SPAIN Law and Practice Contributed by: Marta González-Llera, Toni Barios, Jorge del Castillo and Rafael Baena, Cases & Lacambra
shall be subject to prior authorisation by the competent public authority.
acquisition of large portfolios of commercial real estate assets. 3.2 Typical Security Created by Commercial Investors The most common security package to secure repayment of the financing granted for the acquisition and/or development of commercial real estate would typically comprise: • a mortgage on the real estate asset; • a pledge over the shares of the company holding the real estate asset (the “borrower”); • a pledge on the borrower’s bank accounts; • a pledge granted on the credit rights aris - ing from any income producing agreement entered by the borrower and related to the specific real estate asset (such as insurance policies, construction agreements and/or lease agreements). Each type of security has, under Spanish law, its own formalities to be effective against third par - ties, and therefore, it is advisable to confirm on a case-by-case basis that the security is validly created and perfected. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no restrictions on granting security over real estate assets to foreign lenders, pro - vided that the mortgagor is not considered a consumer. Nevertheless, it is necessary to highlight that the lender must confirm the potential enforceability of the mortgage granted in a default scenario and ensure that the charge is properly granted and registered at the relevant land registry.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of commercial real estate are gen - erally financed by loans (bilateral or syndicated) granted by local Spanish banks. The structure of the financing and security pack - age granted (see 3.2 Typical Security Created by Commercial Investors ) depends mainly on the specific characteristics of the transaction and the borrower profile. When the commercial real estate asset that is being financed requires construction work (either for its development or refurbishment), lenders usually structure the financing in two different tranches: one in the form of a loan facility for the partial financing of the purchase price and the other, in the form of a credit facility, to fund the construction works. Banks in Spain also offer financing for the acqui - sition of commercial real estate assets in the form of real estate leases. Under the leasing, the use of the real estate asset is transferred by the lessor to the lessee in exchange for the payment of instalments that can be constant, increasing or decreasing. Renovation costs can also be financed. When the leasing ends, the lessee has the option to acquire the property. This form of financing also offers certain tax advantages. Structures may be adjusted but not differ materi - ally when the transaction being financed is the
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