss

____________________________________

(=) Effective Rental Income

____________________________________

(+) Other Income

____________________________________

(=) Gross Operating Income

____________________________________

(-)Operating Expenses

____________________________________

(=) Net Operating Income =

____________________________________

Value Class Practice:

____________________________________

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SIMULATION SESSION 2: DAY 1 Part 1 Salesperson: In the first part of this activity and using the information provided, your objectives are: • Review the financial details of the property • Use the figures to determine net operating income (NOI) and a value for the property In the second part of the activity, you will use adjusted financials provided to you to recalculate the value of the property. You may refer to the following formulae sheet below if needed during this activity Term Cash Flow (Before Taxes) Net operating income NOI (Net Operating Income) Overall capitalization rate Potential rental income Value Cost Approach

Formula Net operating income – Annual debt service Gross operating income – Operating Expenses Rate (capitalization rate) x Value of property Net operating income ÷ Value of property Number of units x Annual rent per unit NOI (net operating income) ÷ Rate (capitalization rate) Land value + Soft costs + Hard costs

Activity Instructions 1. Independently read the scenario background information. 2. Use the Cash Flow Worksheet to calculate all the financial information listed for the property in order to determine the following: a. The NOI b. The value of the property 3. Once everyone in your group has analyzed the financials, discuss your calculations as a group. What NOI did each of you determine, and how did you get this answer? 4. After discussing your choices for the NOI, repeat for the value of the property. Write your own notes on the instructions here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Scenario Background Information – Part 1 You are assisting a buyer client with the purchase of a mid-size, 24-unit office building in the central business district of Anycity. After doing the initial investigation and being satisfied with the results, you have submitted an Agreement of Purchase and Sale with the required Schedule A with all the appropriate clauses and conditions. The seller as accepted your offer by initialling and signing the offer. After signing a confidentiality agreement, the following information has been supplied. The total base rent income per month is $1,300 per unit. There are no vacancies in the building so no vacancy factor has been added. Seven of the tenants pay an extra $30/month for one extra parking spot each. The total expenses for the property are 30% of the gross operating income. Using the above information, what is the value of the building if the capitalization rate is 5%? CASH FLOW WORKSHEET – Part 1

Potential Rental Income

____________________________________

(-) Vacancy & Credit Loss

____________________________________

(=) Effective Rental Income

____________________________________

(+) Other Income

____________________________________

(=) Gross Operating Income

____________________________________

(-) Operating Expenses

____________________________________

(=) Net Operating Income

____________________________________

Value Part 1:

____________________________________

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SIMULATION SESSION 2: DAY 1 Write any additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Scenario Background Information – Part 2 Having reviewed all of the above information, to proceed with the purchase of the property, the buyer feels they need to adjust some of the financial information to achieve a more accurate analysis of the property. They add in 3% for vacancy and credit loss and increase the total expenses to 35% of the gross operating income. Using this information and a desired Cap Rate of 6.5%, what value adjustment would the buyer make for the property?

CASH FLOW WORKSHEET – Part 2

Potential Rental Income

____________________________________

(-) Vacancy & Credit Loss

____________________________________

(=) Effective Rental Income

____________________________________

(+) Other Income

____________________________________

(=) Gross Operating Income

____________________________________

(-) Operating Expenses

____________________________________

(=) Net Operating Income

____________________________________

Value Part 2:

____________________________________

Write any additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Wrap-Up Points of discussion during the class debrief around Office Property Financial Analysis included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important to conduct a financial analysis on an office property: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Summary of Key Points Remember to: • Gather and review all relevant financial information and details • Use the proper formulas when calculating the value, net operating income, and capitalization rates • Discuss the results with the buyer Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “What steps could you take to become more comfortable with analyzing financials to determine the value of an office property?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Office Buyer Storyline Conclusion After reviewing all the documentation and verifying financials, the buyer adjusts some of the financials to arrive at a more accurate analysis of the property. The salesperson drafts an amendment to the agreement with the new price (because of the adjusted calculations and cap rate), which is sent to the seller. After the seller agrees and signs the amendment, the salesperson sends the notice(s) of fulfillment to remove the conditions and the offer becomes firm and binding. If a condition is not fulfilled but the buyer still wants to proceed with the transation, a waiver would be used instead of a notice of fulfillment. Write any additional notes on what has happened since the last activity here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Transition from Office to Retail Properties We have reviewed the documents and verified the financials used in an office property transaction. Now, let’s assume that you’re a different salesperson (in the same brokerage) who works in the retail division. You will be selling a small retail plaza to a new buyer client. Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Introduction to Retail Properties Retail Property Activities • Gathering and Verifying Information for a Retail Property • Identify Clauses for Agreement of Purchase and Sale for Retail Properties • Write a Custom Condition for a Retail Property • Explaining Clauses to a Retail Buyer • Determining the Value of a Retail Property How many retail property types can you think of? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Retail Buyer Storyline Beginning This is the beginning of a new storyline that you will be using throughout the upcoming activities related to retail properties. Scenario Background Information You are one of the salespersons working in the retail division of a commercial brokerage. An investor calls in wanting to buy a retail plaza. The buyer is referred to you as you are in the retail division. The buyer is interested in purchasing a retail plaza containing four to eight units. You set up an appointment to meet with the buyer. You have an initial conversation with them, and they decide they would like to be represented by your brokerage. You prepare and explain all the documentation for them to sign. You gather all the requirements regarding the property the buyer is looking for. You note the type of property/location the buyer is interested in. You also discuss the investment strategy.

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SIMULATION SESSION 2: DAY 1 Day 1 Summary Recap • • • •

Introductory Activities Introduction to Commercial Properties Office Properties Retail Properties

What is one new thing you learned today? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Which of the tasks that we practised today do you think will be most challenging on the job? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What task that we practised today do you think will be most helpful on the job? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 1 Day 1 Action Planning Action Planning Introduction Take out your Action Planning Workbook. Building a career in real estate requires you to be adept at many skills. Some skills will come naturally, while others will require practice and refinement throughout your career. Action Planning is a tool to help you develop a concrete strategy for improving your skills and reaching your professional goals. Throughout the Simulation Session, you will be adding to your Action Planning Workbook to ultimately create some tangible action steps to perform after the simulation. Three steps to Action Planning 1. Reflect – The Reflect portion of planning starts during each practice activity as you receive feedback from others and then do the self-reflection activity. Then, at the end of each day, you will take a few minutes to look over the self-reflection notes you have made throughout the day and gather information to include in your Action Planning Workbook. Each day, you will choose two areas you performed well and two areas for improvement and enter them in your Action Planning Workbook. 2. Create the Plan – You will perform the Create the Plan portion on the last day of the Simulation Session. First, you will priority rank your areas for improvement and select the top two areas from the entire simulation you want to focus on for improvement. Then, you will determine your goals for each of those areas. Lastly, you will identify action steps to help you meet each of your goals. Please note that improvement planning is most effective when focused on 2 – 3 key items at a time. 3. Take Action – The Take Action portion of your plan will be performed after you leave the simulation session. Review the self-reflection notes that you took during the day in your workbook and identify areas where you think you performed well and areas where you think you could improve. Select up to two areas where you performed well and two areas for improvement and enter those into the corresponding columns of your Action Planning Workbook.

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SIMULATION SESSION 2: APPENDIX

Appendix This performance checklist is the same as the one that appears earlier in this document.

Performance Checklist Write a Custom Condition for an Office Property Criteria to Observe

Observed None/Few

Observed Some

Observed All

Write a custom condition using the "W" steps and appropriate language to promote and protect the best interests of your buyer. Created an accurate custom condition • The wording is clear and precise • The wording is complete and accurate Used the “W” steps when writing a custom condition



















• • •

Who is to do it? – The buyer Who is to pay for it? – The buyer What is to be done? – Determine if a pylon sign can be installed on the subject property • Within what time limit? – Placeholder date and time • What is to happen in the event it is not done? – The offer shall become null and void and the deposit returned to the buyer in full without deduction • That it may be waived – Condition is inserted for the benefit of the buyer and may be waived at their sole option Included wording to fully protect the buyer by: • Stating that the size and location should be suitable to the buyer • Stating that the determination should be at the sole and absolute discretion of the buyer • Ensuring that the time period is long enough to fulfill the condition

•

Including a waiver provision in the condition in case the buyer wishes to proceed with the transaction if the buyer is unable to fulfill the condition

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PARTICIPANT WORKBOOK

SIMULATION SESSION 2 COMMERCIAL REAL ESTATE DAY 2

Real Estate Salesperson Program © 2022 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means— electronic, mechanical, photocopying, recording, or otherwise—without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

Contents How to Use This Workbook ..................................................................................................................... ii Session Agenda ........................................................................................................................................ iii Disclaimer ................................................................................................................................................ iii Session Activities – Day 2 ......................................................................................................................... 1 Welcome to Day 2 ................................................................................................................................. 1 Gathering and Verifying Information for Retail Properties .................................................................. 3 Identify Clauses for Agreement of Purchase and Sale for Retail Properties......................................... 7 Write a Custom Condition for a Retail Property ................................................................................. 12 Explaining Clauses to a Retail Buyer ................................................................................................... 17 Retail Buyer Storyline Bridge .............................................................................................................. 29 Determining the Value of a Retail Property ........................................................................................ 30 Retail Buyer Storyline Conclusion ....................................................................................................... 36 Introduction to Industrial Properties .................................................................................................. 37 Gathering and Verifying Information for Industrial Properties .......................................................... 39 Identify Clauses for Agreement of Purchase and Sale for Industrial Properties ................................ 43 Day 2 Summary ................................................................................................................................... 47 Day 2 Action Planning ......................................................................................................................... 47 Appendix ................................................................................................................................................. 48

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SIMULATION SESSION 2: INTRODUCTION

How to Use This Workbook This workbook is intended for use by a residential Simulation Session 2 – Commercial Real Estate salesperson learner only. Once the session has begun, use the workbook to: • Record your own notes (see blank lines provided) o These notes can be anything you wish to record, (e.g., reflections you have during an activity, or goals you set for yourself) • Refer to the Activity Performance Checklists • Follow along with the flow of each day Session activities are presented sequentially, and your facilitator(s) will provide guidance on their execution. This workbook works in tandem with any additional support materials that will be utilized during the simulation session (e.g., activity Role Cards, visual presentations, Action Planning Booklet, Forms Booklet).

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SIMULATION SESSION 2: INTRODUCTION

Session Agenda Day 2 PURPOSE/TOPIC Welcome to Day 2 Gathering and Verifying Information for Retail Properties Identify Clauses for Agreement of Purchase and Sale for Retail Properties Write a Custom Condition for a Retail Property Explaining Clauses to a Retail Buyer Lunch Explaining Clauses to a Retail Buyer (Continued) Retail Buyer Storyline Bridge Determining the Value of a Retail Property Retail Buyer Storyline Conclusion Introduction to Industrial Properties Gathering and Verifying Information for Industrial Properties Identify Clauses for Agreement of Purchase and Sale for Industrial Properties Day 2 Summary Day 2 Action Planning

Disclaimer Throughout the program, you have learned about organized real estate, which includes membership in a local real estate board, the Ontario Real Estate Association (OREA) should the local real estate board choose to join, and the Canadian Real Estate Association (CREA). These associations provide services to brokerages and salespersons who choose to have membership. If you become a member, you will have access to standard forms and clauses created by OREA. However, not all brokerages and salespersons choose to be members of organized real estate and are not required to use these forms. As they are commonly used in trading, specific forms and clauses will be used throughout the program for illustrative purposes. Images of OREA standard forms and clauses are included with permission of the Ontario Real Estate Association (OREA).

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SIMULATION SESSION 2: DAY 2

Session Activities – Day 2 Welcome to Day 2 Discuss the following in your group: • Any questions from yesterday’s activities • Reflections on activities completed so far What is something you learned/liked? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What did you find challenging? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What questions do you still have, if any? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Scenario Background Information Recap You are one of the salespersons working in the retail division of a commercial brokerage. An investor calls in wanting to buy a retail plaza. The buyer is referred to you as you are in the retail division. The buyer is interested in purchasing a retail plaza containing four to eight units. You set up an appointment to meet with the buyer. You have an initial conversation with them, and they decide they would like to be represented by the brokerage. You prepare and explain all the documentation for them to sign. You gather all the requirements regarding the property the buyer is looking for. You note the type of property/location the buyer is interested in. You also discuss the investment strategy. Preview of the Day’s Activities • • • • • • •

Gathering and Verifying Information for Retail Properties Identify Clauses for Agreement of Purchase and Sale for Retail Properties Write a Custom Condition for a Retail Property Explaining Clauses to a Retail Buyer Determining the Value of a Retail Property Gathering and Verifying Information for Industrial Properties Identify Clauses for Agreement of Purchase and Sale for Industrial Properties

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SIMULATION SESSION 2: DAY 2 Gathering and Verifying Information for Retail Properties The buyer is interested in purchasing a retail plaza. As a salesperson, for due diligence purposes, you need to ensure that the buyer consults a third-party professional or completes an environmental site assessment before they plan to give an offer. You will need to gather and/or verify much more information to perform a complete due diligence for the buyer. This activity will focus on the importance of gathering and/or verifying the information while performing due diligence for retail properties. Salesperson: Your objectives in this activity are: • Determine the requirements of the buyer for the purchase • Gather all the relevant information required for the property • Access the appropriate sources to verify the information Activity Instructions 1. 2. 3. 4.

You will be divided into groups of three. Answer the questions in your Participant Workbook by discussing as a group. You will have 15 minutes to complete this activity. You will get an extra 10 minutes to work on an example once you are done with these questions.

What questions would you ask the client about their needs? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

What information would you, as a salesperson, be required to gather and/or verify to perform due diligence? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Why does this information matter? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

Where would you find this information? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

Based on the buyer’s requirements, you shortlist two retail plazas for your buyer. Details about the two properties you shortlisted: • • • • • •

Plaza 1 tenant mix Variety store Restaurant Dry cleaner with in-house cleaning Hair/nail salon Real estate brokerage Clothing store

• • • • • •

Plaza 2 tenant mix Shoe store Jewelry store Dollar store Music store Dry cleaning depot Vacant unit

What potential issues might you be concerned about while performing due diligence for the two properties? _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Wrap-Up Points of discussion during the class debrief around Gathering and Verifying Information for Retail Properties included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important for a salesperson to gather and/or verify information when representing a buyer looking to purchase a retail property: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Summary of Key Points As a salesperson dealing in retail properties, you will: • • •

Determine the requirements of the buyer Gather all the relevant information Access the appropriate sources to gather and/or verify the information

Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “What information do you think would be challenging to gather and/or verify?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

You agree with the buyer, who chooses Plaza 2 despite the vacancy. The possible environmental issues with the dry cleaning business would impact their ability to obtain financing for Plaza 1.

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SIMULATION SESSION 2: DAY 2 Identify Clauses for Agreement of Purchase and Sale for Retail Properties In this activity, for the given scenario and objectives, you will independently decide on a course of action and then discuss your decisions with your group. Now that you are getting ready to identify the clauses for the offer, what kind of information should you consider before identifying clauses to include in the offer? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Scenario Background Information Now, the buyer feels the property is underutilized and would like to investigate adding another unit. You begin the offer plan by determining details such as deposit, completion, and title search dates along with offer math and by selecting clauses and looking more deeply at the Agreement of Purchase and Sale for the retail property. You gather all the relevant information for the buyer and review it with them. Note any information and buyer requirements you think you should consider before identifying clauses for the offer. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Salesperson: Your objectives in this activity are: • Identify clauses to include in the agreement of purchase and sale for a retail property • Determine why these clauses should be included Activity Instructions Part A 1. 2. Part B 3. 4. 5.

Independently read the information in your Participant Workbook. Individually, generate a list of the clauses you think should be included in the offer. Discuss your choices as a group. Which clauses did you choose, and why? Come to a consensus on the list of clauses and write them down. You will have 10 minutes to complete this activity.

Decide which clauses to include in the agreement for purchase and sale, and why. Clause

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Rationale

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SIMULATION SESSION 2: DAY 2 Clauses to Add to the Offer The correct clauses to include in the offer, as identified by the facilitator: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Wrap-Up Points of discussion during the class debrief around Identifying Clauses for Agreement of Purchase and Sale for Retail Properties included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Why Is It Important? Considerations on why it is important to practise identifying clauses for an agreement of purchase and sale for retail properties: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points When identifying clauses, consider: • Property details • Surrounding area • Buyer’s concerns • Protecting buyer’s best interests Write your additional notes here: ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Self-Reflection Reflect on your response to the question, “How comfortable would you be identifying clauses required to include in the agreement of purchase and sale for a retail property?” ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Write a Custom Condition for a Retail Property In this activity, for the given scenario, you will need to individually write a custom condition and then discuss it as a group. What are the key components of a conditional clause (“W” steps)? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ During the Activity Your objective is to write a custom condition: • That addresses the buyer’s specific requirements • That promotes and protects the best interests of the buyer • That is accurate and complete • By using the information provided and the “W” steps for reference Activity Instructions 1. Independently review the scenario background information in your Participant Workbook. 2. Create a custom condition. 3. Review and discuss your custom condition with your partner. Try to identify the 6 “W”s in your partner’s custom condition and discuss any errors with them. Scenario Background Information You have gathered and verified the relevant information and considered which clauses will protect your buyer’s best interests. You identified the custom condition—determine if an additional 2,000 sq. ft. unit can be added to the property—to include in the offer.

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SIMULATION SESSION 2: DAY 2 Write a Custom Condition for a Retail Property – Performance Checklist

Criteria to Observe

Observed None/Few

Observed Some

Observed All

Write a custom condition for a retail property using the "W" steps and appropriate language to promote and protect the best interests of your buyer. Created an accurate custom condition • The wording is clear and precise   • The wording is complete and accurate Used the “W” steps when writing a custom condition • Who is to do it? – The buyer • Who is to pay for it? – The buyer • What is to be done – Determine if an additional 2,000 sq. ft. can be added to the north side of the existing building • Within what time limit? – Placeholder Date   and Time • What is to happen in the event it is not done? – The offer shall become null and void and the deposit returned to the buyer in full without deduction • That it may be waived – Condition is inserted for the benefit of the buyer and may be waived at their sole option The wording fully protects the buyer by: • Stating that the determination should be satisfactory to buyer in their sole and absolute discretion • Ensuring that the time period is long enough   to fulfill the condition • Including a waiver provision in the condition in case the buyer wishes to proceed with the transaction even if the buyer is unable to fulfill the condition

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





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SIMULATION SESSION 2: DAY 2 In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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My Peers’ Performance

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SIMULATION SESSION 2: DAY 2 Write a Custom Condition Based on the Activity Objectives, Activity Instructions, and Scenario Background Information, create a custom condition. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Review and Discuss Work with Partner Review and discuss your condition with your partner, designating your partner as the peer to review your work. Using the Performance Checklist and the example condition, evaluate and discuss your own and partner’s custom condition. Discuss your observations about your partner’s custom condition with them. Discuss the following: • •

Was the language in your condition similar to the language in your partner’s condition? What about the example? Were there any components missing from your condition?

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _____________________________________________________________________________________

______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Self-Reflection Using the Performance Checklist and the example custom condition, do corrections to your custom condition and assess your own performance in the writing a custom condition activity. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important to practise writing a custom condition: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points Remember: • Rely on the “W” steps when drafting custom conditions and use clear, precise wording • Drafting accurate and complete conditions will result from continual practice • Ask the manager or broker of record for assistance when necessary Write your additional notes here: ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Explaining Clauses to a Retail Buyer Role Play Introduction The purpose of this role play is to give you an opportunity to practise explaining clauses to the buyer. This role play is divided into two parts. We will complete the first part of this role play before lunch and continue with the second part after lunch. Scenario Background Information You have drafted the offer with all the relevant clauses that promote and protect the best interests of the buyer. Now you are ready to meet with the buyer and begin explaining the clauses to them. The Buyer may terminate this Agreement through written notice delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 5:00 p.m. on the 5th day of December, 20xx, if the Buyer is not satisfied with the results of the Buyer’s inspection of the real property, the Leases (or Offers to Lease if no Leases are available), and improvement. Upon receipt of the above notice, this Agreement shall be null and void and the deposit shall be returned to the Buyer in full without deduction. If no such notice is received within the above time limit, then this term of contract shall be deemed waived by the Buyer and this Agreement shall remain valid and binding whether or not the Buyer is satisfied with the results of the inspection as stated herein.

The Seller agrees to: a) Supply the Buyer not later than 5:00 p.m. on the 12th day of November, 20xx, with all Leases and/or Offers to Lease which are in force at the time of acceptance of this Offer and a set of “as built” building plans for the development of the site (if such are in its possession); b) Allow the Buyer, its agents and employees, to inspect the land and improvements at mutually convenient time or times; and c) Authorize all governmental and other authorities having jurisdiction over the real property to release to the Buyer all information such authorities have on file respecting the property. Should the Buyer hire agents, the cost and responsibility of such work shall be for the account of the Buyer. The Buyer covenants and agrees to restore the property forthwith after inspection to its pre-existing physical condition prior to the time of the first such inspection.

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SIMULATION SESSION 2: DAY 2

The Buyer agrees to treat the results of such inspections in a strictly confidential manner and not to disclose the results to a third party except where required by law. There shall be no compulsory requirement to disclose the result to the Seller. Write any additional notes on the scenario background information here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Salesperson: During this Role Play Your objectives are: • Explain the details of one of the key clauses included in Schedule A • Confirm the buyer’s understanding of: o A condition for the Buyer inspecting and approving the real property, the Leases (or Offers to Lease if no Leases are available), and improvements

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SIMULATION SESSION 2: DAY 2 Explaining Clauses to a Retail Buyer – Performance Checklist

Criteria to Observe

Observed None/Few

Observed Some

Observed All

Explain the details of a condition included in Schedule A and confirm the buyer’s understanding. Explained to the buyer that: • The offer is conditional upon the Buyer: o Inspecting and approving the property and improvements o Reviewing the leases • If the Buyer is not satisfied with the inspection and review: o They may terminate the agreement by notifying the seller in writing •

•

•

•

• • •

The Buyer has until 5:00 p.m. on the 5th day of December, 2020 to terminate the agreement If the Buyer provides written notice of termination to the Seller: o The offer shall become null and void o The deposit shall be returned to the Buyer If the Buyer does not provide written notice of termination: o The agreements shall remain valid and binding, despite whether or not the Buyer is satisfied with the inspection and review The seller authorizes government agencies to release information and documents on file to the buyer Any searches that are done will be at the buyer’s expense If the property is affected in any way due to the inspections, the buyer will be required to restore the property to its original state The buyer must keep the results of any inspections confidential

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









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SIMULATION SESSION 2: DAY 2

Criteria to Observe •

Observed None/Few

Observed Some

Observed All

The buyer has no obligation to disclose the results of any inspections to the seller

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SIMULATION SESSION 2: DAY 2 In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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My Peers’ Performance

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SIMULATION SESSION 2: DAY 2 Role Cards These character role cards are for your use during the role play.

Salesperson Card: Role Play – Explaining Clauses to a Retail Buyer Scenario Background Information: You prepare the offer and include all the clauses that promote and protect the best interests of your buyer. Instructions: You will use this opportunity to explain one of the clauses from the offer. You can end the conversation once you have addressed the objectives outlined below. Refer to the wording of the clause in your Participant Workbook. Your Objectives: In this conversation with the retail buyer, you will want to: • Explain the details of the condition for the buyer inspecting and approving the real property, the Leases (or Offers to Lease if no Leases are available), and improvements included in Schedule A and confirm the buyer’s understanding • Explain the significance and importance of the details within the condition

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SIMULATION SESSION 2: DAY 2 Buyer Card: Role Play – Explaining Clauses to a Retail Buyer Scenario Background Information: You have located a suitable retail plaza, and now you have decided to submit an offer on the property. The salesperson has prepared the offer and is ready to walk through and discuss the details with you. Instructions: You will listen to the salesperson guide you through the details of one of the clauses from the offer. You should make sure that by the end of the conversation, you have a clear understanding of all topics outlined below. Your Objectives: During this conversation there is important information that you as a buyer should receive. This should include the importance of: • The inspection of the real property • The review of all the leases • The seller’s obligations in the clause • The time frames in the clause • The confidentiality of the results of the inspections In order to understand these concepts, ask probing or clarification questions a potential buyer would ask. These questions might include: • “What are the consequences of me not meeting the time frames in the condition?” • “What if the seller doesn’t provide the documentation within the within the time limit?” • “What if I am not satisfied with one of the inspections, but I still want to proceed with the transaction?”

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SIMULATION SESSION 2: DAY 2 Observer Card: Role Play – Observer Card Instructions: You will observe your peers as they role play a conversation. Your Goal: Your goal is to provide feedback to the person playing the salesperson role. You will: • Use the Performance Checklist for the role play to determine if the salesperson has met their objectives for the conversation • Use the My Peers’ Performance field to capture any points you may want to include in your feedback • Provide feedback using the leading practices discussed earlier: o Follow the Performance Checklist o Focus on consumer protection o Focus on compliance with REBBA o Focus on objectivity o Reference observable behaviours o Frame your feedback for improvement o Be specific o Be constructive o Be positive

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SIMULATION SESSION 2: DAY 2 Buyer Feedback (optional, as time permits) If there is time after the observer has finished with their feedback, the person playing the buyer should offer any feedback they have on the salesperson’s performance following the same guidelines as above. Buyer feedback: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection (when playing the salesperson) Using the activity Performance Checklist, assess your own performance when you played the salesperson (i.e., yourself). ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Small Group Debrief With your group, discuss the answers to the following questions (write down some of the responses): What were some effective ways you described the clause? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What challenges did you encounter when describing the details of the clause to the buyer? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What are some patterns you noticed across each round of role play when explaining the clause to the buyer? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Wrap-Up Points of discussion during the class debrief around Explaining the Clauses to a Retail Buyer included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is It Important? Considerations on why it is important to practise explaining clauses to a retail buyer: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Summary of Key Points Remember to: • •

Ensure all the details of the pre-printed and selected clauses have been fully explained to the buyers Confirm that the buyers fully understand all explanations prior to the buyer signing the offer

Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Retail Buyer Storyline Bridge After you draft the offer, you meet with buyer and you explain all the details of the pre-printed and selected clauses to confirm that they fully understand all explanations before they sign the offer. After all explanations, the buyer proceeds to sign the offer. The offer is then submitted to the seller who accepts it. Once the offer is accepted, the seller provides the required documentation (e.g., financial statements, leases, contracts, etc.) Now, you need to discuss the components that would affect the value (e.g., market value appraisal) of the property with the buyer. This is done in order for the buyer to make an informed decision regarding his perceived value of the property. Write any additional notes on what has happened since the last activity here: ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Determining the Value of a Retail Property When reviewing the financials for a buyer of a retail property it will be your duty as a salesperson to properly interpret and calculate the financials concerning the property. For this group discussion, using the scenario background information and financial details provided, you will individually calculate the financials that are required to determine the value of the retail property and then discuss your answers as a group. What financials would you need to determine the value of a retail property? ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

______________________________________________________________________________ ______________________________________________________________________________ Key points to remember before you proceed further: • • • •

When you are doing per sq. ft calculations, it will be an annualized number TMI stands for taxes, maintenance, and insurance, which are expenses that the landlord will recover as additional rent and is not considered income (nor expenses) for the building. We are looking for a potential rental income calculation. Therefore, include any vacant units while doing calculations. You may refer to the formulae sheet below if needed during this activity

Term Cash Flow (Before Taxes) Net operating income NOI (Net Operating Income) Overall capitalization rate Potential rental income Value Cost Approach

Formula Net operating income – Annual debt service Gross operating income – Operating Expenses Rate (capitalization rate) x Value of property Net operating income ÷ Value of property Number of units x Annual rent per unit NOI (net operating income) ÷ Rate (capitalization rate) Land value + Soft costs + Hard costs

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SIMULATION SESSION 2: DAY 2 Activity Instructions – Part 1 1. Read the Scenario Background Information and other details provided in the cash flow worksheet. 2. Determine the Potential Rental Income, Effective Rental Income, Gross Operating Income and the Net Operating Income of the targeted property using the property's financials. 3. Determine the value of the plaza using the NOI calculated in the previous step and the given Capitalization (Cap) Rate. 4. Once everyone in your group has determined the value of the plaza, discuss your calculations as a group. What value did each of you determine, and how did you get this answer? 5. You have 20 minutes to complete Part 1 of the activity. Scenario Background Information – Part 1 After showing your buyer client two potential retail plazas, they decide to make an offer on the six-unit plaza that has one vacant unit. Once the offer is prepared and all the terms and conditions are explained, including the pre-printed ones and the ones on Schedule A, the buyer initials and signs the appropriate areas. The salesperson then delivers the Agreement of Purchase and Sale to the listing salesperson. The seller accepts the agreement with no changes. The buyer receives and reviews all of the appropriate documentation, which includes the following information: Units 1 & 2 are 1,200 sq. ft. each and are paying a base rent of $21.00/sq. ft. with an additional $5.50/sq. ft. for TMI. Units 3, 4 & 5 are 1,000 sq. ft. each and are paying $17.50/sq. ft. with an additional $5.35/sq. ft. for TMI. The vacant unit, which is also 1,000 sq. ft., would have a potential rental the same as units 3, 4 & 5. There is no other income attached to the plaza. The seller feels that a Cap Rate of 6% would be an attractive rate of return to an investor. In this location, the vacancy rates for plazas is 2%. The seller has a non-recoverable expense of $9,500/yr.

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SIMULATION SESSION 2: DAY 2 Based upon the information provided, what is the value of the plaza? CASH FLOW WORKSHEET

Potential Rental Income

______________________________________

(-) Vacancy Rate

______________________________________

(=) Effective Rental Income =

______________________________________

(+) Other Income

______________________________________

(=) Gross Operating Income

______________________________________

(-) Operating Expenses

______________________________________

(=) Net Operating Income

Value of the plaza:

______________________________________

______________________________________

Use this space to perform any calculations and take additional notes. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Activity Instructions – Part 2 1. Read the Scenario Background Information. 2. Determine the value of the property using the NOI calculated in Part 1 and the buyer's desired Cap Rate. 3. Once everyone in your group has determined the value of the property, discuss your calculations as a group. What value did each of you determine and how did you get this answer? 4. You have 10 minutes to complete this part of the activity. Scenario Background Information – Part 2 Having reviewed all the information, and being satisfied with it, the buyer feels that since a retail plaza is a higher risk than other types of commercial properties, they would want an 8% Cap Rate. Based on the buyer’s desired Cap Rate of 8%, what would be the value of the plaza? Value of the plaza: _____________________ Use this space to perform any calculations and take additional notes. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Wrap-Up Points of discussion during the class debrief around Determining the Value of a Retail Property included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is It Important? Considerations on why it is important for a salesperson to practise determining the value of a retail property: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Summary of Key Points Remember to: • • •

Gather and review all the relevant financial information and details Use the proper formulas when calculating the value, net operating income, and capitalization rates Discuss the results with the buyer

Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “What steps could you take to become more comfortable determining the value of a retail property?” ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Retail Buyer Storyline Conclusion After reviewing all the documentation and verifying financials, the buyer adjusts some of the financials to arrive at a more accurate analysis of the property. The buyer wants to proceed with the transaction but would like a price reduction based on the analysis. The salesperson prepares an amendment to the agreement with the new price and an irrevocable of 9:00 p.m. on the 4th day of December, 20xx, and the buyer signs it. The salesperson submits the amendment to the listing salesperson. The seller declines the amendment with the new price. The buyer decides that they would still like to move forward at the original price. The salesperson explains to the buyer that there is no further action needed on the buyer’s part and that the agreement remains valid and binding.

Write any additional notes on what has happened since the last activity here: ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Introduction to Industrial Properties Yesterday, we discussed office properties and we have just finished reviewing the documents and verifying the financials used in a retail property transaction. Now, we’ll be discussing a different market sector: industrial properties. What are the three types of industrial properties? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What are some industrial property uses that you can think of? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 A prospective buyer contacts the commercial brokerage and is forwarded to you, as you work in the industrial division. They would like to relocate their warehousing for their restaurant supply distribution business. They’re currently leasing and are looking to expand after outgrowing their current location and are looking to purchase an industrial property. You, as the salesperson, meet with the buyer, determine their needs and desired type of property, find potential properties, narrow them down, and select one. Scenario Background Information: The buyer wants to expand and purchase a larger industrial property with multiple loading docks, clear height of 30 ft., 20,000 square feet of space, at least 10% office space, ample parking, a fenced perimeter, and a heated warehouse, with the requirement of a transformer to increase voltage, and an adequate sprinkler system. In addition to all these requirements, the buyer would also like to have a separate building for the storage of containers/cylinders of Puron gas. For the main property the buyer is looking at, a Phase 1 environmental assessment was done five years ago and there was no evidence that a Phase 2 assessment was required. The business next door at the time was an automotive repair shop (which relocated four years ago). Write any additional notes on the scenario background information here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Gathering and Verifying Information for Industrial Properties Salesperson: Your objectives in this activity are: • Determine the requirements of the buyer for the purchase • Gather all the relevant information required for the property • Access the appropriate sources to verify the information Activity Instructions 1. You will be divided into groups of three. 2. Answer the questions in your Participant Workbook by discussing as a group. 3. You will have 20 minutes to complete this activity. What information would you, as a salesperson, be required to gather and/or verify to perform due diligence? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Where would you find this information? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 What do you see as different for gathering and/or verifying information for an industrial property? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Wrap-Up Points of discussion during the class debrief around gathering and/or verifying Information for Industrial properties included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Why Is This Important? Considerations on why it is important for a salesperson to practise gathering and/or verifying information when representing a buyer looking to purchase an industrial property: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points

As a salesperson dealing in industrial properties, you will: • Determine the requirements of the buyer • Gather all the relevant information • Access the appropriate sources to gather and/or verify the information Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Self-Reflection Reflect on your response to the question, “What information do you think would be the most important when performing due diligence for an industrial property?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Identify Clauses for Agreement of Purchase and Sale for Industrial Properties In this activity, based on the buyer’s requirements in the given scenario, you will identify issues that you would like to consider when drafting an agreement of purchase and sale. Scenario Background Information The buyer will be the user of the property and needs the property for a specific purpose. The choice of available properties is fairly limited. You locate a property that meets most of the buyer's requirements but has no separate building for storage. You show the property to the buyer. They like the property even though it does not have a separate building for storage that they are looking for. The buyer wants to proceed, however, as one of their conditions, they want to determine and satisfy themselves of the ability to add a separate building for storage on the property. You begin the offer plan by identifying issues and selecting clauses and looking more deeply at the Agreement of Purchase and Sale for the industrial property. Salesperson: The salesperson’s objectives are: • •

Identify issues that may require the inclusion of clauses in the agreement of purchase and sale for an industrial property Determine why these issues may require the inclusion of clauses

Activity Instructions 1. Independently read the information in your Participant Workbook. 2. Individually, generate a list of the issues that would need to be considered when drafting an agreement of purchase and sale for an industrial property. 3. Once everyone in your group has identified the issues, discuss your choices as a group. Which issues did you come up with, and why? 4. Come to a consensus on which issues should be reflected in Schedule A in an agreement of purchase and sale and write them on your group’s whiteboard/flip chart. 5. You will have 15 minutes to complete this activity.

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SIMULATION SESSION 2: DAY 2 Write your own notes on the instructions here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Decide which issues may require the inclusion of clauses in the agreement for purchase and sale, and why. Issues

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Rationale

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SIMULATION SESSION 2: DAY 2 Wrap-Up Points of discussion during the class debrief around Identifying Clauses for Agreement of Purchase and Sale for Industrial Properties included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is It important? Considerations on why it is important to identify issues that may require the inclusion of clauses in the agreement of purchase and sale for industrial properties: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Summary of Key Points When identifying issues, consider: • • • •

Property details Surrounding area Buyer’s concerns Protecting buyer’s best interests

Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “How comfortable would you be identifying the issues that may require the inclusion of clauses in the agreement of purchase and sale?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 2 Day 2 Summary Recap • •

Retail Properties Industrial Properties

Day 2 Action Planning Review the self-reflection notes that you took during the day in your workbook and identify areas where you thought you performed well and areas where you thought you could improve. Select up to two areas where you performed well and two areas for improvement and enter those into the corresponding columns of your Action Planning Workbook.

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SIMULATION SESSION 2: APPENDIX

Appendix These Performance Checklists are the same as those that appear earlier in this document and are compiled one after the other for your convenience.

Performance Checklists Write a Custom Condition for a Retail Property

Criteria to Observe

Observed None/Few

Observed Some

Observed All

Write a custom condition for a retail property using the "W" steps and appropriate language to promote and protect the best interests of your buyer. Created an accurate custom condition • The wording is clear and precise • The wording is complete and accurate Used the “W” steps when writing a custom condition • Who is to do it? – The buyer • Who is to pay for it? – The buyer • What is to be done – Determine if an additional 2,000 sq. ft. can be added to the north side of the existing building • Within what time limit? – Placeholder Date and Time • What is to happen in the event it is not done? – The offer shall become null and void and the deposit returned to the buyer in full without deduction



















•

That it may be waived – Condition is inserted for the benefit of the buyer and may be waived at their sole option The wording fully protect the buyer by: • Stating that the determination should be satisfactory to buyer in their sole and absolute discretion • Ensuring that the time period is long enough to fulfill the condition

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SIMULATION SESSION 2: APPENDIX

Criteria to Observe •

Observed None/Few

Observed Some

Observed All

Including a waiver provision in the condition in case the buyer wishes to proceed with the transaction even if the buyer is unable to fulfill the condition

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SIMULATION SESSION 2: APPENDIX In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity.

My Performance

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My Peers’ Performance

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SIMULATION SESSION 2: APPENDIX Explaining Clauses to a Retail Buyer

Criteria to Observe

Observed None/Few

Observed Some

Explain the details of a condition included in Schedule A and confirm the buyer’s understanding. Explained to the buyer that: • The offer is conditional upon: o Inspecting and approving the property and improvements o Review of the leases • If they are not satisfied with any of the inspections: o They may terminate the agreement by written notice within the time period • If they do not terminate the agreement within the time period: o The offer shall remain valid and binding • The seller agrees to supply: o All the leases and/or offers to lease o A set of “as built” building plans o All documentation must be supplied by   specified time • The seller will allow the buyer, and their agents and employees access to inspect the property • The seller authorizes government agencies to release information and documents on file to the buyer • Any searches that are done will be at the buyer’s expense • If the property is affected in any way due to the inspections, the buyer will be required to restore the property to its original state • The buyer must keep the results of any inspections confidential • The buyer has no obligation to disclose the results of any inspections to the seller

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Observed All



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SIMULATION SESSION 2: APPENDIX In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity.

My Performance

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My Peers’ Performance

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PARTICIPANT WORKBOOK

SIMULATION SESSION 2 COMMERCIAL REAL ESTATE DAY 3

Real Estate Salesperson Program © 2022 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

Contents How to Use This Workbook ..........................................................................................................ii Session Agenda............................................................................................................................iii Disclaimer ....................................................................................................................................iii Session Activities – Day 3 ............................................................................................................ 1 Welcome to Day 3 ................................................................................................................... 1 Write a Custom Condition for an Industrial Property ............................................................. 2 Environmental Site Analysis for Industrial Properties ............................................................. 9 Explaining Clauses to an Industrial Buyer .............................................................................. 14 Industrial Buyer Storyline Bridge ........................................................................................... 25 Determining Value Using the Cost Approach for Industrial Properties ................................ 26 Industrial Buyer Storyline Conclusion ................................................................................... 30 Differences Between Condominium Transactions and Freehold Transactions .................... 31 Different Types of Commercial Leases .................................................................................. 35 Explaining Clauses Related to Leasing Properties ................................................................. 42 Day 3 Summary ...................................................................................................................... 53 Day 3 Action Planning ............................................................................................................ 54 Appendix ................................................................................................................................... 55 Explaining Clauses Related to Leasing Properties (Part 2) .................................................... 60

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SIMULATION SESSION 2: INTRODUCTION

How to Use This Workbook This workbook is intended for use by a residential Simulation Session 2 – Residential Real Estate salesperson learner only. Once the session has begun, use the workbook to: • Record your own notes (see blank lines provided) o These notes can be anything you wish to record, (e.g., reflections you have during an activity, or goals you set for yourself) • Refer to the Activity Performance Checklists • Follow along with the flow of each day Session activities are presented sequentially, and your facilitator(s) will provide guidance on their execution. This workbook works in tandem with any additional support materials that will be utilized during the simulation session (e.g., activity Role Cards, visual presentations, Action Planning Booklet, Forms Booklet).

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SIMULATION SESSION 2: INTRODUCTION

Session Agenda Day 3 PURPOSE/TOPIC Welcome to Day 3 Write a Custom Condition for an Industrial Property Environmental Site Analysis for Industrial Properties Explaining Clauses to an Industrial Buyer Lunch Industrial Buyer Storyline Bridge Determining Value Using the Cost Approach for Industrial Properties Industrial Buyer Storyline Conclusion Transition from Industrial to Condominium Differences Between Condominium Transactions and Freehold Transactions Transition from Condominium Properties to Leasing Leasing Storyline Bridge Different Types of Commercial Leases Explaining Clauses Related to Leasing Properties (Part 1) Day 3 Summary Day 3 Action Planning

Disclaimer Throughout the program, you have learned about organized real estate, which includes membership in a local real estate board, the Ontario Real Estate Association (OREA) should the local real estate board choose to join, and the Canadian Real Estate Association (CREA). These associations provide services to brokerages and salespersons who choose to have membership. If you become a member, you will have access to standard forms and clauses created by OREA. However, not all brokerages and salespersons choose to be members of organized real estate and are not required to use these forms. As they are commonly used in trading, specific forms and clauses will be used throughout the program for illustrative purposes. Images of OREA standard forms and clauses are included with permission of the Ontario Real Estate Association (OREA).

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SIMULATION SESSION 2: DAY 3

Session Activities – Day 3 Welcome to Day 3 Elevator Pitch Example: Hi, my name is Alisha Silver and I work at ABC Brokerage in Anytown, Ontario. I help people achieve their dreams. I do this by truly understanding my clients and providing them with the best solutions that will get their dream house or help them be on the way to getting their dream house. Write your elevator pitch below: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Discuss the following in your group: • Any questions from yesterday’s activities • Reflections on activities completed so far What is something you learned? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 What did you find challenging? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ What questions do you still have, if any? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Write a Custom Condition for an Industrial Property In this activity, for the given scenario, you will need to individually write a custom condition and then discuss it as a group. Use the “W” steps in the Performance Checklist as a guide. During this Activity Your objective is to write a custom condition: • That addresses the buyer’s specific requirements • That promotes and protects the best interests of the buyer • That is accurate and complete • By using given information and “W” steps for reference Activity Instructions: 1. 2. 3. 4. 5.

Review the scenario background information in your Participant Workbook. Independently create a custom condition. Share your custom condition with your partner, and vice versa. Try to identify the “W” steps in your partner’s custom condition. Regroup as a class and review an example of this custom condition that correctly includes all “W” steps. 6. Assess your own work using the Performance Checklist. Scenario Background Information The buyer views the vacant industrial building and determines that it mostly suits what they’re looking for. However, they want to be able to add a gross floor area of 2,500 square feet for an external storage facility to hold containers/cylinders of puron refrigerant and would like you to include a clause in the agreement of purchase and sale that makes the offer conditional on their ability to satisfy themselves that they can build the storage facility.

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SIMULATION SESSION 2: DAY 3 Write a Custom Condition Based on the Activity Objectives, Activity Instructions, and Scenario Background Information, create a custom condition that addresses the buyer’s desire to add outdoor storage. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Share Work with Partner Share your condition with your partner, designating your partner as the peer to review your work.

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SIMULATION SESSION 2: DAY 3 Review Work Using the Performance Checklist, assess your partner on how you thought they did on writing a custom condition. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Write a Custom Condition for an Industrial Property – Performance Checklist Observed Observed Observed None/Few Some All Write a custom condition for an industrial property using the "W" steps and appropriate language to promote and protect the best interests of your buyer. Created an accurate custom condition • The wording is clear and precise    • The wording is complete and accurate Used the “W” steps when writing a custom condition • Who is to do it? – The buyer • Who is to pay for it? – The buyer • What is to be done – Determine if a gross floor area of 2,500 sq. ft. for an outdoor storage facility can be added to the property • Within what time limit? – Placeholder date    and time • What is to happen in the event it is not done? – The offer shall become null and void and the deposit returned to the buyer in full without deduction • That it may be waived – Condition is inserted for the benefit of the buyer and may be waived at their sole option The wording fully protects the buyer by: • Stating that the determination should be satisfactory to the buyer in their sole and absolute discretion    • Including a waiver provision in the condition in case the buyer wishes to proceed with the transaction even if the buyer is unable to fulfill the condition Criteria to Observe

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SIMULATION SESSION 2: DAY 3 In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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My Peers’ Performance

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SIMULATION SESSION 2: DAY 3 Self-Reflection Using the Performance Checklist, assess your own performance in the writing of a custom condition activity. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Small Group Debrief After you assess your own performance, within your pairs, do a short debrief. In this debrief, discuss the following: • Were there any components missing from your condition? • Was the language in your condition similar to the language in your partner’s condition? What about the example? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Class Debrief Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Why Is It Important? Considerations on why it is important to practise writing a custom condition: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points Remember: • Rely on the “W” steps when drafting custom conditions and use clear, precise wording • Drafting accurate and complete conditions will result from continual practice • Ask the manager or broker of record for assistance when necessary Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Environmental Site Analysis for Industrial Properties In this activity, you’ll be looking at how different environmental scenarios may impact the value of the property for the buyer as well as its potential future use. Activity Instructions 1. 2. 3. 4.

You will be divided into groups of three and given a scenario to discuss. Answer the questions by discussing as a group. If you have time, move onto the next scenario and discuss it in your group. You will have 10 minutes to complete this activity.

Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Scenario #1: The seller previously stored new tires in the building for distribution to different automotive businesses throughout Ontario. The seller has relocated to a larger building in the area and all the tires have been moved to their new facility. • How would this impact the purchase of the property? • Who would be responsible for costs associated with environmental testing and remediation? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Scenario #2: When the buyer was viewing the property there were a lot of positives that they noticed regarding the building. When walking around the outside of the building, they noticed that some of the neigbouring properties were being used for light industrial. However, they did notice that on the north side of the property there is an older building being used as a plastic manufacturer. The buyer is concerned that this may be an issue and was wondering how this may affect the purchase of the property. • How would this impact the purchase of the property? • Who would be responsible for costs associated with environmental testing and remediation? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Scenario #3: When the buyer was arriving at the property, they noticed an old abandoned gas station across the road with cement blocks surrounding the perimiter to block access to the site. When speaking with their salesperson, they asked if this could be a potential problem. • How would this impact the purchase of the property? • Who would be responsible for costs associated with environmental testing and remediation? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Wrap-Up Points of discussion during the class debrief: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it’s important to be able to explain the impact of an environmental site analysis clause on the value and use of a property? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Summary of Key Points As a salesperson, you need to be able to: • Explain the importance of an ESA clause • Identify the three phases of an ESA • Explain the time frames and costs associated with an ESA Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “What information might you use on the job to determine the potential impact of environmental factors on the value and use of a property?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Explaining Clauses to an Industrial Buyer Role Play Introduction This activity is a role play, which will operate the same as the role play you did on Day 2. As in the previous role play, you are going to practise explaining clauses to the buyer—this time, the industrial buyer we’ve been following over the course of today.

Scenario Background Information Your industrial buyer is interested in the property and is satisfied with the clause you drafted regarding the separate storage building. They have some other specific requirements regarding the use of the property and, as a result, you draft three additional clauses to protect their best interests. Salesperson: During this Role Play The salesperson’s objectives during this role play are: • Explain the details of three clauses included in Schedule A • Confirm the buyer’s understanding of the conditions for adequate floor loads for equipment storage, sufficient sprinkler system coverage to meet buyer and insurance requirements, and a crane system for material transport Building Report – Floor Load Condition This Offer is conditional upon the confirmation by a structural engineer that the floor load capacity will support restaurant equipment of up to 5 metric tons, at the Buyer’s own expense, and obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than 5 p.m. on the (15th) day September, 20xx that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to cooperate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period herein stated.

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SIMULATION SESSION 2: DAY 3 Sprinkler Systems Condition This Offer is conditional upon the confirmation by an commercial insurance provider that the existing sprinkler system is capable of extinguishing a fire in a warehouse which will contain the storage of restaurant equipment and related paper products, at the Buyer’s own expense, and obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than 5 p.m. on the 15th day of September, 20xx that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to cooperate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period herein stated. Structural Engineering – Crane Condition This Offer is conditional upon the confirmation by a structural engineer that a 5-ton bridge crane can be installed in the warehouse, at the Buyer’s own expense, and obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than 5 p.m. on the 15th day of September, 20xx that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to cooperate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period herein stated.

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SIMULATION SESSION 2: DAY 3 Explaining Clauses to an Industrial Buyer – Performance Checklist Observed Observed Observed None/Few Some All Explain the details of three conditions included in Schedule A and confirm the buyer’s understanding. Explained Clauses in Schedule A: • Explained the following: o That conditions were selected to promote and protect the buyer’s best interests o That these conditions provide the opportunity for the buyer to do their due diligence prior to the offer becoming firm and binding • Explained the following conditions: o Building Report – Floor Load – Allows for confirmation by a structural engineer that the floor load capacity    will support restaurant equipment of up to five metric tons o Sprinkler Systems – Allows for confirmation by a commercial insurance provider that the existing sprinkler system can extinguish a fire in a warehouse which will contain the storage of restaurant equipment and related paper products o Structural Engineering – Crane – Allows for confirmation by a structural engineer that a five-ton bridge crane can be installed in the warehouse Criteria to Observe

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SIMULATION SESSION 2: DAY 3 Criteria to Observe •

Explained that in all conditions: o The buyer is allowed a specific period of time to give the seller written notice that conditions have been fulfilled or waived o If the buyer does not send written notice to the seller within the time period, the offer will become null and void o That the conditions are inserted for the buyer’s benefit and may be waived by the buyer regardless of whether the conditions have been fulfilled o The Seller agrees to provide access to the property for the purpose of the inspections

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Observed None/Few



Observed Some

Observed All





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SIMULATION SESSION 2: DAY 3 In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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My Peers’ Performance

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SIMULATION SESSION 2: DAY 3 Role Cards These character role cards are for your use during the role play. Salesperson Card:

Role Play – Explaining Clauses to an Industrial Buyer Scenario Background Information: Your industrial buyer is interested in purchasing a property for their own use and is satisfied with the clause you drafted regarding the outdoor storage. They have some other specific requirements regarding the use of the property and, as a result, you draft three additional clauses to protect their best interests. Instructions: You will use this opportunity to explain these conditions to your buyer. You can end the conversation once you have addressed the objectives outlined below. Refer to the wording of the conditions in your Participant Workbook. Your Objectives: In this conversation with the buyer, you will want to: • Explain the details of these conditions contained in Schedule A and confirm the buyer’s understanding: o Building Report – Floor Load o Sprinkler System o Structural Engineering – Crane • Explain the significance and importance of the details within the conditions

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SIMULATION SESSION 2: DAY 3 Buyer Card:

Role Play – Explaining Clauses to an Industrial Buyer Scenario Background Information: You have located a suitable industrial property and have decided to submit an offer on the property. The salesperson has prepared the offer with three additional conditions based on your specific requirements and is ready to walk through and discuss the details of those conditions with you. Instructions: You will listen to the salesperson guide you through the details of the three conditions from the offer. You should make sure that by the end of the conversation, you have a clear understanding of all topics outlined below. Your Objectives: During this conversation there is important information that you as a buyer should receive. This should include the importance of the: • Building Report – Floor Load condition • Sprinkler System condition • Engineering Report – Crane condition • Time frames in the conditions • Seller providing access for the inspections To gain an understanding of the details of the conditions, ask probing or clarification questions a potential buyer would ask. These questions might include: • “What are the consequences if I don’t meet the time frames in the condition?” • “What if the seller doesn’t provide access for the inspections?” • “What if I am not satisfied with one of the inspections, but I still want to proceed with the transaction?”

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SIMULATION SESSION 2: DAY 3 Observer Card:

Role Play – Observer Card Instructions: You will observe your peers as they role play a conversation. Your Goal: Your goal is to provide feedback to the person playing the salesperson role. You will: • Use the performance checklist for the role play to determine if the salesperson has met their objectives for the conversation • Use the My Peers’ Performance field to capture any points you may want to include in your feedback • Provide feedback using the leading practices discussed earlier: o Follow the performance checklist o Focus on consumer protection o Focus on compliance with REBBA o Focus on objectivity o Reference observable behaviours o Frame your feedback for improvement o Be specific o Be constructive o Be positive

Buyer Feedback (optional, as time permits) If there is time after the observer has finished with their feedback, the person playing the buyer should offer any feedback they have following the same guidelines as above. Buyer feedback: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Self-Reflection (when playing the salesperson) Using the activity Performance Checklist, assess your own performance when you played the salesperson (i.e., yourself). ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Small Group Debrief In your group, ask yourselves the following question (write down some of the responses): Did the clauses meet the requirements of the buyer? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Wrap-Up Points of discussion during the class debrief around explaining clauses to an industrial buyer: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This important? Considerations on why it is important to practise explaining clauses to an industrial buyer: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 What was most important to demonstrate to your buyer regarding these clauses? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points Remember to: • Ensure all the details of the pre-printed and selected clauses have been fully explained to the buyer • Confirm that the buyer fully understands all explanations prior to signing the offer Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Industrial Buyer Storyline Bridge Moving ahead, the offer has been drafted and you have explained all the clauses to the buyer and the buyer is happy with all the terms and conditions. They then ask you to submit the offer to the seller. After some negotiations, the offer is conditionally accepted by the seller. The seller provides all required documentation, such as financial statements, leases, and service contracts. Once the offer is accepted, you verify all the financial information to ensure that nothing’s missing and then proceed to do your due diligence and confirm the value of the property. Remember that this is common in commercial real estate transactions—you might need to make amendments after conditional acceptance of the offer. You decide that you’re going to use the Cost Approach to determine the value of the property, as typically, a salesperson would have a difficult time finding comparable properties for industrial transactions. Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Determining Value Using the Cost Approach for Industrial Properties Scenario Background Information Remember that your buyer has outgrown their current location and is seeking to expand their warehousing and distribution of restaurant equipment. Now, with your help, they have located a three-acre industrial property with a building that has a gross floor area of 20,000 sq. ft. They feel this property would meet their current needs and would allow for future expansion of their business. They ask you for an opinion of the value of the property. You do the research and gather the following information: The industrial land values are estimated to be $4.95/sq. ft. The hard and soft costs are $68/sq. ft. and $14/sq. ft., respectively. (1 acre = 43,560 sq. ft.) Objectives The salesperson’s objective is: • To be able to calculate an estimate of replacement value using the cost approach You may refer to the following formulae sheet below if needed during this activity Term Cash Flow (Before Taxes) Net operating income NOI (Net Operating Income) Overall capitalization rate Potential rental income Value Cost Approach

Formula Net operating income – Annual debt service Gross operating income – Operating Expenses Rate (capitalization rate) x Value of property Net operating income ÷ Value of property Number of units x Annual rent per unit NOI (net operating income) ÷ Rate (capitalization rate) Land value + Soft costs + Hard costs

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SIMULATION SESSION 2: DAY 3 Activity Instructions 1. Individually, use the scenario background information to answer each question. 2. Once everyone in your group has determined the value of the property using the cost approach, discuss your responses as a group. What did you come up with? 3. Come to a consensus on the correct response and write it on your group’s whiteboard or flip chart. 4. You will have 15 minutes to complete this activity. Using the information provided, what is the estimated value of the property? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Wrap-Up Points of discussion during the class debrief included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important to practise determining the value of an industrial property using the cost approach: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Summary of Key Points Remember: • Gather and review all the relevant financial information and details • Use the cost approach as one method of determining the value of an industrial property • Discuss the results with the buyer Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “What steps could you take to become more comfortable determining the value of an industrial property?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Industrial Buyer Storyline Conclusion Let’s wrap up with the industrial buyer. As it turns out, the buyer’s condition for separate storage cannot be satisfied due to zoning restrictions. Since the buyer still wants to proceed with the transaction with a price reduction, you prepare an amendment with a new price, which the buyer signs, and the seller agrees and signs the amendment. The buyer then waives the condition on the outdoor storage and completes a notice of fulfillment for all other conditions and the agreement becomes firm and binding. Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Differences Between Condominium Transactions and Freehold Transactions Activity Instructions 1. Answer the questions in your small groups. 2. We will then discuss your responses as a full class. 3. You will have five minutes to complete this activity. How is an industrial condominium different from an industrial freehold building? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ How does a real estate transaction for an industrial condominium differ from a transaction involving an industrial freehold building? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Wrap-Up Points of discussion during the class debrief included: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important to know the difference between a freehold property and a condominium: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Summary of Key Points Remember: • Be able to explain the differences between freehold and condominium to a buyer • Be able to explain the purpose of a Status Certificate Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “How comfortable would you be working in condominium transactions?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3

Now, we’re going to move away from the sale of commercial condominium properties to a scenario in which you’ll be working in the realm of leasing. This will be done from the perspective of a salesperson representing a landlord.

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SIMULATION SESSION 2: DAY 3 Different Types of Commercial Leases This is a continuation of the previous retail buyer scenario that occurred in Day 2: • The client who purchased the six-unit strip plaza with one vacant unit asks the salesperson to refer them to a colleague who focuses on commercial leasing who can represent them as a landlord. • You are now a salesperson in the commercial leasing division and will be representing the landlord. • You receive an offer on Form 510 – Agreement to Lease Commercial – Long Form. • You discuss some of the clauses contained in the lease and key components of the Commercial Tenancies Act (CTA) with the landlord (rights and obligations of both the landlord and tenant). Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ It’s important to be able to identify and explain the different types of commercial leases. In this activity, you will work in groups to determine whether the scenario statements are true or false, as well as identifying any benefits and drawbacks for either the landlord or tenant. Activity Instructions 1. You will be divided into groups of three. 2. As a group, discuss and come to a consensus on whether the statements are true or false and why. 3. You will have 20 minutes to complete this activity.

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SIMULATION SESSION 2: DAY 3

Respond to each situation with either “true” or “false,” indicate why, and list the benefits and drawbacks. Situation #1 A potential tenant is looking at an available unit in a retail plaza and is very concerned about how much they would have to pay each month. They would like to sign a lease where they would only have to pay a fixed amount of rent and the landlord would pay all operating expenses associated with the property. To achieve this, they would have to sign a triple net lease. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Situation #2 The landlord of a commercial property has a vacant unit they would like to lease out. The landlord would like to have the potential tenant pay as much of their expenses relating to the property as possible. To achieve this, the landlord would have to have the tenant sign a gross lease. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________ Situation #3 A potential tenant is looking at leasing a unit to run their retail flower shop. The potential tenant would like to pay the least amount per square foot possible and have an arrangement with the landlord where the tenant would pay an additional rent based on their sales. This type of lease is called a percentage lease. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________ Version: V3.6 – 2022-07-05 | © 2022 Real Estate Council of Ontario

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SIMULATION SESSION 2: DAY 3 Situation #4 While looking at different properties for lease, a potential tenant speaks with a few of the tenants in a building that they are interested in. During the conversation, the existing tenants mention that their lease agreements are for base rent plus taxes and maintenance. This type of lease is called a net lease. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________ Situation #5 A potential tenant has just signed a lease agreement with a landlord where they are paying rent plus certain defined expenses connected with the leased premises. This type of lease is called a net lease. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Situation #6 When a landlord is considering different types of leases, a base rent represents the minimum rent a future tenant would pay monthly. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________ Situation #7 A landlord presents a lease agreement to a tenant stipulating what the base and additional rent would be. The additional rent portion could include 1) taxes, or 2) taxes and maintenance, or 3) taxes, maintenance, and insurance. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Situation #8 A landlord is negotiating the lease for a 3,000-sq.-ft. unit with a potential tenant. The landlord would like to include, as additional rent, a percentage of the taxes, maintenance, and insurance. This type of lease is referred to as a triple net lease. True

False

Why ______________________________________________________________________________ ______________________________________________________________________________ Benefits ______________________________________________________________________________ ______________________________________________________________________________ Drawbacks ______________________________________________________________________________ ______________________________________________________________________________ Wrap-Up Points of discussion during the class debrief: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Why Is This Important? Considerations on why it’s important to be able to explain the different types of commercial leases: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points Remember: • Explain the types of leasing available to the client • Explain the benefits and drawbacks of each type of lease Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Self-Reflection Reflect on your response to the question, “What do you think is the most important information to have about a property when trying to determine the type of lease?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Version: V3.6 – 2022-07-05 | © 2022 Real Estate Council of Ontario

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SIMULATION SESSION 2: DAY 3 Explaining Clauses Related to Leasing Properties Role Play Introduction Next, we’re going to wrap up today with a role play where you will practise explaining clauses involved in the standard offer to lease. Scenario Background Information The buyer who purchased the strip plaza in the retail storyline is now looking to lease out the empty unit. They call the commercial brokerage back to talk to a salesperson in the leasing division. You, as the leasing salesperson, walk through the offer to lease with the landlord to set expectations and make sure they understand the clauses before they lease the unit to a potential tenant. Salesperson: During this Role Play The salesperson’s objectives during this role play are: • Explain the details of three of the key clauses and confirm the landlord’s understanding • Explain the impact the clauses may have on the tenant and landlord

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SIMULATION SESSION 2: DAY 3 7. ADDITIONAL RENT AND CHARGES The Tenant shall additionally pay a proportionate share of all costs and expenses incurred by the Landlord in maintaining, operating, cleaning, insuring and repairing the property and, without limiting the generality of the foregoing, such costs and expenses shall include the costs of: (i) snow, garbage, and trash removal; (ii) landscaping and planters; (iii) heating, ventilating and air-conditioning, and providing hot and cold water and other utilities and services to, and operating the common areas of the property, and maintaining and repairing the machinery and equipment for such utilities and services; (iv) the realty taxes, assessments, rates, charges and duties levied or assessed against the property (save any tax on the personal income of the Landlord); (v) insuring the property and such other insurance as the Landlord will effect against public liability, property damage, loss of rental income and other casualties and risks. From Form 510 – Agreement to Lease (Commercial – Long Form) ©2022 Ontario Real Estate Association. All rights reserved. Used under license.

15. OCCUPANCY OR RENT TO ABATE In the event the premises are not completed by the Landlord for occupancy by the Tenant on the date set out herein for commencement of the Term of the Lease, the rent under this agreement shall abate to the extent of such delay, and the Tenant hereby agrees to accept such abatement of rent in full settlement of all claims which the Tenant might otherwise make because the Premises were not ready for occupancy by the said date. From Form 510 – Agreement to Lease (Commercial – Long Form) ©2022 Ontario Real Estate Association. All rights reserved. Used under license.

16. ASSIGNMENT This Agreement to Lease shall not be assignable or otherwise transferable by the Tenant. The Tenant may not sublet or assign or transfer its interest in the Lease contemplated herein without securing the written consent from the Landlord, which consent shall not be unreasonably withheld, provided however, if the consent is granted, the Tenant shall remain liable for all obligations under the Lease. If the Tenant is a corporation, the transfer of the majority of the issued shares in the capital stock, or any transfer, issuance or division of shares of the corporation sufficient to transfer control of the corporation shall be deemed for all purposes to be an assignment within the meaning of this Agreement and any Lease. This provision shall not apply to a corporation whose shares are listed and traded on any recognized public stock exchange in Canada or the United States. From Form 510 – Agreement to Lease (Commercial – Long Form) ©2022 Ontario Real Estate Association. All rights reserved. Used under license.

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SIMULATION SESSION 2: DAY 3 Explaining Clauses Related to Leasing Properties – Performance Checklist Observed Observed Observed None/Few Some All Explain the details of three pre-printed clauses in the agreement to lease and confirm the landlord’s understanding. Explained Clauses in Agreement to Lease: Explained the details of the following clauses: • Additional Rent and Charges: o Determines who will for pay which services and costs o Determines the proportionate share of cost and expenses between the landlord and the tenant o Costs and expenses include: ▪ Maintenance of the property ▪ Utilities ▪ Realty taxes ▪ Insurance • Occupancy or Rent to Abate: o Protects landlord from any liability in the event construction of the unit is not completed by occupancy date o The tenant agrees accept the    abatement of rent, which means they don’t have to pay rent until the unit is ready for occupancy o Other than the abatement of rent, the tenant agrees not to make any other claims against the landlord • Assignment o The tenant agrees not sublet or assign the agreement of lease without the landlord’s written consent o The landlord cannot withhold the consent unreasonably o If the landlord gives the tenant consent for a sublet or assignment, then the tenant remains liable for whole term of the lease o If the tenant is a corporation and transfers the majority of their shares, Criteria to Observe

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SIMULATION SESSION 2: DAY 3 Criteria to Observe

Observed None/Few

Observed Some

Observed All

this would still be considered an assignment of the agreement to lease and the original tenant would remain liable

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SIMULATION SESSION 2: DAY 3 In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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SIMULATION SESSION 2: DAY 3 Role Cards These character role cards are for your use during the role play. Salesperson Card:

Role Play – Explaining Clauses Related to Leasing Properties Scenario Background Information: The buyer who purchased the strip plaza in the retail storyline is now looking to lease out the empty unit. They call the commercial brokerage to talk to a salesperson whose focus is leasing. You, as the leasing salesperson, walk through the agreement to lease with the landlord to set expectations and make sure they understand the clauses before they lease the unit to a potential tenant. Instructions: You will use this opportunity to explain three pre-printed clauses from the agreement to lease to your buyer/landlord. You can end the conversation once you have addressed the objectives outlined below. Refer to the wording of the conditions in your Participant Workbook. Your Objectives: In this conversation with the buyer/landlord, you will want to: • Explain details of three of the key clauses and confirm the buyer/landlord’s understanding o Additional Rent and Charges o Occupancy or Rent to Abate o Assignment • Explain the significance of the details contained in the pre-printed clauses

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SIMULATION SESSION 2: DAY 3 Buyer/Landlord Card:

Role Play – Explaining Clauses Related to Leasing Properties Scenario Background Information: You purchased the strip plaza in the retail storyline and you are now looking to lease out the empty unit. You call the commercial brokerage to discuss the details of the agreement to lease with a leasing salesperson. Instructions: You will listen to the salesperson as they guide you through the details of three pre-printed clauses from the agreement to lease. You should make sure that by the end of the conversation, you have a clear understanding of all topics outlined below. Your Objectives: During this conversation there is important information that you as a buyer/landlord should receive. This should include the importance of the: • Additional Rent and Charges • Occupancy or Rent to Abate • Assignment To gain an understanding of the details of the clauses, ask probing or clarification questions a potential buyer/landlord would ask. These questions might include: • “What if the taxes, maintenance, and insurance increase next year? Who will pay for the increase?” • “How long can occupancy be delayed before the tenant can make a claim against me?” • “What does it mean that consent cannot be unreasonably withheld?”

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SIMULATION SESSION 2: DAY 3 Observer Card:

Role Play – Observer Card Instructions: You will observe your peers as they role play a conversation. Your Goal: Your goal is to provide feedback to the person playing the salesperson role. You will: • Use the performance checklist for the role play to determine if the salesperson has met their objectives for the conversation • Use the My Peers’ Performance field to capture any points you may want to include in your feedback • Provide feedback using the leading practices discussed earlier: o Follow the performance checklist o Focus on consumer protection o Focus on compliance with REBBA o Focus on objectivity o Reference observable behaviours o Frame your feedback for improvement o Be specific o Be constructive o Be positive

Buyer/Landlord Feedback (optional, as time permits) If there is time after the observer has finished with their feedback, the person playing the buyer/landlord should offer any feedback they have following the same guidelines as above. Buyer/landlord feedback: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Self-Reflection (when playing the salesperson) Using the activity Performance Checklist, assess your own performance on how you thought you did when you played the salesperson (i.e., yourself). ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Small Group Debrief Ask yourselves in your group the following questions (write down some of the responses): How would you ensure that the landlord now has a thorough understanding of the clauses you explained to them? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 What components of these clauses have the potential for misunderstandings, and why might this happen? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Wrap-Up Points of discussion during the class debrief around explaining clauses related to leasing properties: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why Is This Important? Considerations on why it is important to practise explaining clauses related to leasing properties: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Summary of Key Points Remember: • Ensure all the details of the pre-printed and selected clauses have been fully explained to the buyer • Confirm that the landlord fully understands all explanations prior to signing the agreement to lease Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Day 3 Summary Recap • • • • • • •

Industrial Property cont’d Environmental Site Analysis for Industrial Properties Explaining Clauses to an Industrial Buyer Determining Value Using the Cost Approach for Industrial Properties Differences Between Condominium Transactions and Freehold Transactions Different Types of Property Leases Explaining Clauses Related to Leasing Properties

What is one new thing you learned today? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Which of the tasks that we practised today do you think will be most challenging on the job? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Which of the tasks that we practised today do you think will be most helpful on the job? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: DAY 3 Day 3 Action Planning Review the self-reflection notes that you took during the day in your workbook and identify areas where you thought you performed well and areas you thought you could improve on. Select up to two areas you performed well and two areas for improvement and enter those into the corresponding columns of your Action Planning Workbook.

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SIMULATION SESSION 2: APPENDIX

Appendix These Performance Checklists are the same as those that appear earlier in this document and are compiled one after the other for your convenience.

Performance Checklists Write a Custom Condition for an Industrial Property Observed Observed Observed None/Few Some All Write a custom condition for an industrial property using the "W" steps and appropriate language to promote and protect the best interests of your buyer. Created an accurate custom condition • The wording is clear and precise    • The wording is complete and accurate Used the “W” steps when writing a custom condition • Who is to do it? – The buyer • Who is to pay for it? – The buyer • What is to be done – Determine if a 2,500sq.-ft. outdoor storage facility can be added to the property • Within what time limit? – Placeholder date    and time • What is to happen in the event it is not done? – The offer shall become null and void and the deposit returned to the buyer in full without deduction • That it may be waived – Condition is inserted for the benefit of the buyer and may be waived at their sole option The wording fully protects the buyer by: • Stating that the determination should be satisfactory to the buyer in their sole and absolute discretion    • Including a waiver provision in the condition in case the buyer wishes to proceed with the transaction even if the buyer is unable to fulfill the condition Criteria to Observe

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SIMULATION SESSION 2: APPENDIX In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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SIMULATION SESSION 2: APPENDIX Explaining Clauses to an Industrial Buyer Observed Observed Observed None/Few Some All Explain the details of three conditions included in Schedule A and confirm the buyer’s understanding. Explained Clauses in Schedule A: • Explained the following: o That conditions were selected to promote and protect the buyer’s best interests o That these conditions provide the opportunity for the buyer to do their due diligence prior to the offer becoming firm and binding • Explained the following conditions: o Building Report – Floor Load – Allows for confirmation by a structural engineer that the floor load capacity    will support restaurant equipment of up to five metric tons o Sprinkler Systems – Allows for confirmation by a commercial insurance provider that the existing sprinkler system can extinguish a fire in a warehouse which will contain the storage of restaurant equipment and related paper products o Structural Engineering – Crane – Allows for confirmation by a structural engineer that a five-ton bridge crane can be installed in the warehouse Criteria to Observe

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SIMULATION SESSION 2: APPENDIX Criteria to Observe •

Explained that in all conditions: o The buyer is allowed a specific period of time to give the seller written notice that conditions have been fulfilled or waived o If the buyer does not send written notice to the seller within the time period, the offer will become null and void o That the conditions are inserted for the buyer’s benefit and may be waived by the buyer regardless of whether the conditions have been fulfilled o The Seller agrees to provide access to the property for the purpose of the inspections

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Observed None/Few



Observed Some

Observed All





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SIMULATION SESSION 2: APPENDIX In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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SIMULATION SESSION 2: APPENDIX Explaining Clauses Related to Leasing Properties (Part 2) Observed Observed Observed None/Few Some All Explain the details of three pre-printed clauses in the agreement to lease and confirm the landlord’s understanding. Explained Clauses in Agreement to Lease: Criteria to Observe

Explained the details of the following clauses: •

•

Additional Rent and Charges: o Determines who will pay for which services and costs o Determines the proportionate share of cost and expenses between the landlord and the tenant o Costs and expenses include: ▪ Maintenance of the property ▪ Utilities ▪ Realty taxes ▪ Insurance Occupancy or Rent to Abate: o Protects landlord from any liability in the event construction of the unit is not completed by occupancy date o The tenant agrees accept the abatement of rent which means they don’t have to pay rent until the unit is ready for occupancy o Other than the abatement of rent, the tenant agrees not to make any other claims against the landlord

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





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SIMULATION SESSION 2: APPENDIX Criteria to Observe •

Assignment o The tenant agrees not to sublet or assign the agreement of lease without the landlord’s written consent o The landlord cannot withhold the consent unreasonably o If the landlord gives the tenant consent for a sublet or assignment, the tenant remains liable for whole term of the lease o If the tenant is a corporation and transfers the majority of their shares, this would still be considered an assignment of the agreement to lease and the original tenant would remain liable

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Observed None/Few



Observed Some

Observed All





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SIMULATION SESSION 2: APPENDIX In the table below, capture notes about your own performance and understanding of this activity. Also, use the right-hand column to capture notes about your peers when you observed/evaluated their performance of this activity. My Performance

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PARTICIPANT WORKBOOK

SIMULATION SESSION 2 COMMERCIAL REAL ESTATE DAY 4

Real Estate Salesperson Program © 2022 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

SIMULATION SESSION 2: INTRODUCTION Contents How to Use This Workbook .........................................................................................................ii Session Agenda ............................................................................................................................ii Disclaimer....................................................................................................................................iii Session Activities – Day 4 ............................................................................................................ 4 Welcome to Day 4 ................................................................................................................................................4 Tenant Concerns and Issues Related to Commercial Properties .........................................................................5 Transition to Farm, Land Development, and Business Brokerage .....................................................................10 Variables that Impact the Value of a Farm Property, Development Land, and Sale of a Business ....................11 Commercial Real Estate Wrap-Up ......................................................................................................................18 Simulation Overall Wrap-Up ..............................................................................................................................23 Day 4 Action Planning ........................................................................................................................................24 Assessment ........................................................................................................................................................25

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SIMULATION SESSION 2: INTRODUCTION

How to Use This Workbook This workbook is intended for use by a Simulation Session 2 – Commercial Real Estate salesperson learner only. Once the session has begun, use the workbook to: • Record your own notes (see blank lines provided) o These notes can be anything you wish to record, (e.g., reflections you have during an activity or goals you set for yourself) • Record answers to direct questions • Complete math calculations/work with formulas • Refer to the activity Performance Checklists • Follow along with the flow of each day Session activities are presented sequentially and your facilitator(s) will provide guidance on their execution. This workbook works in tandem with any additional support materials that will be provided to you during the simulation session (e.g., activity Role Cards, visual presentations, Action Planning Booklet, Forms Booklet).

Session Agenda Day 4 PURPOSE/TOPIC Welcome to Day 4 Tenant Concerns & Issues Related to Commercial Properties Transition to Farm, Land Development, and Business Brokerage Variables that Impact the Value of a Farm Property, Development Land, and Sale of a Business Commercial Real Estate Wrap-Up Simulation Overall Wrap-Up Day 4 Action Planning Lunch Assessment preparation Assessment

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SIMULATION SESSION 2: INTRODUCTION

Disclaimer Throughout the program, you have learned about organized real estate, which includes membership in a local real estate board, the Ontario Real Estate Association (OREA) should the local real estate board choose to join, and the Canadian Real Estate Association (CREA). These associations provide services to brokerages and salespersons who choose to have membership. If you become a member, you will have access to standard forms and clauses created by OREA. However, not all brokerages and salespersons choose to be members of organized real estate and are not required to use these forms. As they are commonly used in trading, specific forms and clauses will be used throughout the program for illustrative purposes. Images of OREA standard forms and clauses are included with permission of the Ontario Real Estate Association (OREA).

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SIMULATION SESSION 2: INTRODUCTION

Session Activities – Day 4 Welcome to Day 4 What are some things that you notice now about commercial properties that you didn’t notice before? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Preview of the Day’s Activities Here are the activities we will work through today: • Tenant Concerns and Issues Related to Commercial Properties • Transition to Farm, Land Development, and Business Brokerage • Variables that Impact the Value of a Farm Property, Development Land, and Sale of a Business • Commercial Real Estate Transaction Wrap-Up • Simulation Overall Wrap-Up • Day 4 Action Planning • Assessment

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SIMULATION SESSION 2: INTRODUCTION Tenant Concerns and Issues Related to Commercial Properties Salesperson: Your objective in this activity is: •

Explain different issues that need to be considered when creating a lease agreement

When representing a tenant, some items you should discuss include: • Free rent period • Length of the lease • Taxes, Maintenance, and Insurance (TMI) concerns in a triple net lease • Option to renew What does a tenant need to understand regarding rent-free periods? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why might a tenant be concerned about the length of lease? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why might a tenant be concerned about a Taxes, Maintenance, and Insurance (TMI) in a triple net lease? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Why might a tenant be concerned about an option to renew? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ How would you confirm that the tenant has a full understanding of the issues that were reviewed? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Why is it important to recommend that the tenant obtains third-party legal advice? ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Wrap-Up Points of discussion during the class debrief around Tenant Concerns and Issues Related to Commercial Properties: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Why Is This Important? Considerations on why it is important for a salesperson to discuss concerns and issues with a tenant: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points As a salesperson, you should: • • •

Ensure that all concerns and issues have been explained to the tenant Confirm that the tenants fully understand all explanations prior to the tenants signing the offer to lease Ensure that the tenant has proper third-party (lawyer) approvals

Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Self-Reflection: Reflect on your response to the question, “How might you prepare to be more comfortable communicating with tenants about their concerns?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Transition to Farm, Land Development, and Business Brokerage We’ve talked about four major topics in commercial real estate: office, retail, industrial, and leasing. Next, we’ll talk about three more commercial transaction types: farm, land development, and business brokerage. We’ll discuss these topics at a high level, but we should understand that these are very specialized areas of commercial real estate that require specific expertise. Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Variables that Impact the Value of a Farm Property, Development Land, and Sale of a Business Salesperson: Your objectives are: • • •

Understand the complexities involved with farm, development land, and the sale of a business Understand the information required for each type of transaction Understand the factors that affect value for each type of transaction

Activity Instructions 1. You will be divided into groups of three. 2. Answer all the questions by discussing as a group. 3. You will have 30 minutes to complete this activity.

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SIMULATION SESSION 2: INTRODUCTION Why should you consider the following variables, when representing a client who is buying/selling a farm? Considerations

Rationale

Arable Land Soil Type Bush Acreage Existing Buildings Creeks and Streams Quota Specialty Farms (e.g.,fruit) Leased Land Zoning Tile Drainage Farm Property Tax Reduction Financing Soil Testing Provincial Legislation

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SIMULATION SESSION 2: INTRODUCTION Why should you consider the following variables, when representing a client who is buying/selling development land? Considerations

Rationale

Planning Act Development Sewage/ Storm Water/ Water/Hydro Highest and Best Use Title Restrictions/Easements Environmental Accessibility Brownfield Acoustics (rail, airport, road) Public input Subdivision/Severance Process Financing Options Adjacent Properties Places to Grow Act, 2005

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SIMULATION SESSION 2: INTRODUCTION Why should you consider the following variables, when representing a client who is buying/selling a business? Considerations REBBA Requirements: Statements

Explanation

REBBA Requirements: Fixtures and Chattels Business Ownership Leases Franchise Agreements Licences Financing Options Valuation Methods Training Discretion Business Shares or Assets Inventory/Goods Accounts Payable/Receivable

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SIMULATION SESSION 2: INTRODUCTION Wrap-Up Points of discussion during the class debrief concerning variables that impact the value of a farm property, development land, and sale of a business: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Why Is This Important? Considerations on why it is important for a salesperson to identify the variables that can impact a farm, development land, and the sale of a business: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ Summary of Key Points Many variables impact the value of: • A farm o Arable land o Property taxes o Drainage • Development land o Planning act o Environmental o Services • Sale of a business o REBBA requirements o Leases o Financial statements Write your additional notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Self-Reflection Reflect on your response to the question, “How comfortable would you be explaining variables impacting the value of a farm property, development land, and the sale of a business?” ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Commercial Real Estate Wrap-Up We have reached the final section of our Simulation Session, which means that we are now wrapping up with the entire Commercial program. We have reviewed a lot of topics in our time together during the Simulation Session and also during the eLearning! Let’s spend some time now reflecting on those topics. Activity Instructions 1. In your groups, read the questions specific to your group assignment in your Participant Workbook. 2. Discuss your answers as a group. 3. Prepare a creative presentation about your answers to be shared with the whole class. You may: a. Use the whiteboard (in-class and virtual deliveries)/flip charts (in-class deliveries) available to your group to draw diagrams or visuals b. Create a skit with characters that discuss the topics you have discussed c. Use any other creative method to express this information

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SIMULATION SESSION 2: INTRODUCTION Office 1. Why is it important to gather and/or verify information for office properties? 2. Why would it be necessary to write a custom condition for an office property? 3. Why is it important to conduct an office property financial analysis? Notes from your small group discussions: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Retail 1. What information do you think would be the most important when performing due diligence for a retail property? 2. Where would you find this information? 3. What are the key items to remember when writing a custom condition for a buyer client? 4. What are the key items to consider when determing the value of a retail property? Notes from your small group discussions: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Industrial 1. What information do you think would be the most important when performing due diligence for an industrial property? 2. Where would you find this information? 3. What are the important things to remember about how Environmental Site Assessments can impact the value of an industrial property? 4. What is important to remember when using the cost approach to determine the value of an industrial property? Notes from your small group discussions: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Other Transactions 1. What are the key differences between condominium transactions and freehold transactions? 2. When you are explaining the types of commercial leases to your client, what points will be important to remember? 3. What are the key items to remember when discussing tenant concerns related to commercial leasing? 4. Which variables impacting the value of a farm property, development land, and the sale of a business do you think would be important to consider? Notes from your small group discussions: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Simulation Overall Wrap-Up Post-Registration Requirements

To be eligible to renew your registration at the end of your initial two-year registration cycle with RECO, you must complete the post-registration phase. This means completing the mandatory compliance course and then completing any two of the remaining five electives, which are: • Working in Real Estate – Rural, Recreational, Waterfront Properties • Working in Real Estate – Ownership Alternatives and Complexities • Real Estate as an Investment Strategy: Residential Properties • Real Estate as an Investment Strategy: Commercial Properties (Fundamentals) • Real Estate as an Investment Strategy: Commercial Properties (Advanced) Write your notes here: ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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SIMULATION SESSION 2: INTRODUCTION Day 4 Action Planning Part 1: Day 4 Action Planning Review the self-reflection notes that you took during the day in your workbook and identify areas where you thought you performed well and areas where you thought you could improve. Select up to two areas where you performed well and two areas for improvement and enter those into the corresponding columns of your Action Planning Workbook. Part 2: Create an Action Plan Follow these steps to create your action plan: • Prioritize Areas for Improvement: Review your areas for improvement from Day 1 through 4 and rank them. Choose 1 for the highest priority. • Select the top two areas for improvement you’d like to work on over the next three to six months (the ones you ranked as 1 and 2). • Define Goals: For each of your priority areas for improvement, create a specific goal related to how you can improve your skills or knowledge to address the area. Enter these goals in the Goal column of your Action Planning Workbook. • Identify Action Planning Steps: Identify 2 – 3 tangible steps you can take to put each of your goals into action within the next 3 – 6 months. Enter these in the Action Plan Steps column of your Action Planning Workbook. Consider the following: o What specific action you will do, and by when? Look at a combination of simple tasks and more complex tasks. The more success you have with the simple ones, the more likely you are to stick to your plan! o Recognize opportunities and challenges. What can help you get there? Who can help you get there? What will get in your way? What can you do now to minimize the impact of obstacles? Looking Ahead Going forward is the time to persevere and put your plan into action, do the things that you said you would, and get them done in the time you said it would take. Get out of your comfort zone and keep going! This is an ongoing process and, as you start to reap the benefits, it is one that you will want to continue.

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SIMULATION SESSION 2: APPENDIX Assessment You will have 180 minutes to complete the assessment. During the assessment, do not (in-class deliveries): • Leave the room • Talk to your peers • Reference any outside materials • Open the envelope until all instructions are given • Write on or mark the exam/question booklet Format • Scenario and Questions Booklet • Answer Sheet Note: When the course is delivered online/virtually, the assessment is also written online through a virtual proctoring service. Instructions for this assessment will be provided separately.

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FORMS BOOKLET

SIMULATION SESSION 2 COMMERCIAL REAL ESTATE ALL DAYS

Real Estate Salesperson Program © 2022 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means— electronic, mechanical, photocopying, recording, or otherwise—without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

SIMULATION SESSION 2: FORMS BOOKLET Agreement of Purchase and Sale - Residential

From Form 100: Agreement of Purchase and Sale © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 100: Agreement of Purchase and Sale © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 100: Agreement of Purchase and Sale © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 100: Agreement of Purchase and Sale © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 100: Agreement of Purchase and Sale © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 100: Agreement of Purchase and Sale © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET Agreement of Purchase and Sale - Commercial

From Form 500: Agreement of Purchase and Sale Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 500: Agreement of Purchase and Sale Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 500: Agreement of Purchase and Sale Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 500: Agreement of Purchase and Sale Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 500: Agreement of Purchase and Sale Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 500: Agreement of Purchase and Sale Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET Confidentiality Agreement- Commercial

From Form 560: Confidentiality Agreement - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET Agreement of Purchase and Sale - Condominium

From Form 501: Agreement of Purchase and Sale Condominium Resale - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 501: Agreement of Purchase and Sale Condominium Resale - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 501: Agreement of Purchase and Sale Condominium Resale - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 501: Agreement of Purchase and Sale Condominium Resale - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 501: Agreement of Purchase and Sale Condominium Resale - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 501: Agreement of Purchase and Sale Condominium Resale - Commercial © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET Agreement to Lease Condominium – Long Form

From Form 510: Agreement to Lease Commercial – Long Form © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 510: Agreement to Lease Commercial – Long Form © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 510: Agreement to Lease Commercial – Long Form © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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SIMULATION SESSION 2: FORMS BOOKLET

From Form 510: Agreement to Lease Commercial – Long Form © 2022 Ontario Real Estate Association. All rights reserved. Used under licence.

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Action Planning Workbook

SIMULATION SESSION 2 COMMERCIAL REAL ESTATE

Real Estate Salesperson Program © 2020 Real Estate Council of Ontario. All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or in any means – by electronic, mechanical, photocopying, recording or otherwise without prior written permission, except for the personal use of the Real Estate Salesperson Program learner.

Action Planning Workbook

How to Use This Workbook At the End of Each Day: 1. Review the self-reflection notes from your Participant Workbook. 2. Identify up to two areas of skills/knowledge you felt you performed well and write those in the Areas Performed Well section for that day in this workbook. 3. Identify up to two areas that you thought you could improve upon and write those in the Areas for Improvement column for that day. Action Planning Steps for Day 4 of the Simulation Session: • Prioritize Areas for Improvement: Select the top two Areas for Improvement you’d like to work on over the next three to six months, and label them Priority #1 and Priority #2. • Define Goals: Write a specific goal related to how you can improve your skills and/or knowledge to address each of your two priority Areas for Improvement. • Identify Action Planning Steps: Identify two to three tangible steps you can take to put your goals into action.

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Day 1 Areas Performed Well

Areas for Improvement 1.

1.

2.

2.

Day 2 Areas Performed Well

Areas for Improvement 1.

1.

2.

2.

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Day 3 Areas Performed Well

Areas for Improvement

1.

1.

2.

2.

Day 4 Areas Performed Well

Areas for Improvement

1.

1.

2.

2.

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Day 4

Areas for Improvement

1.

Select two items from the simulation to work on over the next three to six months.

Priority Ranking

Goals

Action Planning Steps

Complete this section to detail your goals and put them into action.

2.

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