The Commercial Real Estate Loan Term Sheet is a crucial preliminary document used in Hong Kong's commercial property financing transactions. It is typically issued after initial credit approval but before the preparation of full loan documentation, serving to document the commercial agreement between the lender and borrower on key terms of the proposed facility. The document reflects Hong Kong's sophisticated banking and real estate sectors, incorporating local regulatory requirements and market practices. It covers essential elements including facility terms, security structure, key conditions, and covenants, forming the basis for lawyers to prepare the detailed loan documentation. The term sheet is non-binding except for certain provisions such as confidentiality and governing law, but represents a moral commitment between the parties to proceed on the stated terms.
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1. Parties: Identification of Lender, Borrower, and any Guarantors
2. Property Details: Full description and address of the property serving as security
3. Facility Type and Purpose: Type of loan facility and its intended use
4. Facility Amount: Principal amount of the loan
5. Interest Rate and Fees: Interest rate structure, arrangement fees, commitment fees, and other charges
6. Term and Repayment: Loan duration and repayment schedule
7. Security Package: Details of all security to be provided, including first mortgage over the property
8. Key Financial Covenants: LTV ratio, DSCR requirements, and other financial maintenance covenants
9. Conditions Precedent: Key conditions to be satisfied before drawdown
10. Representations and Warranties: Standard representations regarding property, authority to enter into loan
11. Key Undertakings: Essential borrower obligations during loan term
12. Events of Default: Key events triggering default
13. Governing Law: Confirmation of Hong Kong law as governing law
1. Hedging Requirements: Required when interest rate hedging is mandatory - specifies minimum hedging requirements
2. Insurance Requirements: Detailed insurance requirements when specific coverage needs to be highlighted
3. Property Management: When specific property management requirements need to be imposed
4. Environmental Matters: For properties with specific environmental concerns or requirements
5. Development Provisions: When property requires development or significant renovation
6. Multiple Properties: Special provisions for portfolio deals with multiple properties
7. Rental Income Requirements: For properties with specific lease or rental income requirements
8. Special Purpose Vehicle Requirements: When borrower must be or establish an SPV
1. Property Schedule: Detailed property information including title details and existing encumbrances
2. Financial Schedule: Key financial terms, including detailed fee structure and interest calculation examples
3. Security Schedule: Comprehensive list of all required security documents
4. CP Schedule: Detailed list of all conditions precedent
5. Form of Drawdown Request: Template for drawdown requests
6. Financial Covenant Calculations: Detailed methodology for calculating financial covenants
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