What's Now in Real Estate Finance (April 2025)

Topics from our April agenda included:

Navigating the Shifting Insurance Landscape
Luke Teresi (Atlanta)

The effects of climate change are driving up the frequency and severity of natural disasters, making it increasingly difficult for borrowers to secure insurance that meets construction and permanent lending requirements. Lenders and insurers are responding by tightening standards, scrutinizing appraisals more closely, and evaluating risk on a property-by-property basis—particularly focusing on construction costs and underinsured locations.

A major concern for lenders is now exit risk, where rising premiums or lack of coverage could make it hard to refinance or sell a property in the future. Over the last three years, the US has experienced 73 billion-dollar disasters—double the long-term average—prompting the industry to adopt new strategies. Solutions include more flexible deductibles, long-term resiliency planning, use of master insurance programs, and the exploration of innovative options like parametric insurance and risk-sharing structures.

Mezzanine Loan to Preferred Equity Conversion
(New York)

A lending client with partially negotiated mezzanine loan documents requested guidance on converting the proposed loan structure to a preferred equity investment. Seyfarth's team reviewed and revised the mortgage borrower’s operating agreement and altered it to reflect both the standard preferred equity investment provisions and the rights of a preferred equity investor, as well as the operative provisions from the mezzanine loan documents. We revised and repurposed the standalone mezzanine loan guaranty and negotiated recognition agreements with the mortgage lenders.