Fundamentals of Commercial Real Estate Debt Finance

2 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

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A one-day commercial real estate debt finance training presented over two-half days in a virtual class from 9:30am to 1:00pm UK time

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Download: Course Category Brochure | Course Outline

Part 1

Developments in the Commercial Real Estate Markets: An Overview

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

This commercial real estate finance course covers a summary of the methods and how 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

Commercial Real Estate DEbt Finance Training Exercise & Discussion: a review of the 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 an overview of Commercial Mortgage Backed securitisations
Commercial real estate debt finance training covers 'green financing'; an overview of some of the requirements in structuring ESG-compliant financings

Debt Structuring Issues & 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

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

Redcliffe’s commercial real estate finance training is delivered by a trainer who 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 corporations 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 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, including commercial real estate debt finance training. 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 many major corporations.

Participants in his courses 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, 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.

This commercial real estate finance 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

Focused content providing a short but intensive overview of the 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 training
References to further reading that will illustrate the topics covered in commercial real estate finance training
Provides a structured methodology in a short 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 commercial real estate debt finance 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. This includes:

Banks
Real estate companies
Real estate Investors
Public sector organisations
Professional services firms

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

Familiarity with the main functions in Excel will also assist you in obtaining maximum benefit from this commercial real estate valuation course.

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, monitor financing exposures more intensively, and sector and specific property selection will be increasingly important.

Course Methodology

Redcliffe’s commercial real estate debt finance training course is delivered in two half-day modules:

Part 1 will primarily focus on key features of Commercial Real Estate, the historical performance of Commercial Real Estate, and the 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.

A primary focus will be 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 commercial real estate finance 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.

Good understanding of valuations and insight into what banks look at when determining what finance to provide. Good interaction between leader and participants.

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(min. 50 participants)