HVCRE Loans: Guidance for Developers and Lenders on New ADC Rules, Impact on Loan Covenants
Navigating Borrower Contributed Capital Rules, Maximum LTV Ratio, Conversion to Permanent Financing and More
Recording of a 90-minute premium CLE webinar with Q&A
This CLE course will be a timely update on the high volatility commercial real estate (HVCRE) regime. Our panel will discuss Basel III requirements and exemptions for HVCRE loans, and the recent reforms to Dodd-Frank which modify those requirements for acquisition, development or
construction (ADC) loans. The program will also discuss how lenders are revising covenants in loan documentation in response to the HVCRE rules and the uncertainties facing borrowers.
- Basel III rules
- Definition of an HVCRE loan
- Exemption criteria
- Impact on real estate and construction lending landscape
- Outstanding issues addressed by bank regulator FAQs
- Contributing additional capital to an existing HVCRE loan
- Grandfathering of current ADC loans
- Cash provided by the second mortgage on a property
- As-stabilized value
- Land committed to a new development
- Soft costs as contributed capital
- Subsequent appraisal/valuation resulting in LTV no longer exceeding maximum LTV ration
- Contributed capital remaining in the project
- Impact of mezzanine debt
- Typical loan covenants addressing HVCRE rules
- Borrower concerns
The panel will review these and other critical 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?
Joseph Philip Forte
Sullivan & Worcester
Mr. Forte has substantial experience in commercial real estate capital markets and finance, with a particular... | Read More
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.Close
Matthew (Matt) Galligan
Vice Chairman, Real Estate Finance,
Mr. Galligan’s group provides stabilized, value-add and construction loans between $20 million and $50 million to... | Read More
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.Close
Executive Vice President, U.S. Head of CRE
Mr. Gerken is a seasoned leader with more than 20 years of experience overseeing commercial real estate for top... | Read More
Mr. Gerken is a seasoned leader with more than 20 years of experience overseeing commercial real estate for top U.S.banks, with expertise growing multi-billion dollar assets and developing world-class teams.Close
William G. Lashbrook
Senior Vice President
Mr. Lashbrook led the PNC Real Estate team to meet the Basel III and Advanced Capital Management reporting... | Read More
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.Close