Cash Management Structures, Waterfall Provisions, and Reserves in Real Estate Finance Transactions

Description

In the aftermath of the credit crisis, borrowers experienced a tightening of cash management arrangements in real estate loans, particularly for those loans intended to be securitized. With the improvement of the commercial real estate market, borrowers have seen less stringent cash management structures, but cash management remains an integral part of commercial real estate finance.

Terms and conditions of cash management systems are often very heavily negotiated. Lenders seek to ensure that debt service, property expenses, and reserves are paid before funds are disbursed to the borrower. Hard lockboxes offer the most protection to the lender.

Borrowers, on the other hand, want the most control over the revenues that flow from the property. Springing lockboxes allow the borrower more control over rents or revenues since they require the use of a deposit account only upon the occurrence of a specified triggering event, such as loan default.

Listen as our authoritative panel of real estate finance practitioners guides you through current terms and trends in lockbox and cash management systems. The group will discuss structuring cash management waterfall provisions and drafting both cash management agreements and deposit control account agreements.