The LMA REF Development Document is used for transactions in the United Kingdom and solely to acquire and develop property. It assumes that the obligors are incorporated in England and Wales, the facility agent is based in London, the property is located in England and Wales or Scotland, and that the facility agreement is governed by English law.
The transaction structure of LMA-style real estate development transactions is simpler than that for real estate investment transactions. Besides the assumptions common to LMA REF investment facility agreements, the REF Development Document anticipates:
- A single special purpose vehicle specially set up for the transaction to act as “Borrower” and to obtain financing to develop the “Property” by one or more operating companies ("Shareholders");
- The Shareholders hold 100% of the share capital and subordinated debt in the Borrower and act as Guarantors of Borrower’s obligations under the finance documents, providing security over the shares in the Borrower;
- A single-currency fixed-term senior loan facility with either a fixed or a floating rate of interest is agreed between the “Finance Parties” (“Lenders”, “Hedge Counterparties”, “Agent” and “Security Agent”) and the Borrower and the Guarantors for the development of Property – no other form of financing is foreseen;
- Floating-rate loans are hedged with the “Hedge Counterparty”, as party to the facility agreement and beneficiary of the security package; and
- Security is granted in favor of a security trustee (“Security Agent”) for the lenders.