Advanced Real Estate Finance: Capital Structures, Private Credit & Term Sheet Negotiation

Part One Methods of Investing in Real Estate

• Real Estate Investment Structures – Types of Finance The Lending Structure Investment Finance Structure & Key Features

• Security Package & Guarantees

• Drawdown, Repayment & Prepayment

• Interest

• Bank accounts

Development Finance

• Structure & Key Features

• Security Package

• Collateral Warranties and Guarantees

• Drawdown, Repayment & Prepayment

• Interest

• Bank accounts

Flexible Financing Arrangements

• Flexible Senior Loans – Accordian and Hunting Facilities

• Stretched Senior Loans

• Mezzanine Loans

• Preferred Equity Loans

Islamic Finance Structures

Sale and Leaseback

• Opco/Propco Structures Ring fencing

• Syndication

• Bridge take-out

REITs

• Form of a UK REIT

• The conditions

• Breach

• Ringfence

• Property Rental Business

• Tax treatment

Property Derivatives

Private Credit and Debt Funds in Real Estate Finance

• What is Private Credit in a Real Estate Context

• Why Private Credit Has Grown in Real Estate

• How Debt Funds Operate as Lenders — Key Differences from Banks

• The Lending Entity: SPV Structures and Fund Architecture

• Back Leverage Loan on Loan Structure

• Repo Structure

• Advantages of back leverage structures

Key Negotiating Points in Back Leverage Structures

Part Two Term Sheets

• Legal Standing of a Term Sheet - Enforceability

• Reasons for having a Term Sheet

• Process and Timing

• Duty to negotiate in good faith Case law

• Binding terms

Negotiation Guidelines

• Borrower's perspective

• Lender's perspective

• General points to bear in mind

Real Estate Finance Term Sheet - LMA

• Section 1– Senior Facility Terms Security

• Repayment, Prepayment & Cancellation

• Bank Accounts

• Representations & Warranties

• Undertakings

• Events of Default

• Conditions Precedent

Section 2–Mezzanine Facility Terms

• Bank Accounts

• Cross Defaults

• Costs and Expenses

Section 3– Intercreditor Agreement Terms

• Security Ranking

• Payments & Cure Periods

• Security Enforcement

• Waterfall

Group Case Study: Participants will work together to negotiate the terms of financing and a term sheet for a real estate finance transaction. Groups will be assigned different roles e.g. banker, sponsor, lender, seller). What's the best deal you can negotiate?

Loan Portfolio Sale

• The Bidding Process Commitment Letters

• Highly Interested/Confident Letters

• Due Diligence

• Documents

• Negotiations MAC clause

• Market Flex clause

• Clear Market provision

Reliance Letters

Legal Opinions

Reports and Audits

Timeline

Acquiring Distressed Portfolios

Exit Strategies/Bridge Take-out

• Syndication

• Securitisation

Training Objectives

By the end of this course participants will be able to:

• Identify and compare the main real estate finance structures including investment finance, development finance, flexible financing arrangements, Opco/Propco, REITs, sale and leaseback and property derivatives.

• Understand how private credit and debt funds operate as real estate lenders, how they structure their lending vehicles and the key features of whole loan, mezzanine, preferred equity and back leverage structures.

• Explain the legal standing and enforceability of term sheets and navigate the key negotiation dynamics from both lender and borrower perspectives.

• Analyse the key provisions of the LMA Real Estate Finance Term Sheet across senior, mezzanine and intercreditor agreement terms.

• Understand the loan portfolio sale and bidding process including commitment letters, due diligence, MAC, market flex and clear market provisions.

• Identify the main exit strategies available in real estate finance including syndication, securitisation and tap issues

Training Course Summary

This course provides a comprehensive and practical guide to real estate finance from a legal structuring and deal dynamics perspective. It is designed and delivered by a lawyer with over 25 years of transactional experience across magic circle law firms and bulge bracket investment banks and covers the full spectrum of real estate finance from origination and structuring through to term sheet negotiation and exit.

Part One covers the methods of investing in real estate finance and the range of financing structures available, from investment and development finance through to flexible arrangements including stretched senior loans, mezzanine, preferred equity and Islamic finance structures. It also covers sale and leaseback, Opco/Propco, REITs and property derivatives.

A dedicated section on private credit and debt funds addresses one of the most significant structural shifts in the real estate finance market, covering how debt funds operate as lenders, how they are structured as lending vehicles including SPV and fund architecture and the key back leverage structures including loan-on-loan and repo under the GMRA.

Part Two moves to the deal negotiation stage, covering the legal standing and enforceability of term sheets, the duty to negotiate in good faith and practical negotiation guidelines from both lender and borrower perspectives. Participants then work through the key provisions of the LMA Real Estate Finance Term Sheet across senior facility, mezzanine facility and intercreditor agreement terms. A group case study gives participants the opportunity to negotiate a real estate finance term sheet in a live exercise, taking on the roles of lender, borrower, sponsor and adviser.

The course concludes with a practical overview of loan portfolio sales and the bidding process including commitment letters, due diligence, MAC, market flex and clear market provisions, and the main exit strategies available including syndication, securitisation and tap issues.

It is aimed at private practice lawyers and in-house lawyers, real estate investors and borrowers, transaction managers, originators, structurers and analysts at banks and debt funds, asset managers, property funds, private equity firms and private fund professionals — all seeking a commercial and structuring perspective on real estate finance transactions. It is also relevant to wealth fund managers, hedge funds and commercial banks involved in loan portfolio sales, leveraged deals and the acquisition of distressed real estate assets.