Analysing the latest form of LMA real estate finance investment facility agreement

Analysing the latest form of LMA real estate finance investment facility agreement

Clive Wells, partner, and Paul Carroll, associate, both at Skadden, Arps, Slate, Meagher & Flom (UK) LLP, examine the key changes that have been made to the Loan Market Association’s recommended form of facility agreement for real estate finance multi-property investment transactions.

What are the key changes that have been made to the recommended form of facility agreement for real estate finance multi-property investment transactions?

The revised recommended form of facility agreement for real estate finance multi-property investment transactions includes a number of general updates and amendments ranging from minor drafting corrections to market-driven additions.

A version of the provisions relating to ‘debt purchase transactions’ which were included in the Loan Market Association (LMA) leveraged facility agreement a number of years ago have now been incorporated into the real estate facility agreement. These provisions essentially prohibit a borrower or members of its group from buying back its own debt. The provisions also cover the scenario where a ‘sponsor affiliate’ purchases such debt and provides for the disenfranchisement of such sponsor affiliate in order to avoid conflicts of interest where the lender syndicate is voting on issues relating to such debt. Importantly, the drafting of this amendment does not include the option contained in the leveraged precedent allowing the borrower or a group member to buy-back its debt subject to disenfranchisement.

The amendments also include:

  • the addition of an undertaking relating to ‘asset managers’, along with related definitions and documentary conditions precedent requiring a copy of the appointment of the asset managers and a duty of care agreement between the asset managers, the borrower and the security agent—this reflects the fact that, in addition to having managing agents for individual properties, lenders will require the appointment of an asset manager who oversees the property portfolio
  • the addition of a footnote relating to the definition of ‘lender’ referring to provisions on defaulting lenders and impaired agents (that are included in the leveraged precedent) which the parties may wish to include
  • amendments to the insurance undertaking bringing it more in line with current market practices for example, reflecting the fact that insurance premia may not be paid prior to the commencement of an insurance period
  • the removal of references to the security agent’s ‘delegate’ throughout the document

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About the author:

Meet Suzanna:

1. Banking and finance lawyer with experience in real estate finance, trade finance and aviation finance

2. Likes skiing, comedy shows and listening to live music

3. Thinks the law is not for the fainthearted

Suzanna has wide-ranging experience in banking and finance transactions with particular emphasis on advising lenders in the context of real estate finance and trade finance, and advising on ECA supported aviation finance transactions. Suzanna qualified as a solicitor in 2001 with Theodore Goddard (now Addleshaw Goddard LLP) and has since gained experience with Barclays Bank PLC, ECGD and Crédit Agricole CIB before joining LexisNexis.