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The use of loan covenants in the European real estate sector

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  • Victoria E. Ormond

Abstract

This paper reviews the use of loan covenants employed within private credit agreements in the commercial real estate sector. As well as reviewing the most commonly covenanted financial ratios; loan to value and interest coverage, an overview of other financial, general, property and informational covenants is provided. The paper is uniquely based on a panel of data drawn directly from a sample of European commercial credit agreements. These agreements are sourced from a cross-section of listed and unlisted borrowers. A sub-sample of renegotiated credit agreements are also analysed to provide a comparison of loans pre and post renegotiation. Additionally, data from supporting loan documentation, also provided by the borrowers, offers further details regarding actual financial ratio levels over the term of the loans. This research is generously sponsored by the Investment Property Forum Educational Trust.

Suggested Citation

  • Victoria E. Ormond, 2012. "The use of loan covenants in the European real estate sector," ERES eres2012_184, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2012_184
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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