Mixed-Use Construction Loan Finance: Senior Lender Due Diligence, Multiple Lender Challenges

Ensuring Proper Collateral Structure and Loan Documentation in Event of Borrower Default or Project Failure

Recording of a 90-minute premium CLE webinar with Q&A

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Conducted on Thursday, October 22, 2015

Recorded event now available

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Course Materials

This CLE course will brief real estate financing counsel on challenges for lenders and developers in structuring debt and mezzanine financing for mixed-use and real estate development projects in the current economic environment. The program will discuss the due diligence lender counsel should conduct and borrower’s counsel should expect.

Description

The real estate project development industry is in an upswing as this cyclical industry continues to heat up. How can counsel pave the way for smooth closing of financing deals in the ever complex mixed-use development project?

Counsel representing lenders must be sure the collateral structure and loan documentation adequately address complications and risks of mixed-use developments. Due diligence in these deals requires scrutiny of development agreements with municipalities, in addition to review of the title, survey, zoning and environmental issues.

Typically in large scale developments, there is more than one lender involved. Counsel must assure that their client’s rights are protected against lenders on other phases of the construction. For mezzanine loans, that requires careful negotiation of intercreditor agreements.

Listen as our authoritative panel of real estate finance attorneys guides you through the various challenges facing traditional and mezzanine lenders financing mixed-use project development and the due diligence lenders counsel should conduct and borrower’s counsel should expect.

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Outline

  1. Current terms for construction loans
    1. Completion guaranties
    2. Payment guaranties
    3. Collateral assignments of borrower’s rights under any development agreements
    4. Collateral assignments of project leases
  2. Lender due diligence issues
    1. Scrutiny of land development agreement with municipality
      1. Borrower covenants
      2. Fees due municipality
      3. Mortgagee protection provisions
      4. Lender rights vs. the municipality’s rights
    2. Title, survey and zoning due diligence
    3. Environmental due diligence for contamination and other brownfield issues
    4. Review of borrower’s operating agreement: SPEs and other control issues
  3. Dealing with multiple lenders
    1. Coordinating default remedies with other lenders
    2. Multiple ownership entities: reciprocal easements and access agreements
    3. Syndicated lenders
  4. Subordinate and mezzanine lenders
    1. Intercreditor agreements
    2. Rights in event borrower’s default

Benefits

The panel will review these and other key issues:

  • What are the key due diligence points for lenders financing mixed-use development projects?
  • What special challenges arise when there are multiple lenders involved in various phases for parts of the project?
  • What significance does the borrower’s development agreement with a municipality have on the lender and what issues should borrower’s counsel be concerned with?

Faculty

Temple, Jeffrey
Jeffrey J. Temple
Partner, Co-Chair- US Real Estate Group
Morrison & Foerster

Mr. Temple represents a broad spectrum of clients in connection with investments in, and the financing, development,...  |  Read More

Eric D. Lemont
Eric D. Lemont
Sullivan & Worcester

Mr. Lemont’s practice focuses on transactional commercial real estate matters, including acquisitions and sales...  |  Read More

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