LMA publishes real estate development finance facility agreement

The Loan Market Association has published its new recommended form of Single Currency Term Facility Agreement intended for use in real estate development finance transactions.

The new development facility agreement was prepared following the success of the LMA real estate investment facility agreement.

Both the investment and development facility agreements were prepared in consultation with a working party comprising representatives of lenders and law firms in the London real estate finance market, including Simon Johnston, CMS partner and head of real estate finance.

The development facility agreement (in line with the investment facility agreement) follows the LMA recommended forms for investment grade and leveraged finance markets which have been in place for many years, using the same basic structure and “boilerplate”.

One of the objectives of both facility agreements is to bring a greater degree of standardisation to the documentation used in the real estate finance market. On its publication last year, the investment facility was welcomed by participants in the real estate finance market and has since become established in the market as a standard starting point in mid-sized and larger transactions.

The development facility agreement is likewise intended as a starting point for drafting and negotiation. We anticipate that this will be an extremely useful framework for both lenders and borrowers. In our view, by its very nature, development finance involves such a range of circumstances and complexities that there will be more aspects of this facility agreement which will need to be considered in depth on a case by case basis.