Lease Enhancement Insurance
Lease Enhancement Insurance (“LEI”) protects lenders in credit tenant lease (“CTL”) financings from a lease termination by a credit tenant resulting from a covered casualty or condemnation event or rent abatement from a covered condemnation event. LEI provides advantages to commercial real estate owners, developers and institutional lenders by enhancing CTL financings.
Residual Value Insurance
Residual Value Insurance (“RVI”) protects a lender against a market downturn or other economic factors that could adversely affect the insured residual value of the mortgaged property at the scheduled maturity of the loan. RVI pays the lender an amount equal to the agreed residual value at the loan’s scheduled maturity which is typically equal to the lender’s balloon amount.
Shortfall Insurance (“SI”) protects lenders in commercial real estate financings from a loss resulting from property damage of 75% or greater of the replacement cost value of a property or a total condemnation. SI takes its name from the fact that it covers the “shortfall” between the outstanding loan amount and the combined value of the underlying property insurance proceeds and the land that collateralizes the loan in a covered casualty event. In a total taking event, the “shortfall” between the outstanding loan balance and the condemnation award is covered.
Zoning Non-Conformance Insurance
Zoning Non-Conformance Insurance (“ZI”) protects lenders in commercial real estate financings from a loss that results from a peril not otherwise excluded that damages or destroys a building or buildings such that it cannot be rebuilt to the same size and purpose due to zoning ordinances. Most zoning ordinances require that a non-conforming property that suffers enough damage be rebuilt in compliance with current zoning ordinances. This can leave commercial real estate lenders with a potential loss.