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Pre-Construction New Build Rental Income Guarantee

Solving for Absorption Risks in Today's Market

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Designed to support lenders and their developer clients against absorption risk by eliminating variation or uncertainty in future income through a straight-line guaranteed return, backed by a Performance Bond.

The Rental Income Guarantee Is Ideal for:

  • Pre-construction and completed residential, multi-family, and condo projects
  • Acquisitions of multi-family, condo, hotel, student rentals, or senior living projects
  • From 5 to 200+ Units

Added Benefits for Qualified Projects and Loans:

Pensio makes available a 5-year property management program with Rent Guarantees fully underwritten by a rental income Performance Bond. Rent is paid on the last day of every month, regardless of whether the unit is rented or vacant.

The Pensio rental income program provides lenders with certainty that a completed unit can be sold or can earn a certain income regardless of market conditions.

Once completed, the rental income guarantee by the Pensio Group will be fully supported by a Performance Bond, 100% reinsured by reinsurers within the Lloyd’s Market or global reinsurers rated A.M. Best A- Excellent or Better.

FAQ

How much is the Rental Income Guarantee?

The standard cost of the program fee is 4.5% of the total value of all units being enrolled or the total project value. This cost may be risk-adjusted for higher-risk projects. The program fees can be fully financed as part of the project capital stack and are paid in full before the opening date. There are no additional program fees or premiums due during the 5-year program term.

What is the process to qualify?

The lender completes the initial internal screening of the project to ensure it will qualify for the next steps of internal underwriting and benefit from the Rental Income Guarantee Program. The lender then works with the prospect to organize the project details and provide access to a data room for the Pensio team. Once the data room project details are received, the Pensio Analytics Team completes the initial rental market analysis and proposal within 3-5 business days. Pensio will send an alysis and summary back to the lender for review and approval.

Final deal terms are agreed upon by all stakeholders: guarantee values, timing and critical dates, property management strategy, etc. Once approved, final analysis and program agreements to be completed for execution between the bank, client, and Pensio (3-5 days). Upon payment of the program fee, a Performance Bond securing Pensio’s agreement will be issued to the stakeholders by Pensio’s Licensed Insurance Broker, World Insurance Associates LLC.

What is the effective date of the Guarantee Program?

The Guarantee begins paying in the month following the 90-day stabilization period.

Who issues the Rent Guarantees and Performance Bonds?

The Program is exclusively administered by World Insurance Associates LLC. World releases the Performance Bonds to clients on behalf of Pensio and Rentalis Insurance Company, Inc.

Does Pensio have to be the property manager?

No. Pensio prefers being the property manager and head leasing agent on any projects being enrolled in the Program but understands that many clients have preferred 3rd party managers or in-house teams. If Pensio is not the property manager, Pensio will reserve the proxy right through the five years to augment or replace the in-place manager in the case of unremedied underperformance of leasing and tenant management.

What management system does Pensio use?

Pensio uses the industry standard Yardi PM Software system for managing units, payments, and reports. Pensio can integrate seamless reporting with clients, also using Yardi to ensure real-time access to information.

What happens to any renal income earned above the guaranteed amount?

For providing the guaranteed rents through the five years, Pensio retains 100% of any rent paid in the initial 90-day stabilization period and any excess net rental income greater than the guaranteed rent received for the units during the term of the program.

What happens after the five-year guarantee period?

After the five-year guarantee period, owners may choose to re-underwrite, re-finance, and re-enroll in the rent guarantee program or self-manage or sell the asset. The program provides flexible options so the choice is yours.

What is the cancellation policy?

The program can be terminated at any point during the five-year program with 60-days’ notice and payment of an administration fee equal to one month of the guaranteed rent.

Who is Pensio?

Learn more about our partnership with Pensio here.

Who can I contact if I want to learn more?

Contact Kishan Alexander at 646-767-1148 or kishanalexander@worldinsurance.com.

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