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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Wednesday, June 30, 2021

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will provide a timely update regarding high-volatility commercial real estate (HVCRE) loans, as well as regulatory requirements relating to nonperforming real estate loans, and options for lenders, borrowers, and investors relating to nonperforming loans. Our panel will discuss regulatory requirements for HVCRE loans and the HVCRE exemption criteria. The program will also discuss (1) how lenders are currently revising covenants in loan documentation, (2) regulatory requirements for nonperforming loans, and (3) the current options for loans that do not comply with the regulatory requirements.

Faculty

Brook Boyd
Counsel
Meister Seelig & Fein Pllc

Mr. Boyd has a broad range of experience in real estate, corporate and commercial transactions and related litigation. He has represented banks and trust companies, investment banks, credit unions, investors, developers, general contractors, nonprofit organizations, receivers and a wide variety of other companies and individuals. Mr. Boyd has been quoted extensively as an expert on various legal matters by numerous publications, including the New York Times, the Wall Street Journal, Le Monde, Business Week, and The Mortgage and Real Estate Executives Report and is a frequent speaker on real estate law and other matters.

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Paula Konikoff
Attorney
Miscellaneous

Ms. Konikoff provides expert testimony and rent resetting advice for negotiation and arbitration, serves as an arbitrator, performs market analyses, due diligence and independent fiduciary services, and teaches and conducts seminars for continuing professional education legal credits. Among other matters, she has testified on behalf of plaintiffs and defendants in RMBS litigations and testified on behalf of the SEC in matters involving Mello-Roos bond issues and public limited partnerships holding investment grade office properties in New England. In addition to litigation support Ms. Konikoff develops appraisal and portfolio reviews (residential and commercial) for lenders, pension funds, and investment banks.

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Description

The 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, and the final HVCRE rule issued by federal banking agencies in 2019, caused an increase in the cost of lending (and, consequently, borrowing) concerning 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 investments.

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

Lenders and borrowers have attempted to negotiate best structuring practices and loan documentation to avoid inadvertent HVCRE treatment but continue to face uncertainties over issues such as the impact of mezzanine debt, preferred equity, and actual cash flow. Lenders and borrowers involved in nonperforming real estate loans must also deal with regulatory requirements relating to such loans.

Listen as our authoritative panel of real estate finance attorneys guides you through the regulatory requirements for HVCRE and other real estate loans. The panel will also address (1) the regulatory requirements for nonperforming real estate loans and (2) the current options of lenders and borrowers for loans that do not comply with applicable regulatory requirements.

Outline

  1. HVCRE loans
    1. Definition of an HVCRE loan
    2. Exceptions for real estate loans that are not HVCRE loans
  2. HVCRE regulatory issues
    1. Contributing additional capital to an existing HVCRE loan
    2. Cash provided by the second mortgage on a property
    3. "As-stabilized" value
    4. Land committed to a new development
    5. Soft costs as contributed capital
    6. Subsequent appraisal/valuation resulting in LTV no longer exceeding maximum LTV ratio
    7. Contributed capital remaining in the project
    8. Impact of mezzanine debt
  3. Current enhanced loan covenants addressing HVCRE rules
  4. Regulatory requirements relating to nonperforming real estate loans
  5. Borrower and lender options for loans that do not comply with regulatory requirements or related loan covenants

Benefits

The panel will review these and other critical issues:

  • What is the current state of the real estate market?
  • How can appraisals be prepared, in accordance with legal requirements, at a time when market values for many properties are uncertain?
  • Can the borrower contribute additional capital to an existing HVCRE loan, after loan funds have been advanced, to exclude the loan from the definition of HVCRE?
  • Are soft costs part of the borrower's contributed capital as development expenses?
  • What is the impact of mezzanine debt and preferred equity?
  • What are a lender’s options, with respect to HVCRE loans, and other loans that do not comply with regulatory requirements, such as (1) selling such loans, (2) selling a subordinated portion of an existing loan and retaining a remaining portion that complies with the HVCRE and other regulatory rules, and (3) getting more capital in order to meet capital requirements?
  • What are the available borrower options, which may include (1) refinancing with non-bank lenders, (2) funding from new equity investors, (3) a capital call to existing investors, and (4) a long-term net lease of the mortgaged property to a third party that provides additional capital?