Michelle Napoli is editor of Net Lease forum, from which this article is excerpted.

Westport, CT—German bank HSH Nordbank AG has established HSH N Residual Value Ltd., a Bermuda-based insurance company formed to provide residual value insurance for commercial real estate, particularly credit tenant lease and sale-leaseback properties.

CRCapital Advisors LLC of Westport, CT is the program administrator for the new insurer, responsible for project submissions and review underwriting. “We think we bring a real estate mentality to the business,” says CRCapital Advisors’ Don Horton. “The bank is very heavily involved in real estate and understands it. We think that we can help the capital markets and your traditional CTL sale-leasebacks by providing this service.”

Properties eligible for the residual value insurance include office, industrial, distribution/warehouse, R&D and retail assets with loan amounts between $5 million and $100 million, lease terms typically 15 years to 25 years and an RVI as a percent of value of between 30% and 45%, according to CRCapital Advisors.

“We think that with the current environment of some movement in interest rates, people perceiving that there is real refi risk at the end of these deals, that the market for residual value, which had been declining over the last couple of years because of the aggressive underwriting of the CMBS market, will be seeing some comeback,” says Horton. “And we’re already seeing it.”

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