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Fundamentals of Commercial Real Estate Debt Finance

0 Part Course  |  Learn the key issues in the evaluation and structuring of commercial property debt finance of large-scale commercial real estate transactions at a time of disruption

Commercial Real Estate Debt Finance Course

A one-day course presented in two half-day live webinars

This course will be relevant to a range of people working in organisations involved in the arrangement, analysis and structuring of large scale Commercial Real Estate debt financing transactions including banks, Real Estate companies, Real Estate Investors, Public Sector organisations and Professional Services firms.

Limited previous practical experience in the financing of Commercial Real Estate transactions has been assumed.

To obtain maximum benefit from this training participants should have some familiarity with the principles of financial analysis and  Commercial Real Estate valuations, and the main features of the key financing products used in Commercial Real Estate finance.

Familiarity with the main functions in Excel will also assist participants in obtaining maximum benefit from this training.

  • Focused content in a short time period providing an intensive overview of key risk and structuring issues in Commercial Real Estate Debt Finance
  • Practical content using a core case study to illustrate the topics covered in the programme
  • References to further reading that will illustrate the topics covered in the training
  • Provides a structured methodology in a short time period that can be used as an “aide memoire” when assessing Commercial Real Estate Debt Finance transactions
  • Topical coverage of trends in the Commercial Real Estate markets to put course content in context

This course will provide participants with an intensive overview of:

  • Risk analysis, from a lender’s standpoint, in financing large scale Commercial Real Estate transactions
  • Key drivers impacting the value of Commercial Real Estate
  • Key elements influencing capital structuring decisions, with an emphasis on debt structuring issues
  • The principal debt financing options
  • Key risk mitigants in Commercial Real Estate transactions and financings

Part 1

Overview of developments in the Commercial Real Estate markets

  • What can be learned from past economic cycles? - Overview of Commercial Real Estate investment performance
  • Influences on the financing of Commercial Real Estate following the Global Financial Crisis
  • Is this economic cycle different? – the impact of economic downturn, rising interest rates and inflation, ongoing effects of political tensions, COVID-19, technology, shorter lease terms and how this might impact Commercial Real Estate Finance
  • ESG (environmental, social, and governance) and potential impact on the Commercial Real Estate markets

Key risks in Commercial Real Estate

  • Discussion on risk factors identified by a Commercial Real Estate Investment Trust

Principles of Commercial Real Estate valuation

  • Summary of Commercial Real valuation methods and how the different methods can influence the value
    • Comparable buildings
    • Capitalisation of yields
    • Open market values
    • Discounted cashflow valuation methods
  • Occupational lease terms – the impact of shortening commercial lease transactions and enhanced tenant risk?
  • Yields in Commercial Real Estate
    • Initial yields
    • Reversionary yields
    • Equivalent yields
Exercise / discussion: review of impact of changing assumptions on rents, yields and occupancy on valuation

Exercise: valuation of the core Real Estate case study

Part 2

Debt financing choices for Commercial Real Estate transactions, debt and capital structuring issues

Financing choices

  • Who are the principal investors in Commercial Real Estate and their approach - the growing role of Commercial Real Estate Funds post the start of the Global Financial Crisis
    • What are the key elements of a creditworthy Commercial Real Estate company / REIT? Principal elements of a credit rating
    • Equity market indicators of Commercial Real Estate Loans (CRE loans) values
  • Debt vs equity and influencing factors
    • How much debt can be supported?
    • Trends in Debt Finance pre-COVID-19, leverage and credit margins; what will be the impact of current market conditions on capital structuring for Commercial Real Estate transactions?
    • Repayment profiles
  • Private debt financing choices
    • Development vs investment financings
    • Asset specific financing
    • Secured vs unsecured debt
    • Senior / stretched senior/whole loans vs subordinated / mezzanine debt
    • Sale and leaseback transactions
    • Capital markets financings, including including overview of a Commercial Mortgage Backed securitisations
  • “Green financing” – overview of some of the requirements in structuring ESG-compliant financings   

Debt structuring issues and risk mitigation techniques

  • Use of covenants
    • Debt Service Coverage measures (interest and debt service coverage)
    • Asset Coverage measures (Loan to Value ratio and “top up” requirements)
  • Third-party credit support

Exercise: Developing a capital structure and financial covenants for the core Real Estate case study

The trainer has had a career in the financial services industry and financial training for over 45 years.

He started his career with National Westminster Bank (now part of RBS) before moving to Mellon Bank NA, a major regional US bank (now part of Bank of New York Mellon). At Mellon Bank, he held several credit analysis and account management positions in London, focusing on large UK corporates and UK subsidiaries of US corporations.  He also had two extended work assignments in the USA, on the second occasion as an account officer responsible for a group of US subsidiaries of non-US multinationals.

After 11 years at Mellon Bank, he joined Swiss Bank Corporation (now UBS) in London where he was actively involved in the development and ongoing management of the bank's UK Commercial Real Estate lending activities. His Real Estate related skills were further developed at Debenham Tewson Financial, a subsidiary of one of the world’s leading Real Estate advisory firms.

Since 1992 he has been primarily focused on training in the areas of Corporate Credit Analysis, Financial Restructuring, Project, Infrastructure and Structured Debt Finance, such as Real Estate Finance and Asset Securitisation. He has designed and delivered tailored and public courses in more than 60 countries. In these areas he has worked with a wide range of corporate and investment banking firms; Development Finance Institutions; public sector organisations; Export Credit Agencies; property investment and a number of major corporations. Participants in courses run by him range from recent graduates to experienced line managers, and in areas as diverse as bond sales and trading to credit research and Relationship Management positions in financial institutions, as well as project engineers and professional advisers and public sector employees in the area of Project Finance.

In the area of Real Estate Finance, the trainer has run both public and tailored training programmes on a global basis with participants working in banks, Real Estate companies, Real Estate investors , Public Sector organisations and professional services firms.

Background

Commercial Real Estate has always been affected by economic cycles, but the impact of COVID and technology will also have an ongoing impact on how and where people work and shop and therefore demand for Commercial Real Estate, as well as valuations. Given these cyclical and structural changes, as well as political tensions, lenders and investors will need to evaluate the structuring of Commercial Real transactions.

Course methodology

This programme will be delivered in two half-day modules.

Part 1 will be primarily focused on key features of Commercial Real Estate and historical performance of Commercial Real Estate, key risk issues and the principles of valuation techniques.

Part 2 will focus on the financial structure of Commercial Real Estate transactions, and structuring issues in terms of risk protection from a lender’s standpoint.

There will be a primary focus on the financing of single property transactions, and on “traditional” sectors of Commercial Real Estate – offices, retail and industrial / logistics. There will however be some brief coverage of alternative types of Real Estate such as hotels in terms of the risk analysis and how this impacts financing. There will be brief coverage of the analysis of Real Estate Investment Trusts (REIT)

To ensure that this training course is interactive there will be one case study involving a large value Commercial Real Estate transaction, such as a distribution centre, throughout the training. The case study will consider risks both during the development period and also when it is income-producing.

Background on the case study and a supporting spreadsheet will be provided before the training so that participants have an opportunity to familiarise themselves with the material and maximise the benefits of the training programme. Participants will need to access the spreadsheet during the training.

Participant profile

Limited previous practical experience in the financing of Commercial Real Estate investing and transactions has been assumed.

To obtain maximum benefit from this training participants should have some familiarity with the principles of financial analysis and Commercial Real Estate valuations, and the main features of the key financing products used in Commercial Real Estate finance.

Familiarity with the main functions in Excel will also assist participants in obtaining maximum benefit from this training.
Dates coming soon

£695.00

Discounts available:

Book multiple places on both parts in one order for the below discounts:

  • 2+ places at 40% less = £834.00
    per person
  • 4+ places at 50% less = £695.00
    per person
  • 6+ places at 60% less = £556.00
    per person
  • 9+ places at 70% less = £417.00
    per person
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