§27-41-30. Particular investments - Loans, notes, etc., secured by mortgages and leases on real property.

An insurer may invest in loans, notes, bonds, or other evidences of indebtedness of any person up to the fair value of real property securing said indebtedness, upon compliance with the following conditions and provisions:

(1) The indebtedness must be secured by a first mortgage lien on real property having a fair value of not less than the principal amount of the loan, except as provided in subdivision (8) of this section;

(2) The indebtedness must be additionally secured by a lease on said real property, which lease must be assigned and transferred by the lessor to the lender or to a trustee of the lender under a trust instrument;

(3) The lease so assigned as additional security must be noncancellable and may be terminated only upon such conditions as are generally provided in commercial leases, such as, for example, destruction by fire, tornado, or similar hazard or condemnation or taking by power of eminent domain;

(4) Rental payments under such lease must be payable monthly, quarterly, or semi-annually and the aggregate rental payments required to be paid during the initial term of any such lease must be sufficient to pay the fixed charges against the leased property, including expenses of maintenance, upkeep and repair, insurance charges and taxes, and to pay the installments of principal and interest and any other payments required by the instrument evidencing the indebtedness;

(5) The lease additionally securing such indebtedness shall be a so-called "net lease," except as otherwise provided in subdivision (8) of this section. "Net lease" shall mean a lease under the terms of which the lessee is required to pay, in addition to the rental payments, all other charges for the maintenance, upkeep and repair of the leased property and all taxes, insurance, and other charges provided under the terms of the lease;

(6) The indebtedness must be payable in full, both as to principal and interest, during the initial term of the lease assigned or transferred as additional security. The required payments of principal and interest on such indebtedness must be made in substantially equal periodic installments in an aggregate amount sufficient to retire or pay the loan in full upon or prior to the expiration of the initial term of such lease; except, that if the substantially equal periodic installments are at a rate sufficient to retire or pay the loan in full as amortized over the initial term of the lease, balloon payments may be permitted to pay the remaining balance due on the indebtedness if, by the terms of the instruments evidencing the same, the entire indebtedness matures prior to the expiration of the initial term of the lease. In addition to the required payments of principal and interest, the evidences of indebtedness may also provide for payment of additional moneys to the holder thereof based upon excess rentals, volume of sales or other events or factors which the parties may agree upon;

(7) The lessee, or any obligor under any such lease, must be a person, corporation or other legal entity or government agency, unit or subdivision whose obligations, at the time the lender commits in writing to make a loan, are or would be an eligible investment under this chapter and are or would be amortizable under the rules and regulations promulgated by the commissioner (ordinarily the same as promulgated by the National Association of Insurance Commissioners); and

(8) If the lease additionally securing such indebtedness is not a "net lease," then, and in such event, the indebtedness shall not exceed 90 percent of the fair value of the real property mortgaged to secure the payment of such indebtedness.

Where the words "lease," "lessor," or "lessee" appear in this section, the singular shall include the plural.

(Acts 1977, No. 408, p. 530, §30.)