In a volatile market, these arrangements are intended to offer forward-looking financial security for owner-developers, acquirers, lenders, and other stakeholders

Today’s real estate market has many uncertainties. For example, few stakeholders would have ever imagined a global pandemic prompting governments to enact eviction moratoriums that protect tenants unable to pay their rent — while impeding income to landlords. 

Fortunately, there is an option for taking some of the future uncertainty out of the real estate equation. A fully reinsured rental income guarantee program can help ensure that multifamily residential, as well as commercial property, projects produce sufficient cashflow no matter how the status of lessees or rental rates change.

For owner-developers, acquirers, lenders, equity partners, and others in the real estate value chain, rental income guarantees can provide the critical financial surety needed to begin a new building project, launch a subsequent phase of construction or support the acquisition of an existing property.

How it works

M&T Insurance Agency (MTIA) offers rental income guarantee insurance programs through Pensio Global, a leading credit risk consulting, management, and rental income guarantee company. Pensio Global has been in operation since 2004, offers products and services in seven countries, and has more than $1.5 billion in projects under contract. 

A rental income guarantee program is intended to ensure the owner-developer can fill the financial gap during the lease-up period of a new build, or caused by lower-than-expected occupancy rates or lower-than-expected rental rates. Pensio provides a steady income stream for the full length of the 5-year contract at rates pre-negotiated with the company.

Rental income guarantee programs generally run for five-year terms and are appropriate for projects ranging from 5 units to many hundreds.

This arrangement can mean the difference between the long-term success and failure of a project, given the disruption in the overall real estate sector caused by the pandemic. In some markets, such as large cities, occupancy supply currently exceeds demand. These low occupancy rates drive down rental income –- income that a guarantee program could potentially replace.

Alternatively, in other markets such as many suburbs and exurbs, surging demand has pushed rents higher, much to the benefit of owner-developers. But when these rents inevitably fall, an income guarantee program would pay an owner-developer a higher (pre-negotiated) rate to help make up the difference and stabilize long-term revenue.

These programs, which generally run for five-year terms with the option to renew every five years, also can benefit owner-developers of multiphase building projects. Traditionally, lenders and investors will not fund phase two of a project until phase one is adequately leased. But with a guarantee in place on phase one, owner-developers are more likely to access immediate financing to move on to phase two and beyond.

One factor to keep in mind is that if an owner-developer can raise rental rates above the rates pre-negotiated with Pensio during the term of the program, Pensio receives those additional funds. It’s also important to note that program premiums are paid by the post-construction owner of the asset or assets. Lenders and equity partners may recommend a rental income guarantee to help a project move forward, as rent often is used as collateral on these loans.

Condominium considerations

Owner-developers of condominiums, along with lenders and investors, can also benefit from a rental income guarantee program. For example, in a mixed-use multifamily project that contains half rentals and half condominiums, rental income guarantees can cover not only unrented apartments but also unsold condominium units.

These unsold units are treated as unrented apartments and are subject to monthly payments from Pensio – again, based on pre-negotiated rates -– until they are sold. The process works similarly with condominiums being converted to rental units. When the owner-developer purchases the condos for conversion, they can enter into a rental income guarantee program to ensure they receive cashflow while attempting to rent them. 

Unsold condominiums can be treated like unrented units, kicking off monthly payments to the owner-developer.

Additionally, condominium sales can be repositioned from end-users to investors, which can often increase the target sales price and create a better-than-expected sales velocity.

Say goodbye to insurance claims

Unlike a traditional insurance process, owner-developers do not have to file a claim to receive payment for the loss on a unit; instead, Pensio tracks each unit’s status and rental rates, then sends the owner-developer a financial transfer each month for the agreed-upon amount.

Pensio performs like a strategic partner, taking over the rent collection process and other property management roles. This includes the use of Yardi cloud-based, enterprise-class property management software at a fee lower than most developer-owners can arrange on their own.

Programs can provide funding to refresh, market and advertise a vacated unit to attract new renters.

We’re here to help. For more information on rental income guarantee programs, call 1-800-716-8314 today.




M&T Insurance Agency, Inc. is a wholly owned subsidiary of M&T Bank.
Insurance Products offered are: Not FDIC insured; Not a deposit in, obligation of, nor insured by any federal government agency; Not guaranteed or underwritten by the bank; Not a condition to the provisions or terms of any banking service or activity.
Insurance products are offered by M&T Insurance Agency, Inc., not by M&T Bank. Insurance policies are obligations of the insurers that issue the policies.  Insurance products may not be available in all states. 


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