Warehousing real estate

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Warehousing real estate

  1. 1. CMBS-Warehousing Real Estate Finance with Outstanding Prospects
  2. 2. R E A L E S TAT E F I N A N C E V I A T H E The resulting CMBS are capital markets C A P I TA L M A R K E T S instruments that can be sold to international investors. Firmly established on the international scene It should be noted that standardised processes for many years, mortgage-backed securities and defined valuation criteria make CMBS (MBS) have also recently become a recognized Warehousing very attractive for investors. alternative to traditional real estate finance in Property profitability is based on a stable cash Germany. The key difference is refinancing via flow from existing rental income accompanied the capital markets instead of conventional by an appraised default risk. Pfandbrief funding. This process creates capital markets eligible securities whose C O N V E N I E N T I M P L E M E N TAT I O N default risk is collateralised by the real estate For you as a borrower, CBMS Warehousing financing instruments and their underlying offers a number of benefits: mortgages. – Loans are extended to a special purpose A particularly attractive option is the securi- vehicle (borrower SPV) on a non-recourse tization of commercial mortgage receivables, basis, i. e. with-out personal liability for called “commercial mortgage-backed securi- you in your capacity of shareholder. ties” (CBMS). Catering to our customers’ high – Unlike traditional bank loans, you will not requirements, we have packaged our services be affected by future credit ceilings set by our in this area in a product hitherto unparalleled bank if you opt in favor of CBMS Warehousing. in the German market: CMBS Warehousing. – The reference yardsticks for defining loan Generally speaking, access to the capital size are not just market value, but also, and markets presupposes very high transaction in particular, rental income generated. Loan volumes ranging between EUR 300-500 million. extension takes its bearings from the situation CBMS Warehousing now enables us to pool prevailing in the real estate market, which several smaller loans together to achieve a could create fresh leeway for the release of portfolio of sufficient total size. The resultant equity capital. commercial real estate loan portfolio allows – Market value is calculated by independent our customers to gain access to the capital appraisers not affiliated with the bank, and markets. percentage loan-to-value (LTV) limits and loan BENEFITING FROM SHARED INTERESTS terms are transparent for you at all times. – The cost structure is usually more favorable, In simple terms, CBMS Warehousing is the although the typical loan processes remain programme we use to assemble individual exactly the same as those you are already smaller mortgage loans with individual familiar with from other credit products. volumes of about EUR 10-50 million into a – This also applies to the loan agreement; here larger pool suitable for a public CMBS trans- we are Germany’s first bank to have designed action. The smaller loans are assigned to a such an agreement in the familiar form in portfolio for a certain period (six to twelve accordance with German law (German months), and once the portfolio volume Commercial Code, or BGB). required for a capital market transaction is reached, the entire pool is sold to a newly established, bankruptcy remote special purpose company. The special purpose company funds this purchase by issuing and selling CMBS, where the credit risk of the whole pool is carved up into individual tranches each individually rated by rating agencies. This process is known as securi- tization.
  3. 3. R E TA I N I N G T R I E D - A N D - P R O V E N Y O U R A D VA N TA G E S AT A G L A N C E F E AT U R E S Capital markets orientation permits attractive pricing, as a larger number of potential In principle, CMBS Warehousing is suitable investors can be reached via the capital for all commercial real estate properties with markets stable, predictable cash flows and long-term Limitation of personal liability tenancy agreements with the longest possible (“non-recourse”) duration. Depending on the current capital Credit volume based exclusively on markets environment, terms are frequently current market value much more favorable than those offered by Transparent, concise contractual traditional bank loans. And because securi- documentation in German tized receivables do not appear in the bank’s Extended scope for action releases balance sheet, they do not place a burden on equity capital your customer limit, but instead even expand Familiar and tried and tested credit your financial leeway. If you agree to transfer product offering new opportunities your loan, nothing much will change for you, except for the opportunity to obtain more attractive terms. As usual, your financing is based on a loan agreement concluded with HypoVereinsbank, which will remain your knowledgeable contact and service partner after transfer of your loan to the special purpose vehicle.
  4. 4. OUR ANSWERS TO YOUR QUESTIONS What benefits does CMBS Warehousing offer? The most important benefits are access to more favorably priced funding options offered by the capital markets and borrowing without company owners’ personal liability (“non recourse”). Why is CMBS more favorably priced than other types of loans? Because the loans are refinanced via the international capital markets, which permits more efficient risk distribution through tranching of the loan pool as well as access to a considerably larger number of investors. What is the maturity period of the loan? Depending on the tenancy agreements concluded and the capital markets setting, the maximum maturity period of a loan is ten years. This corresponds to the normal standard in Germany. When and how will distributions be paid out? Payouts will be made one month after each quarterly review of the financial ratios, provided that the latter are in compliance and no arrears have been accrued on the loan. What are the borrower’s obligations? Regular presentation of quarterly reports. Content: tenancy rates, including rental income received, vacancy rates, investments made and maintenance expenses incurred as well as general reporting on tenancy relationships. Who is the creditor? Loans are extended by HypoVereinsbank. Our intention is to sell the loan to a securitization company established specifically for this purpose – a special purpose vehicle – within six to twelve months after pay-out of the loan. The SPV refinances itself via the international capital market. How do I establish a special purpose vehicle? The establishment of a borrower SPV can be handled by your auditor or tax consultant. Alternatively, we will be pleased to refer you to a law firm or auditing company that can help you establish an SPV on its behalf and will assume responsibility for the ongoing management of the SPV. What consequences does the sale of the loan have for me? In practice, the sale does not have any implications, because loan processes will be continued in the customary manner. Who will be my contact after the sale of the loan? A HypoVereinsbank relationship manager who handles the loan as a specialist and is also available for any questions will initially remain the borrower’s service partner.
  5. 5. “Our overriding maxim is: act in such a manner that the effect of your decisions always satisfies your customers’ highest requirements. CMBS Warehousing is a successful example of this approach. With this product, we have responded to our customers’ increased requirements with respect to professional real estate finance and set high standards in the fledgling European market for real estate loan securitization. We thus offer our customers not only access to the capital market, but also hitherto unparalleled convenience in contractual implementation. With CMBS Warehousing, our range of services has been extended by a product tailored to our customers’ specific needs – because it has been developed directly from their wishes.” Dr. Stefan Schmittmann, Member of the Management Board of Bayerische Hypo- und Vereinsbank AG

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