Investment finance

Content in the Real estate in corporate transactions subtopic may be of assistance in considering issues where the investment finance is being provided to an SPV or the transaction has a corporate wrapper.

With investment finance, the lender will be primarily interested in the cashflow generated by the property rentals and whether or not these will be sufficient to service the loan interest. The loan to value ratio is also important when considering a host of factors such as liquidity and the ability to pay back the loan either by sale or refinancing. The money borrowed is usually secured on the property and income stream by way of a fixed charge over the property.

Investment finance—the lending structure and key features of the facility agreement

Real estate finance in the form of lending against the cash flow generated by a property is thought of as traditional real estate finance. In its simplest form, it involves a loan to a borrower which is repaid from the rental income of the borrower’s property and involves a loan facility provided to a borrower for it to purchase or refinance a property (or

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Insolvency, declarations of trust, loan agreements, artificial asset protection, sham transactions, transactions defrauding creditors, interspousal asset transfers, change of position defence and wife’s entitlement to share of husband’s assets (Sayers v Dixon)

Restructuring & Insolvency analysis: The court held that six declarations of trust (DoTs) executed by the transferor (Mr Dixon) in favour of his wife (Mrs Dixon) constituted transactions defrauding his creditors within the meaning of section 423 of the Insolvency Act 1986 (IA 1986) and that two of them, purporting to transfer all his future assets and income to Mrs Dixon, along with an accompanying loan agreement, were shams which were void and ineffective. It set aside the DoTs and ordered Mrs Dixon to restore the value of three transferred properties (which had been converted into £551,589 cash) to Mr Dixon’s trustees in bankruptcy (trustees) together with interest of £101,726. It also ordered an account to be taken of the funds that had been transferred to Mrs Dixon or on her behalf by Mr Dixon over the seven years between the date of the DoTs and his bankruptcy. The court dismissed Mrs Dixon’s defence of change of position to the trustees’ claim for restoration, finding that even if such a defence were generally available (which is unclear), she had not acted in good faith and could not rely on it. It also dismissed her defence that, having been married to Mr Dixon for many years, she was entitled to half his assets and/or an entitlement to a share of them by virtue of a right to be maintained. Written by Jonathan Lopian, barrister at New Square Chambers, who acted for the successful claimants.

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