Commercial Mortgage Loans

Credit tenant lease (CTL) financing is a very unique and very specialized type of commercial mortgage lending designed to provide funding for the purchase, refinance and construction of real estate that is triple net leased (NNN) to credit worthy tenants.

Unlike traditional commercial mortgage lending CTL loans are underwritten based upon the financial strength of the tenant and the structure of the lease rather than the underlying value of the property and the credit of the borrower. With CTL loans the lease and the income it guarantees is the primary collateral that backs up the loan.

Because of the straight forward nature of CTL financing these loans offer NNN investors several significant benefits.

• Highest Loan Amounts

CTL lenders generally make no restrictions on loan-to-value and will lend up to 100% LTV. There are also no restrictions on loan-to-cost (100% LTC) for construction loans. The only stipulation is that the rent collected must cover the mortgage payment. (Debt-service-coverage ratios [DSCR] are very low, typically 1.01-1.05) CTL financing offers the very highest possible loan amounts. The amount of potential leverage is unrivaled in the commercial real estate industry today.

• Speed of Execution

CTL lending is a streamlined process that takes much less time than bank loans or other typical commercial mortgages. An average CTL loan can be closed in 60 days or less from-start-to-finish. Loans from Wall Street bankers, Hartford insurance companies and commercial banks are notorious for being drawn-out, bureaucratic affairs that can take 90-200 days to close.

• Non-Recourse

Property owners appreciate the fact that CTL loans are non-recourse mortgages. The lease is the collateral; lenders won’t be coming after borrowers if something goes wrong.

• Long-Term Financing

The term of a CTL loan is usually co-terminus with the term of the lease. Many tenants sign 10, 20 or even 25 year leases. CTL financing is often the last loan an investor will ever need. If they sell the building the new owners can simply assume the CTL loan. If the keep the building they won’t have to worry about refinancing for a very long time.

• Fixed Rate, Self Amortizing

Virtually all CTL loan rates are fixed for the life of the loan. Investors can confidentially plan for the future because they know for certain what their debt service is going to cost. CTL mortgages also self amortize over the loan term, so property owners do not have to worry about coming up with money for balloon payments.

• Construction Financing

Almost all other lenders have significantly curtailed construction and development funding, but CTL capital s still readily available for financing the construction of buildings that will be leased to investment grade tenants.

• Many Tenants Qualify

The US Government is still the ultimate “credit tenant”. Anyone buying or developing a building that will house a government administration office or a federal court house will find it relatively easy to secure a CTL loan. In the private sector several retail firms meet the requirements for CTL financing as-well. The drug store chains Walgreens and CVS are among the most popular as-are the home improvement giants Home Depot and Lowes. Wal-Mart is also a very prominent CTL financing candidate. Virtually any real estate tenant that enjoys an investment grade (BBB- or higher) credit rating from one of the major credit agencies, and rents space on a NNN basis can qualify for CTL lending.