Drafting & Negotiating Real Estate Finance Documentation

Part One Property Due Diligence

• Purpose

• Scope – Materiality

• Investigation of Title

• Certificate of Title

• Warranties, Indemnities & Disclosure

• Due Diligence Questionnaire

• Due Diligence Report

Exercise 1- Risk Mitigation Techniques: You will learn how to apply the information gathered from the due diligence report into the drafting and negotiation of the real estate finance documentation.

Covenant of Title

• Full Title Guarantees

• Limited Title Guarantees

• Subject to actual knowledge

Key Parties Involved

• Borrower entities

• Syndicate of Lenders

• Other Parties: Investment Finance

• Development Finance

Key Documents

• Facility Agreement

• Duty of Care Agreement

• Property Documentation

• Report on Title

• Certificate of Title

• Security Documents

• Valuation Report

• Insurance Report

• Environment Report

Drafting or Negotiating a REF Facility Agreement

• Conditions Precedent For Investment Finance Valuation & Survey

• Insurance

• Title

• Security

• Management

• Tax

Additional CPs for Development Finance

• Insurance – for additional parties

• Development Documentation

• Security

Exercise 2 – Change of control: Learn the significance of the change of control clause and its definition during this section of the real estate documentation course

• Prepayments & Cancellations Mandatory Prepayments

• Change of Control

• Break costs

Interest Provisions

• Interest Periods

• Hedging

• Calculation of Interest

• Default Interest

Valuation Provisions

• Definitions

• Costs

• Representations

Bank Account Provisions

• Rent Account

• Deposit Account

• Disposal Account

• VAT Account

• General Account

• Retention Account

Part Two Representations & Warranties

• For Investment Facilities Title

• Legislation

• Security

• Use & Condition

• Reports

For Development Facilities

• On the Development

• On the Development Documentation

When made and by whom

Qualifications

Common Negotiating Points

• For Lender

• For Borrower

Covenants

• Information Covenants

• Financial Covenants

• Property Covenants

• Development Covenants

• General Covenants

• Common Negotiating Points For Lender

• For Borrower

Exercise 3 – Real Estate Finance specific events of default

• Events of Default Standard Events of Default

• Compulsory Purchase

• Major Damage

• Headlease

• Insolvency of Significant Tenant

• Abandonment

• Completion

• Step-in Agreements

• Common Negotiating Points Material Adverse Effect

• Thresholds – Cross Defaults etc.

• Qualifications

Drafting or Negotiating the Security Documents

• The Security Package

• Covenants

• Taking Security Land

• Shares

• Bank Accounts

• Fixed vs Floating Charge

• Contractual Rights

• Insurance Policies

• Development contracts and collateral warranties

Perfection of Security

Enforcement

Cross Border Security

Intercreditor Arrangements

• Key Provisions for Negotiation

• Priority of Payments

• Other Rights

Documenting Derivatives in Loan Transactions

• ISDA Master Agreement and Schedule

• Events of Defaults

• Additional Termination Events

• Specified Entities

• Notional Reductions

• Collateral

Legal Opinions

• What legal opinions should cover

• Foreign Legal Opinions

Loan Agreements and FATCA

Group Exercise (Live case study): Work together to discuss the required documentation, due diligence and structuring for a real estate finance transaction in order to prepare a feasibility proposal.

Training Objectives

• Learn how to identify the appropriate risk mitigation technique for a range of commonly encountered issues in the property due diligence report.

• Get an overview of the key parties and key documents involved in a typical real estate finance transaction.

• Obtain checklists of the common negotiating points when acting for the seller and the borrower along with a detailed review of all the clauses of the LMA Real Estate Finance Facility Agreement.

• Review the drafting and negotiating of the Security Documents in detail, along with issues related to taking security.

• Explore the main legal and commercial issues around Intercreditor Arrangements.

• Be apprised of the various aspects of documenting derivatives in Loan Transactions.

• An outline of the points that legal opinions should cover including any foreign legal opinions.

• Understand the FATCA issues involved in drafting a Real Estate Finance Facility Agreement.

• Sharpen up your drafting and negotiating abilities through participation in the group case study allowing you to apply in practice the concepts/theory covered in this training.

Training Course Summary

This 2-part course provides full coverage of the important aspects of drafting and negotiating real estate finance documentation. It covers topics from drafting or negotiating the REF Facility Agreement, the Security Documents, and the Hedging Documents, to an in-depth discussion around the issues related to Intercreditor Arrangements and Legal Opinions.

It is relevant for in-house lawyers and private practice lawyers alike and bankers involved in complex structuring involving real estate finance and real estate finance documentation, lending/banking documentation teams, structures, commercial real estate origination teams including originators, the sales team, commercial real estate investors, developers and borrowers as well as accountants who advise clients on real estate finance transactions.

Initially, we set the scene by going through the property-related issues around due diligence and covenant of title. We then explore the key parties and documents involved in a typical real estate finance transaction. We then assess the drafting and negotiating points involving the REF Facility Agreement, including the drawdown mechanics, conditions precedent, representations and warranties, covenants and events of default.

We go on to cover the Security Documents and discuss the issues around taking security, perfection and enforcement of security and cross-border security. The Intercreditor Arrangements are discussed including the key provisions for negotiation, cure rights etc. followed by the coverage of the ISDA Master Agreement provisions to be aware of when drafting and negotiating real estate finance documentation.

Additionally, we will explore legal opinions and discuss what banking lawyers should consider for specific FATCA drafting.

This real estate finance documentation training will have group exercises at various intervals on pertinent topics to allow you to practically apply the knowledge you learn.