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<p>Foreword by <i>Prof. Dr. Junhai Liu</i> xi</p> <p>Foreword by <i>Prof. Dr. Matthias Thomas </i>xiii</p> <p>Preface xv</p> <p>Preface to Part Two xvii</p> <p>Acknowledgements xix</p> <p>List of Figures xxi</p> <p>Reader’s Manual xxiii</p> <p><b>Part One </b></p> <p><b>Chapter 1 Introduction to Property Financing 3</b></p> <p>1.1 Forms of financing: Debt and equity 3</p> <p>1.1.1 Debt 4</p> <p>1.1.2 Equity 6</p> <p>1.2 A different approach to property financing 6</p> <p>1.3 Corporate finance and project finance 7</p> <p>1.4 Bank financing 8</p> <p>1.4.1 Property Loans to Private Individuals 9</p> <p>1.4.2 Property Financing to Cover Financial Requirements 9</p> <p>1.4.3 Structured Real Estate Financing 10</p> <p>1.5 Fund raising, securitization, and syndication 10</p> <p>1.5.1 Traditional Funding and Securitization 11</p> <p>1.5.2 Funding for Real Estate Loans and Syndication 12</p> <p>1.5.3 Syndication of Real Estate Loans 13</p> <p><b>Chapter 2 Structured Real Estate Financing 15</b></p> <p>2.1 Bank roles 17</p> <p>2.2 Bank loan contractual forms 17</p> <p>2.3 Loans for development projects 18</p> <p>2.4 Parts and stages of a structured loan 18</p> <p>2.4.1 Analysis of the Transaction and Term Sheet 19</p> <p>2.4.2 Real Estate Valuation 21</p> <p>2.4.3 Basics of Property Appraisal 23</p> <p>2.4.4 Due Diligence Process 32</p> <p>2.4.5 Legal Due Diligence 32</p> <p><b>Chapter 3 Loan Agreement 33</b></p> <p>3.1 Object and purpose of the loan 34</p> <p>3.2 Conditions precedent 34</p> <p>3.3 Amount of the loan 35</p> <p>3.4 Interest rates 36</p> <p>3.5 Interest rate risk hedging 38</p> <p>3.5.1 Interest Rate Cap 38</p> <p>3.5.2 Collar 38</p> <p>3.5.3 Interest Rate Swap 38</p> <p>3.6 Loan allocation 41</p> <p>3.7 Loan repayment schedule 43</p> <p>3.8 Fees 43</p> <p>3.9 Frequency of drawdown and procedures 45</p> <p>3.10 Events of default 46</p> <p>3.11 Property insurance 48</p> <p>3.12 Representations and warranties 49</p> <p>3.13 Duty to provide information 53</p> <p>3.14 Costs, taxes, and ancillary charges 56</p> <p>3.15 Contractual covenants 56</p> <p>3.15.1 Balance Sheet Covenants 57</p> <p>3.15.2 Financial Covenants 57</p> <p><b>Chapter 4 Loan Repayment, Interest, and Renegotiation 63</b></p> <p>4.1 Bullet payments 63</p> <p>4.2 Pre-amortizing (semi-bullet) 63</p> <p>4.3 Balloon payment 64</p> <p>4.4 Fully amortizing repayment plans 65</p> <p>4.4.1 Fixed-Capital Loan Repayment Plan 66</p> <p>4.4.2 Floating-Rate Loan Repayment Plan 68</p> <p>4.4.3 Loan with Interest Rate Caps 71</p> <p>4.5 Other repayment schedules 73</p> <p>4.5.1 Negative Amortizing Constant Payment Loan 73</p> <p>4.5.2 Declining Payment Loan with Constant Amortizing 74</p> <p>4.6 Restructuring and renegotiation of real estate loans 75</p> <p>4.6.1 Grant of a New Loan 76</p> <p>4.6.2 Deferral of Payment Deadlines 76</p> <p>4.6.3 Restructuring Arrangement 77</p> <p><b>Chapter 5 Effects of Financial Leverage on Real Estate Investments 79</b></p> <p>5.1 An illustration of financial leverage 80</p> <p>5.2 The effects of an increase in volatility 81</p> <p>5.3 The effect of financial leverage on returns 82</p> <p>5.4 The effect of financial leverage on risk 82</p> <p>5.5 “No Free Lunch” 84</p> <p>5.6 The mechanics of financial leverage 84</p> <p>5.7 The effect of the spread 85</p> <p>5.8 A brief summary of when to use financial leverage 86</p> <p><b>Chapter 6 Structured Real Estate Financing Case Studies 89</b></p> <p>6.1 Structured financing for an income producing property 90</p> <p>6.1.1 Description of the Transaction 90</p> <p>6.1.2 Term Sheet for an Income Producing Property 90</p> <p>6.2 Structured financing for a real estate portfolio acquisition 100</p> <p>6.2.1 Description of the Portfolio Acquisition 100</p> <p>6.2.2 Term Sheet for the Financing of a Real Estate Portfolio 101</p> <p>6.3 Financing of a real estate development project 113</p> <p>6.3.1 Description of the Residential Development Project 113</p> <p>6.3.2 Term Sheet for the Development Project Loan 113</p> <p>6.4 Financing a shopping centre: Credit application 121</p> <p>6.4.1 Players Involved 121</p> <p>6.4.2 Financial Analysis and Key Figures 126</p> <p>6.4.3 Risk Appraisal 128</p> <p>6.4.4 Risk Rating and Risk-Reward 131</p> <p>6.4.5 Conclusion and Recommendation 131</p> <p><b>Chapter 7 Hybrid Forms of Financing 133</b></p> <p>7.1 Description 133</p> <p>7.2 Procedures for establishing mezzanine finance and cost 137</p> <p>7.2.1 The Debt Component 137</p> <p>7.2.2 Equity Kicker 139</p> <p>7.3 Covenants in a mezzanine financing 140</p> <p>7.4 Economic mechanics of hybrid financing 141</p> <p>7.4.1 Mezzanine Financing for an Income Producing Property 142</p> <p>7.4.2 Preferred Equity for Development Projects 144</p> <p>7.5 Waterfall payout agreement 148</p> <p>7.6 Intercreditor agreement 154</p> <p><b>Chapter 8 Basel Accords and Effects on Real Estate Financing 159</b></p> <p>8.1 Basel II 160</p> <p>8.2 Basel III 160</p> <p>8.3 The Basel Accords and real estate financing 161</p> <p>8.4 Standardized Approach 162</p> <p>8.5 IRB Foundation and Advanced methods 163</p> <p><b>Part Two Outline of the most relevant legal issues in selected jurisdictions</b></p> <p><b>Chapter 9 China 171</b></p> <p><b>Chapter 10 England and Wales 177</b></p> <p><b>Chapter 11 France 185</b></p> <p><b>Chapter 12 Germany 201</b></p> <p><b>Chapter 13 India 207</b></p> <p><b>Chapter 14 Italy 215</b></p> <p><b>Chapter 15 Spain 229</b></p> <p><b>Authors 235</b></p> <p>Giacomo Morri 235</p> <p>Antonio Mazza 235</p> <p>Alessandro P. Scarso 236</p> <p>References 237</p> <p>Index 241</p>

<p><b>GIACOMO MORRI,</b> 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.<p> <b> www.giacomomorri.info </b> </p><p><b>ANTONIO MAZZA</b> 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. </p><p><b> www.morri-mazza.com</b> </p>

<p><i>Property Finance</i> is a practical book that explores key aspects of financing decisions related to real estate transactions. The book seamlessly blends theory and practice as it discusses real estate financing in leading Western economies, as well as China and India. </p><p><i>Property Finance</i> is an ideal resource for real estate finance practitioners, bankers, lawyers, business owners and students who wish to obtain a clear understanding of the fundamental theories, legal issues and principles that underpin real estate finance. </p><p>The book includes information on all key topics, such as: </p><ul><li>structured real estate financing </li><li>loan agreements </li><li>financial models and cases of property financing </li><li>the effects of financial leverage on real estate investments </li><li>hybrid forms of financing </li><li>the Basel Accords </li><li>the statutory framework and its impact on structured real estate finance</li> </ul><p> The authors explore the legal issues and financial models that potentially affect property financing deals and provide possible legal and financial solutions that permit the completion of some complex transactions. Special attention has been paid to due diligence as many of the failures of property financing transactions can be attributed to the shortcomings in this critical component of the transaction process. </p><p> The book also outlines both key differences and commonalities in the property financing systems in seven key countries around the world. The companion website to the book (www.morri-mazza.com) includes additional data sets, and spreadsheets, which are updated by the authors. </p>

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