Real estate acquisition facilities — key features

Real estate acquisition finance facilities involve a loan to a borrower for it to purchase a property or a group of properties (or to refinance such a purchase). The financing is secured against the property being purchased (or refinanced) and the cash flow generated by the property (that is, rental income). The acquisition may also be to “land bank” the property for subsequent refurbishment or development (in which case, there may or may not be an income source to service interest on the loan and other servicing cash flow will be required).

This guidance note explains the key features of a typical real estate acquisition finance transaction, including the typical security package, intercreditor issues, drawdown mechanics, repayment and mandatory prepayment provisions, bank account and valuation requirements and other property-specific representations, covenants and events of default. Development facilities involve additional issues which are considered below.

See Real estate acquisition facilities — key features.