Real estate finance—interest and interest period provisions in facility agreements

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Real estate finance—interest and interest period provisions in facility agreements
  • Where to start with drafting interest and interest period provisions in a real estate finance transaction
  • LMA real estate finance documentation
  • LIBOR transition
  • Interest in a real estate finance transaction
  • The calculation of interest in a real estate finance transaction
  • The payment of interest and capitalisation in a real estate finance transaction
  • Hedging in real estate finance transactions
  • Default interest in a real estate finance transaction
  • Interest periods in a real estate finance transaction
  • More...

Real estate finance—interest and interest period provisions in facility agreements

One way for banks and other financial institutions to generate revenue is by charging interest on the loans they make. In order for a bank or financial institution to make money through its lending activities, the interest it charges must cover its own costs. See Practice Note: Interest—reference rates and margin—Cost of lending.

Many of the interest and interest period provisions for a typical syndicated loan facility will be very similar to those used in a real estate finance transaction.

This Practice Note examines the interest and interest period provisions which may specifically apply in a real estate investment finance or development finance transaction.

Where to start with drafting interest and interest period provisions in a real estate finance transaction

The interest and interest period provisions for a particular transaction are usually agreed at term sheet stage before drafting the facility agreement. It will be important to check the terms of any term sheet before drafting the facility agreement.

LMA real estate finance documentation

The LMA has clauses to cover interest and interest period provisions in its real estate finance documentation, including its:

  1. single currency term facility agreement for real estate finance multiproperty investment transactions (LMA Investment REF Facility Agreement), and

  2. single currency term facility agreement for real estate finance single property development transactions (LMA Development REF Facility Agreement),

together, the LMA

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