Fundamentals of Commercial Real Estate Debt Finance

Name: Fundamentals of Commercial Real Estate Debt Finance
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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

A panoramic view of a city with glass buiding skyscrapers and blue skies

A one-day commercial real estate debt financing course presented over two half-days in a virtual class

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In-house pricing available – often more cost-effective for teams of 10+

Download: 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 the 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 its 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 debt & 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 cash flow 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: 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
Debt & Commercial Real Estate 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

Exercise: Developing a capital structure and financial covenants for the core real estate case study

Our specialist has over 45 years of experience in the financial services industry and financial training. 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. This was 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, he was 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. He was 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 focused on training in Corporate Credit Analysis, Financial Restructuring, Project, Infrastructure, and Structured Debt Finance, including real estate finance and Asset Securitisation.

He has designed and delivered tailored and public courses in over 60 countries. 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 of his courses range from recent graduates to experienced line managers. Areas as diverse as bond sales and trading, to credit research and Relationship Management positions in financial institutions. He also works with project engineers, professional advisers and public sector employees in the area of project finance.

The trainer runs both public and tailored Real Estate Finance training programmes on a global basis with participants working in banks, Real Estate companies, Real Estate investors, Public Sector organisations and professional services firms.

Commercial real estate debt financing training 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

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 gain the most value from this course, 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 is assumed. Familiarity with the main functions in Excel will also assist you in obtaining the most value from this course.

Background

Economic cycles have always affected Commercial Real Estate. But the impact of COVID and technology will also have an ongoing impact on how and where people work and shop. Therefore, the demand for Commercial Real Estate and valuations. Given these cyclical and structural changes, as well as political tensions, lenders and investors will need to evaluate the structuring of commercial real estate transactions, track financing exposures more intensively, and sector and specific property selection will be increasingly important.

Course Methodology

Redcliffe’s debt & commercial real estate finance course is two intensive half-day modules.

Part 1 will focus on key features of Commercial Real Estate, the historical performance of Commercial Real Estate, 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, the risk analysis and how this impacts financing. There will be brief coverage of the analysis of Real Estate Investment Trusts (REITs).

This is an interactive course, with one case study involving a large-value Commercial Real Estate transaction, such as a distribution centre, that delegates explore throughout the training. The case study will consider risks both during the development period and also when it is income-producing.

We will provide background on the case study and a supporting spreadsheet 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.

We deliver this debt & commercial real estate course online publicly or tailored in-house for your organisation.

Good understanding of valuations and insight into what banks look at when determining what finance to provide. Good interaction between the leader and participants.
My expectations were to get good knowledge of commercial real estate finance. Very good insight into how we can support the business team in the assessment and financing of commercial real estate.

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Request a fee quote for a pre-recorded course
(min. 50 participants)