Management Consulting
Aon
Full Credential Description
Forward Funding has become a staple in residential development, particularly in large-scale regeneration projects, where it plays a crucial role in accelerating housing delivery and facilitating faster letting rates during the early stages of regeneration. However, these structures present unique property insurance challenges that can leave investors and banks exposed if not properly addressed. The Realstar Group, having entered into eight residential forward fund agreements over four years, faced the challenge of ensuring that their contracts adequately protected their interests and those of their lenders regarding insurance arrangements. To tackle these issues, the Aon Real Estate team provided tailored advice to Realstar Group, emphasizing the importance of engaging with their insurance broker during contract negotiations. This proactive approach ensured that the contracts included necessary provisions, such as co-insurance on policies arranged by developers and the inclusion of project-specific Delay in Start-Up (DSU) insurance. This insurance is critical as it protects investors from rental payment delays due to insured perils, which must be secured at the project's commencement to avoid complications later. The results of this tailored solution were significant. By ensuring that the insurance requirements were clearly defined and met from the outset, Realstar Group mitigated the risk of financial loss due to insurable events like fires or floods before practical completion. This strategic engagement not only protected their investments but also facilitated smoother future funding arrangements with banks, which often require specific insurance conditions to be met. The proactive measures taken by Realstar Group, guided by Aon's expertise, ultimately enhanced their ability to secure third-party funding and maintain the integrity of their investment throughout the development process.