High Volatility Commercial Real Estate Loans: Guidance for Developers and Lenders on HVCRE Rules and Loan Covenants

Navigating Borrower Contributed Capital Rules, Maximum LTV Ratio, Conversion to Permanent Financing and More

*** An encore presentation featuring live Q&A ***

A 90-minute CLE webinar with interactive Q&A


Thursday, August 24, 2017
1:00pm-2:30pm EDT, 10:00am-11:30am PDT

Early Registration Discount Deadline, Friday, July 28, 2017


This CLE webinar will discuss Basel III requirements for high-volatility commercial real estate (HVCRE) loans and the HVCRE exemption criteria, as well as bank regulator guidance on a number of issues regarding borrower contributed capital, maximum LTV ratio and conversion to permanent financing. The program will also discuss how lenders are revising covenants in loan documentation in response to the HVCRE rules and the uncertainties facing borrowers.

Description

Basel III standards have resulted in an increase in the cost of lending (and, as a consequence, borrowing) with respect to certain loans financing real estate acquisition, development and construction (ADC loans), as banks are required to retain more capital to address the risk weighting given to such loans.

To avoid higher risk weightings and capital retention requirements as a result of HVCRE classification, loans must fall into at least one of several exceptions to the general rule that all ADC loans constitute HVCRE loans.

In response to questions to banking regulators from the U.S. Mortgage Bankers Association, in 2015 regulators issued a set of FAQs providing guidance on how they would consider factors such as borrower’s contributed capital, maximum LTV ratio, and conversion to permanent financing in determining when an ADC loan is subject to application of the HVCRE rules or is exempted from HVCRE treatment. This guidance remains relevant to lenders and borrowers in structuring ADC loans, but it leaves additional questions unanswered.

Lenders and borrowers have attempted to establish best structuring practices and loan documentation to avoid inadvertent HVCRE treatment, but continue to face uncertainties over financing issues, including the impact of mezzanine debt, preferred equity and true cash flow.

Listen as our authoritative panel of real estate finance attorneys guides you through the capital retention rules for HVCRE loans and the HVCRE exemption criteria. The panel will address guidance provided by bank regulators on issues pertaining to borrower contributed capital, maximum LTV ratio and conversion to permanent financing. The panel will also review how lenders are revising covenants in loan documentation in response to the HVCRE loan rules and the uncertainties facing borrowers.

Outline

  1. Basel III rules
    1. Definition of an HVCRE loan
    2. Exemption criteria
    3. Impact on real estate and construction lending landscape
  2. Outstanding issues addressed by bank regulator FAQs
    1. Contributing additional capital to an existing HVCRE loan
    2. Grandfathering of existing ADC loans
    3. Cash contributed by second mortgage on property
    4. “As stabilized” value
    5. Land contributed to a new development
    6. Soft costs as contributed capital
    7. Subsequent appraisal/valuation resulting in LTV no longer exceeding maximum LTV ration
    8. Contributed capital remaining in the project
  3. Impact of mezzanine debt
  4. Typical loan covenants addressing HVCRE rules
  5. Borrower concerns

Benefits

The panel will review these and other key issues:

  • Can the borrower contribute additional capital to an existing HVCRE loan after funds have been advanced to exclude the loan from the definition of HVCRE?
  • Can the “as stabilized” value be used to determine whether the loan is an HVCRE exposure?
  • Are soft costs part of the borrower’s contributed capital as development expenses?
  • If land purchased with cash is subsequently contributed to a new development, does it count as contributed capital?

This is an encore presentation with live Q&A.

Faculty

Joseph Philip Forte, Partner
Kelley Drye & Warren, New York

Mr. Forte has substantial experience in commercial real estate capital markets and finance, with a particular emphasis on the origination, structuring, workout and enforcement of commercial mortgage loans. His experience includes permanent, bridge and construction mortgage lending; mezzanine finance; pari passu and subordinate debt; co-lending and participation arrangements; loan sales and purchases; loan workouts, foreclosures and restructurings; and environmental risk management for lenders. Mr. Forte has served as Co-Chair of the Real Estate Roundtable High Volatility Commercial Real Estate (HVCRE) Working Group developing regulatory/legislative clarification of the HVCRE Rule as it affects construction lending.

William G. Lashbrook, Senior Vice President
PNC Bank, New York

Mr. Lashbrook led the PNC Real Estate team to meet the Basel III and Advanced Capital Management reporting requirements, which include the LCR and HVCRE. On behalf of the bank and real estate industry and with support from the MBA and CREFC, he met with the members of the FRB, OCC and FDIC drafting the LCR regulation. Mr. Lashbrook has Chaired a bank working group at the MBA and has Co-Chaired one at the Real Estate Roundtable working with these same regulators to promote clarity and uniformity in bank HVCRE reporting. At the Real Estate Roundtable, Mr. Lashbrook advises the Real Estate Capital Committee on bank CRE regulation and is a member of the Sustainable Policy Advisory Committee.

Matthew (Matt) Galligan, President, Real Estate Finance
CIT, New York

Mr. Galligan’s group provides stabilized, value-add and construction loans between $20 million and $50 million to highly experienced and well-capitalized developers in the office, retail, industrial and multi-family rental sectors. His areas of expertise include commercial real estate finance and commercial, construction, bridge and acquisition loans. Mr. Galligan most recently served as managing director and head of U.S. Property Finance for Bank of Ireland where, under his leadership, his team negotiated and closed more than 30 transactions totaling $2 billion.

Gregg Gerken, Head of U.S. Commercial Real Estate
TD Bank, New York

 


Live Webinar

Live Webinar $247.00

Includes Early Discount Savings of $50.00 (through 07/28/17)

Add a colleague on the same connection in the same room for only $97.00 in the shopping cart or by calling customer service.

This webinar is eligible for at least 1.5 general CLE credits.

CLE credits are not available for PR.

*In KS, OH, PA, for more than 1 attendee on the connection you must contact Strafford CLE via email or call 1-800-926-7926 ext. 35 prior to the program for special instructions.


Recordings

CLE On-Demand - Streaming Video

Includes recorded streaming video of full program plus PDF handouts.

On-demand is the only recorded format recognized for CLE credits in DE, IN, KS, LA, MS, NC, OH, OK, SC, TN, VA, WI.

AK, AZ, CA, CO, CT, DE, FL, GA, HI, IA, ID, IL, IN*, KS, KY, LA, ME, MN, MO, MT, NC, ND, NH**, NJ, NM, NV, NY, OH*, OK, OR, PA, SC, TN, TX, UT, VA, VT, WA, WI, WV, WY (Note: Some states restrict CLE eligibility based on the age of a program. Refer to our state CLE Map for additional information.)

*Only available for attorneys admitted for more than two years. For OH CLE credits, only programs recorded within the current calendar year are eligible - contact the CLE department for verification.

**NH attendees must self-determine if a program is eligible for credit and self-report their attendance.

CLE On-Demand Video $247.00
Available 48 hours after the live event

Includes Early Discount Savings of $50.00 (through 07/28/17)

How does this work?


Recorded Event

Includes full event recording plus handouts (available after live webinar).

Strafford is an approved provider and self-study CLE credit is available in most states.

AK, AZ, CA, CO, CT, FL, GA, HI, IA, ID, IL, KY, ME, MN, MO, MT, ND, NJ, NM, NY, OR, PA, TN, TX, UT, VT, WA, WV, WY (Note: Some states restrict CLE eligibility based on the age of a program. Refer to our state CLE Map for additional information.)

Strafford will process CLE credit for one person on each recording.

Additional copies of a recording can be purchased at a discount. Please call Strafford Customer Service toll-free at 1-800-926-7926 ext 10 or email customerservice@straffordpub.com to place your order.

Recorded Webinar Download $247.00
Available 48 hours after the live event

Includes Early Discount Savings of $50.00 (through 07/28/17)

How does this work?

Recorded Audio Download (MP3) $247.00
Available 24 hours after the live event

Includes Early Discount Savings of $50.00 (through 07/28/17)

How does this work?

DVD (Slide Presentation with Audio) $247.00 plus $9.45 S&H
Available ten business days after the live event

Includes Early Discount Savings of $50.00 (through 07/28/17)

How does this work?


Registration Plus Recorded Event

Best value!

Live Webinar & Webinar Download $344.00

Includes Special Savings of $250.00 (through 07/28/17)

Live Webinar & Audio Download $344.00

Includes Special Savings of $250.00 (through 07/28/17)

Live Webinar & DVD $344.00 plus $9.45 S&H

Includes Special Savings of $250.00 (through 07/28/17)


Webinar

Strafford webinars offer several options for participation: online viewing of speaker-controlled PowerPoint presentations with audio via computer speakers or via phone; or audio only via telephone (download speaker handouts prior to the program).  Please note that our webinars do not feature videos of the presenters.

Early Registration
Discount Deadline
July 28, 2017
(6 days)

or call 1-800-926-7926

Can't Attend the Live Program?

CLE Credits By State

See CLE State Map >

or call 1-800-926-7926

Customer Reviews

Webinar contained lots of new information and real life examples.

Adena Patterson

McGuireWoods

The order of the presentation was good and helpful and discussion of key concepts was excellent.

Richard Maloney

GRMS

The program covered a fair amount of material in a short time period.

Dawn Sharff

Bradley Arant Boult Cummings

The topic was timely and relevant.

Jayna Lamar

Maynard Cooper & Gale

The speakers knew their topics and spoke in practical terms addressing real business risks.

Kenneth J. Clarkson

Sullivan Ward

or call 1-800-926-7926

Real Estate Law Advisory Board

David A. Barksdale

Partner

Ballard Spahr

Jacob Bart

Partner

Stroock & Stroock & Lavan

Brian W. Blaesser

Partner

Robinson & Cole

Ronald B. Grais

Counsel

Sugar Felsenthal Grais & Hammer

Ren R. Hayhurst

Partner

Bryan Cave

Thomas C. Homburger

Of Counsel

K&L Gates

Susan C. Tarnower

Counsel

Kilpatrick Townsend & Stockton

Clark T. Thiel

Partner

Pillsbury Winthrop Shaw Pittman

or call 1-800-926-7926

Our Guarantee

Strafford webinars are backed by our 100% Unconditional Money-Back Guarantee: if you are not satisfied with any of our products, simply let us know and get a full refund. For more information regarding complaints and refunds, please contact us at 1-800-926-7926 ext 10. Complaints regarding this program can be submitted via the course evaluation found in the “Thank you” e-mail at the end of the course.