In Part Two of our series on limited recourse finance in the
European real estate finance market, we look at the structural
features.
Limited recourse structure can be achieved either structurally
(which is the most common in real estate financing) or
contractually.
Typical limited recourse borrowing structure
In a typical real estate financing facility, as illustrated in
the diagram below, a special purpose vehicle ("SPV") is
set up to be the Borrower and holds the underlying real estate
asset; or, in the case of multiple properties, via subsidiary
PropCos (each subsidiary again is set up as an SPV, only to hold
the real estate asset). The Sponsor provides funding to the
Borrower SPV either via an intragroup loan or by equity. A separate
management company which is engaged to undertake the maintenance
(and sometimes, manage the income such as rent and manage leases
and tenants) provides services to the Borrower/PropCos with respect
to the properties ("Property
