Front Page
General Info
Order Form
Sponsorship Opportunities

Financing and Refinancing
Large Property Loans
(From £10m – £1bn)

 

Chair

Mike Worley
Head of Property Finance
Bayerische Landesbank

Speakers

Simon Berrill
Chief Executive
DTZ Corporate Finance

Stephen Clark
Partner, Real Estate Finance
Ashurst Morris Crisp

Ahsan Ellahi
Managing Director: Senior Debt Origination
Eurohypo AG

Bonnie Ko
Associate, Real Estate Finance
Credit Suisse First Boston

Priti Mithani
Senior Manager, Real Estate
PriceWaterhouseCoopers

Henrietta Podd
Director: Structured Bond Origination
Royal Bank of Canada

Brian Rubins
Chief Executive
Southern Funding Limited

Alan Russell
Director
DJ Finance

Olivier Sans
Associate, Real Estate Finance
Credit Suisse First Boston

Steve Willingham
Director, Real Estate Finance
Merrill Lynch Global Markets and Investment Banking Group

 

Debt Funding preferences amongst the big lenders: what they will fund, what deals are they looking for, what they charge

Current Bank Preferences

  • Which banks are interested in this type of funding and why?
  • What sort of deals do the banks prefer?
  • How do they differ in their approach and why?
  • What are they looking for in a transaction?
    - Lease profile
    - Required amortisation profiles
    - Release pricing
    - Exit yields
  • How should a deal be presented?
  • What are the detailed information/research requirements?
  • What should be in the business plan?
    - Property comparable-yields
    - Rents
    - Execution strategy

Structures and Charges

  • Timescales
  • Required amortisation
  • Cash sweep clauses
  • Hedging prepayment fees - types of approaches
  • What is driving pricing?
  • Impact of asset and tenant type, business plan and loan to value/interest cover in the current market
  • Current relationships between loan size, margin and front end and back end fees?
  • Favoured potential risk/ reward structures

 

High Gearing Options

Which property characteristics are essential to high gearing levels?
l Current thinking on residual debt – where has the market moved to?
l Maximising the use of the rental cash flow
l New methods - the use of derivatives
l Synthetic leases - do they work?
l Pricing - fees and interest charges
l Mezzanine and equity loans – using surplus cash flow

 

Club Loans and Loan Syndication: How they Work

  • The opportunities and risks within the syndicated loan market
  • Market characteristics – players, terms, key trends
  • Selecting an underwriting group and managing the loan distribution process through the banking and capital markets
  • Managing the loan documentation process
    - Cost
    - Agency
    - Requirements
    - Security Trustees
    - Distribution
  • Loan Servicing – agreeing and managing loan covenant and default provisions
  • Effects of multi-bank syndications on the restructuring and insolvency process
  • The impact of Basel 2 on real estate finance and banking syndicates
  • Club loans and syndications in practice in the current market

 

How to put in place revolving finance facilities and flexible arrangements with your Funder

  • Client objectives
    - Bespoke facility
    - Asset acquisition on short notice
    - Adaptability to advantageous market conditions/opportunistic flexibility
    - Minimisation of time and human resources involvement
  • Bank objectives
    - Investment in first class real estate management with local expertise/ sector focus
    - Adequate deal-flow
    - Diversification of investment inflows
  • Common processes
    - Business plan with investment, realisation and exit strategies
    - Each new property appraised/reviewed on its own merits
    - Approval/ feedback within 2-3 weeks
    - Pre-arranged framework for feasibility
  • Tenant tests
    - Cashflow/ rental income review
    - NAV
    - PBT
  • Property tests
    - Independent valuation
    - No material/ environmental issues
    - No obstacle to free management/disposal
    - Prime property/location

 

Securitised Loans: Credit Ratings and flexibility of loan terms

  • The securitisation options:
    - Whole Loan
    - CMBS
  • The importance of credit ratings
  • The pros and cons of securitised real estate loans
  • Securitisation and the future of the UK real estate market: where is the market moving?

 

The Corporate Bond as a Property Financing Route: How expensive? What are the benefits?

  • Is there a role for the traditional corporate bond in a property company context?
  • Has securitisation killed the traditional corporate bond?
  • What does the corporate bond market offer?
    - Secured
    - Unsecured
    - Fixed Rate
    - Private placements
  • What are the key differences:
    - Costs
    - Admin/flexibility
    - Investor base
  • How has the market changed to keep up with new developments?
    - Greater flexibility for substitution
    - Lower repayment penalties
    - Cash-flow covenants

 

Big Ticket Funding through SPVs and other Indirect Investment and Joint Venture Vehicles

  • Structuring considerations:
    - On/off shore
    - Ring fenced
    - Equity participation
    - Publicly traded?
  • JV companies/General Partnerships/Limited Partnerships/Trusts of Land
    - Advantages/disadvantages of each
    - Flexibility
    - Does the structure reflect the underlying legal/ tax requirements?
    - Match borrowers’ requirements?
  • Loan agreement
    - Warranties and covenants
    - Conditions precedent
    - Interest and interest periods
    - Syndication
    - Guarantees
    - Default
  • Preferred ‘big ticket’ structures

 

Reducing the costs: stamp duty and offshore loans, back-to-back loan arrangements

  • Stamp Duty planning – exemption and restrictions
  • Appropriate investment vehicles – e.g. partnership, UK companies, offshore SPVs
  • Residence of investor
  • Trading versus investment
  • Reform of corporation tax
  • Transfer pricing and thin capitalisation
  • Financing and deductibility of interest
  • Withholding tax, non-UK source and quoted Eurobonds or discounted
  • Securities
  • Capital allowances

 

Techniques Used to Fund Large Mixed-Use Schemes.
A Case Studies Based Review

  • What are the challenges?
  • Typical funding objectives
  • Optimising the capital structure – the returns
  • Alternative funding to underwrite the risk
  • Bespoke funding for non mainstream sectors
  • Multidiscipline approach for bank presentations

Background

  • Example schemes : White City, Bull Ring, Liverpool
  • Nature of the job – large mixed-use developments
  • Challenges
    - Number of funding packages required (mainstream commercial to hotel)
    - Dealing with existing development agreement
    - Satisfy debt and equity requirements
    - Timing, estate management, title and step-in rights

Typical Funding Objectives

  • Maximise profit
  • Developer to maintain stake
  • Create investment holding vehicle to bring in equity
  • Dispose of parts

Capital Structuring and Modelling – The Returns

  • What does the model need to do? What does the model need to tell us?
    - Key debt ratios
    - Fitting it all together, debt equity development/investment

Risk Structuring

  • Using the insurance market to lay off risk and provide insurance backed product to lend against
  • Dividing the risk of the project up into different layers
  • Identifying the most efficient area to insure

Bespoke funding for non-mainstream uses

  • Raising initial development finance for construction in these areas
  • Lease and leaseback route
  • Is it efficient?

Making the presentation to the banks

  • Multidiscipline approach
  • What are the different areas you need to cover?