S.B. No. 1008
AN ACT
relating to the authority of certain domestic life, health, and
accident insurance companies to make investments in mezzanine real
estate loans.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter C, Chapter 425, Insurance Code, is
amended by adding Section 425.1185 to read as follows:
Sec. 425.1185. AUTHORIZED INVESTMENTS: MEZZANINE REAL
ESTATE LOANS. (a) In this section, "mezzanine real estate loan"
means a loan that is secured by a pledge of direct or indirect
equity interests in an entity that owns real estate.
(b) Subject to Subsections (c) and (d), an insurance company
with more than $10 billion in admitted assets may invest in a
mezzanine real estate loan if the loan documents:
(1) require that each pledgor abstain from granting an
additional security interest in the equity interest pledged;
(2) employ techniques to minimize the likelihood or
impact of a bankruptcy filing by the real estate owner or the
mezzanine real estate loan borrower; and
(3) require the real estate owner or the mezzanine
real estate loan borrower to:
(A) hold no assets other than, in the case of the
owner, the real estate, and in the case of the borrower, the equity
interests in the entity;
(B) not engage in any business other than, in the
case of the owner, the ownership and operation of the real estate,
and in the case of the borrower, holding an ownership interest in
the owner; and
(C) not incur additional debt, other than limited
trade payables, a first mortgage loan, or the mezzanine real estate
loan.
(c) Before making an initial investment in a mezzanine real
estate loan, an insurance company shall corroborate that the sum of
the first mortgage on the real estate and the mezzanine real estate
loan does not exceed 100 percent of the value of the current
appraised value of the real estate.
(d) An insurance company's cumulative investment under this
section may not exceed three percent of the insurance company's
admitted assets.
SECTION 2. Section 425.1185, Insurance Code, as added by
this Act, applies only to an investment made on or after the
effective date of this Act. An investment made before the effective
date of this Act is governed by the law as it existed immediately
before that date, and that law is continued in effect for that
purpose.
SECTION 3. This Act takes effect September 1, 2015.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1008 passed the Senate on
April 30, 2015, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1008 passed the House on
May 19, 2015, by the following vote: Yeas 146, Nays 0, two
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor