Property Finance - An International Approach

A holistic guide to financial and legal issues of real estate financing
 
Property financing pertains to the various sources of capital invested in real estate assets. Built on a solid theoretical background, Property Finance features relevant case studies that cover the most common issues in property lending and financing. You will learn the policies surrounding debt and equity resources, preferred equity, mezzanine debt, and other hybrid forms in both general and country-specific terms. The first, general section of the book addresses real estate lending at an international level, financial cash flows, and the main clauses of financing agreements. The second, country-specific section discusses the more relevant element of European markets with a focus on the United Kingdom, France, Germany, Spain, and Italy.
* The book uniquely focuses on real estate financing exclusively, instead of on investment, valuation, or REITS
* A mix of theoretical and practical examples provides useful explanations followed by immediate practical cases
* A frequently updated website complete with errata corrige, updates, new spreadsheets, useful data, and other features accompanies the information in the book
 
Featuring practical case studies and a holistic approach to real estate financing topics, Property Financing is the ideal handbook to applicable financial and legal issues for financial students and managers.

List of contents

Foreword by Prof. Dr. Junhai Liu xi
 
Foreword by Prof. Dr. Matthias Thomas xiii
 
Preface xv
 
Preface to Part Two xvii
 
Acknowledgements xix
 
List of Figures xxi
 
Reader's Manual xxiii
 
Part One
 
Chapter 1 Introduction to Property Financing 3
 
1.1 Forms of financing: debt and equity 3
 
1.1.1 Debt 4
 
1.1.2 Equity 6
 
1.2 A different approach to property financing 6
 
1.3 Corporate finance and project finance 7
 
1.4 Bank financing 8
 
1.4.1 Property Loans to Private Individuals 9
 
1.4.2 Property Financing to Cover Financial Requirements 9
 
1.4.3 Structured Real Estate Financing 10
 
1.5 Fund raising, securitization, and syndication 10
 
1.5.1 Traditional Funding and Securitization 11
 
1.5.2 Funding for Real Estate Loans and Syndication 12
 
1.5.3 Syndication of Real Estate Loans 13
 
Chapter 2 Structured Real Estate Financing 15
 
2.1 Bank roles 17
 
2.2 Bank loan contractual forms 17
 
2.3 Loans for development projects 18
 
2.4 Parts and stages of a structured loan 18
 
2.4.1 Analysis of the Transaction and Term Sheet 19
 
2.4.2 Real Estate Valuation 21
 
2.4.3 Basics of Property Appraisal 23
 
2.4.4 Due Diligence Process 32
 
2.4.5 Legal Due Diligence 32
 
Chapter 3 Loan Agreement 33
 
3.1 Object and purpose of the loan 34
 
3.2 Conditions precedent 34
 
3.3 Amount of the loan 35
 
3.4 Interest rates 36
 
3.5 Interest rate risk hedging 38
 
3.5.1 Interest Rate Cap 38
 
3.5.2 Collar 38
 
3.5.3 Interest Rate Swap 38
 
3.6 Loan allocation 41
 
3.7 Loan repayment schedule 43
 
3.8 Fees 43
 
3.9 Frequency of drawdown and procedures 45
 
3.10 Events of default 46
 
3.11 Property insurance 48
 
3.12 Representations and warranties 49
 
3.13 Duty to provide information 53
 
3.14 Costs, taxes, and ancillary charges 56
 
3.15 Contractual covenants 56
 
3.15.1 Balance Sheet Covenants 57
 
3.15.2 Financial Covenants 57
 
Chapter 4 Loan Repayment, Interest, and Renegotiation 63
 
4.1 Bullet payments 63
 
4.2 Pre-amortizing (semi-bullet) 63
 
4.3 Balloon payment 64
 
4.4 Fully amortizing repayment plans 65
 
4.4.1 Fixed-Capital Loan Repayment Plan 66
 
4.4.2 Floating-Rate Loan Repayment Plan 68
 
4.4.3 Loan with Interest Rate Caps 71
 
4.5 Other repayment schedules 73
 
4.5.1 Negative Amortizing Constant Payment Loan 73
 
4.5.2 Declining Payment Loan with Constant Amortizing 74
 
4.6 Restructuring and renegotiation of real estate loans 75
 
4.6.1 Grant of a New Loan 76
 
4.6.2 Deferral of Payment Deadlines 76
 
4.6.3 Restructuring Arrangement 77
 
Chapter 5 Effects of Financial Leverage on Real Estate Investments 79
 
5.1 An illustration of financial leverage 80
 
5.2 The effects of an increase in volatility 81
 
5.3 The effect of financial leverage on returns 82
 
5.4 The effect of financial leverage on risk 82
 
5.5 "No Free Lunch" 84
 
5.6 The mechanics of financial leverage 84
 
5.7 The effect of the spread 85
 
5.8 A brief summary of when to use financial leverage 86
 
Chapter 6 Structured Real Estate Financing Case Studies 89
 
6.1 Structured financing for an income producing property 90
 
6.1.1 Description of the Transaction 90
 
6.1.2 Term Sheet for an Inc

About the author

GIACOMO MORRI, Ph.D., MRICS, is Senior Professor in the Accounting, Control, Corporate Finance and Real Estate Department at SDA Bocconi School of Management and Lecturer in Real Estate Finance at Bocconi University. He is Past-president and Board Member of the European Real Estate Society. He also sits on the board of several real estate companies and works as freelance advisor. www.giacomomorri.info
ANTONIO MAZZA is Teaching Fellow at SDA Bocconi School of Management. He has been working for almost 25 years in the real estate market for both Italian and foreign banks and he is currently General Manager of "Aareal Bank AG" Italy and board member of several Italian companies within the "Aareal Group". He is Professional Member of the Royal Institution of Chartered Surveyors and a member of several Italian Banking Association.
www.morri-mazza.com

Summary

A unique, international approach to optimal real estate financing Property Finance is an authoritative guide to both the financial and legal issues surrounding real estate financing.

Product details

• Authors: Antonio Mazza, Mazza Antonio, G Morri, Giacom Morri, Giacomo Morri, Giacomo Mazza Morri, Morri Giacomo
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 21.11.2014
• EAN: 9781118764404
• ISBN: 978-1-118-76440-4
• No. of pages: 272
• Series: Wiley Finance; The Wiley Finance Series; Wiley Finance; The Wiley Finance Series
• Subjects: Social sciences, law, business > Business > Business administration; Finanzwesen, Allg. Finanz- u. Anlagewesen, Finance & Investments, Finanz- u. Anlagewesen