Lending against the cash flow generated by a property is the most traditional form of real estate finance Denver. In its simplest form, it involves a loan to a borrower which is repaid from the rental income of the borrower’s property. It is the most used structure for investing in real estate businesses. Real estate finance transactions are usually classified as either investment or development transactions. The Loan Market Association has published standard form facility agreements for both investment and development real estate finance transactions such as:

Investment facility agreement whereby a loan facility is provided to a borrower for it to purchase a property or a group of properties. It is also used for development facility agreement whereby a loan facility is provided to a borrower for it to purchase a property as well as providing funds for the development of the property.

Real estate finance transactions could involve finance for:

• Commercial real estate such as offices, shops, industrial buildings etc.—to be repaid from the rent received from tenants, or
• Blocks of residential real estate to be repaid from the sale of individual residential unit

Key parties in real estate finance

The key parties involved in real estate finance Denver transaction depend on the type of transaction. However, due to the high value of the asset being acquired, there is often a syndicate of lenders involved in lending money to the borrower to mitigate the risk of each lender and to enable the borrower to borrow larger amounts and to obtain the best funding rates In an investment real estate finance transaction, the key parties (in addition to the lender(s) and the borrower) will usually be:

•A valuer
•A managing agent, and
• The tenants
•The consultants with design responsibility for the development taking place, for example, architects, mechanical and electrical engineers, quantity surveyors and structural engineers
•tThe contractors who are appointed to carry out the development of the property—builders, electricians, plumbers etc.
•A managing agent (as in investment facilities)—the borrower will usually appoint a managing agent to run the property once the development has been completed, and
•The tenants of a commercial property or the purchasers of residential unit

These parties depend on the type of the real estate project though.

Key documents in real estate finance

The key documents involved in both an investment and a development real estate finance Denver transaction, are:

•The facility agreement between the lenders and the borrower
•The appointment of the managing agent and the duty of care agreement—the managing agent will be appointed to manage the property and the appointment agreement will set out the terms of their remuneration as well as their rights and responsibilities
•The property documents, including the sale and purchase agreement for the property, any title documents, any head lease and the lease agreements entered into with the tenants
•Certificate of title or report on title
•Security documents — the lender(s) will want to take security over the property, often documented in the form of a mortgage over the specific property which will need to be registered at the Land Registry, as well as at Companies House. The lender(s) will also want to take a debenture over the other assets of the borrower (which will usually take the form of a special purpose vehicle) and any other important operating subsidiaries. The lender(s) will also take a share charge over the shares in the borrower from its parent company so that on a default it could enforce its security over the shares and take control of the borrower
•An insurance report, and/or
•An environmental report

In addition to the above, a development transaction will usually include the following key documents:

1. The building contract—this will set out the terms on which the building contractor is being employed by the borrower to carry out the proposed development
2. Consultant appointments—these will set out the terms on which other professionals are employed by the borrower in relation to the proposed development, i.e. the appointment of mechanical and structural engineers, plumbers, electricians etc.
3. Collateral warranties—these pass the duty of care of the building contractor and other professionals owed to the borrower on to the lender(s)
4. Completion certificate—this is a certificate issued by the building contractor on completion of the development