ISSUE

Commercial real estate is viewed as a high risk investment. Because individual assets are unique, applying risk models and predicting future returns on investments are difficult. Although demand for institutional grade commercial real estate is extensive, it comes from a very narrow base.

APPROACH

By introducing our new, patented form of insurance called Tenant Default Insurance (TDI), available exclusively through the RIISnet MarketPlace™, commercial real estate liquidity and demand will be significantly increased.

TDI will insure the gross rents of a property at acquisition for up to three years. In the event of a tenant default, under the terms of the lease, TDI payment of rents will be made to the owner for a period of up to twelve months any time during the first twenty-four months of ownership.

IMPACT: More liquidity, more predictability, more transactions

UNIQUE SPECIFICS

TENANT DEFAULT INSURANCE

RIISnet will offer its patented Tenant Default Insurance through a major insurance company on multiple tenanted properties and in conjunction with Tenant In Common transactions. TDI is scheduled to be available beginning in 2009.

Not only will TDI stabilize income streams, it also will ensure that as participants purchase more properties through RIISnet, their ability to attract investors will increase as the percentage of their insured portfolio increases. All eligible properties purchased or sold through the RIISnet MarketPlace™ will acquire the added value component of TDI.

RIISnet will cover payment of rents for the existing eligible tenants present at acquisition. Should a tenant default within 24 months of owner’s purchase, and the landlord seeks appropriate remedy via the terms of the lease, the rent payments of that tenant will be covered for a period of twelve months, or until the space is re-leased by a legitimate credit tenant, whichever comes first. A tenant of questionable credit may not be covered, as the likelihood of default is present at acquisition, and the risk should be offset in the pricing of the property.

RESULTS

Properties purchased or sold through the RIISnet MarketPlace™ and eligible for TDI can generate higher cash-on-cash returns as lending institutions offer more aggressive financing rates due to their lower risk. Public and private equity groups will attract additional investors because a percentage of the income represented by their portfolio will be insured. Demand for RIISnet properties will broaden as investors recognize these investments as exceptionally safe due to their insured income streams.

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