Loan Market Association (LMA)/Association of Property Lenders (APL) Real Estate Finance (REF) Quarterly Series Seminar, 5 February 2020

We attended the LMA/APL REF Quarterly Series Seminar held at Pinsent Mason on 5 February 2020. William Oliver, partner and real estate finance specialist at the firm, was the key speaker and Hannah Vanstone, Legal Associate at the LMA, introduced the event.

This seminar, which was part of a quarterly series and free for LMA members, was aimed at junior lawyers to give an insight into the process of real estate finance deals and the LMA documentation which is available for investment facilities.

The seminar covered:

• the key assumptions behind the LMA REF investment loan agreement – looking at the obligor structure and commercial points  

• the structure of the REF loan agreement  

• common areas of negotiation – looking at security value, income, due diligence and property monitoring, and 

• conditions precedent

Some of the main points for junior lawyers to take-away from the seminar included:

1.       the importance of insurance in real estate finance transactions and the need to sort out the insurance related conditions precedent sooner rather than later

2.       how rental income is used to service the debt through the bank account structure

3.       a reminder of the typical financial covenants that are used in REF transactions and the increasing use of debt yield financial covenants (not currently documented in the LMA REF loan agreement), and

4.       the importance of the quarterly monitoring report for lenders

LMA documentation in the pipeline to look out for:

• REF development security agreement and a shareholder security agreement 

• Rider to include a debt yield covenant