Structuring Real Estate Financing With Foreign Borrowers, Trusts, and Tenants in Common

Nonstandard borrowers and guarantors present underwriting and documentation challenges for lenders. Counsel must know how to structure loans with each type of borrower and guarantor. For borrowers that include foreign investors, lenders will require foreign as well as domestic anti-terrorism, anti-money laundering, and credit/litigation searches on each investor.

To allow for suit and collection in the U.S., foreign guarantors should be underwritten based on U.S.-held assets and agree to maintain a minimum U.S. net worth and liquidity throughout the loan term. If the borrower is a TIC, then there must be a TIC agreement which may appoint a managing agent, subordinates TIC claims to the loan, and addresses the parties' relationship to each other and the lender.

Trusts require special attention. Counsel must identify the assets in the trust, determine whether the trust is revocable, and understand conditions for removal of the trustee and how death or insolvency of the trustee or beneficiaries impacts control. Beneficiaries, as well as the trustees, may have to be underwritten as principals in the transaction.

Listen as our authoritative panel prepares lender's and borrower's counsel to structure transactions where borrowers are either foreign investors and guarantors, trusts as investors or guarantors, and/or TICs. The panel will review due diligence concerns with foreign investors, the role of U.S. assets and U.S. agents for foreign guarantors, subordination and other TIC agreement provisions, the trustee-beneficiary relationship of the trustee, revocable trusts, U.S. SPE borrowers in these transactions, and more.