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.
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.
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.
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.
CTL loans are one of the very best ways to finance NNN leased real estate. In this era of tight credit and nervous lenders, property owners, investors and developers with top quality tenants have a funding source they can depend on.
I’m often asked how fast a Credit Tenant Lease (CTL) loan can close. CTL financing is a streamlined method of lending against real estate that is triple net (NNN) leased on a long term basis to an investment grade tenant such as Walgreens, Home Depot or Wal-Mart. Because CTL loans are non-recourse loans, bankers don’t have to spend as much time looking into the credit of the borrower. With CTL it is the lease that is the primary collateral that backs the loan. Most CTL loans can be completed, from-start-to-finish, in about 60 days.
I have constructed a time-line below that should help NNN investors understand the steps involved in CTL lending and how long each step typically takes.
Initial Quote: 1-3 Days
Based on some basic information that you supply to the banker, they provide a preliminary financing quote. This quote will estimate the maximum loan amount they are willing to offer, give you an idea of current rates and review some of the major fees and expenses you can expect to incur.
Term Sheet / Application: 3-5 Days
If you decide to proceed with the CTL process the investment bank will analyze the lease(s) and gather some information about you. Usually within 5 business days they should be able to issue you a highly detailed term sheet that will act as your formal application. This is a very important document that should be read carefully; it outlines the rights and responsibilities of each party to the loan and will form the bases of your particular CTL mortgage.
Rate Lock: 1-3 Days
The bank will go into the market and lock in your particular interest rate. Because CTL is long-term, high leverage financing this usually involves them hedging their interest rate risk. Your rate will be guaranteed and fixed for the life of your loan.
Underwriting: 35-45 Days
Third party reports such as appraisals and environmental surveys will be ordered and analyzed as they come in. The lease will be verified, title work will be done and numbers will be crunched. Meanwhile the deal will be funded by issuing and selling a private placement mortgage backed bond to fixed income investors. This is the most time consuming aspect of CTL lending (and all commercial mortgage lending for-that-matter), but can usually be accomplished in about a month.
You never know what lies ahead in terms of life. Life has a funny way of shaking things up from time to time. It’s difficult to imagine a day when finances are problematic. Whether it’s a medical emergency, a late mortgage payment, or a credit card bill that has gone awry. There are a great deal of different things that can go awry, and being prepared is the most important thing you can do. If you aren’t prepared, life can sneak up and change your perspective forever. If you’re not sure what to do when the chips are down, consider getting cash depot loans, but before you sign anything, remember the following 3 things.
Read The Fine Print – Every lender is going to have a long list of writing that is often referred to as the “fine print” this set of rules and regulations are vastly important to anyone that is going to seek out what to do next in terms of seeking out finances. If you aren’t careful, you could end up signing away your rights in regards to a variety of different things, so don’t just sign away, consider the cost, interest rates, and payment methods that are required to get you back on track. Do not be fooled, read all the fine print and make sure you’re always moving ahead.
Paperwork – Make sure that you have all your paperwork ready and in hand when you’re moving to get any sort of loan. Two forms of identification are often asked, but in a crunch one form of Government Issue i.d. can suffice. Also, make sure you have proof of income so that you can end up with a fair amount based on your next paycheck. Never forget to have proper paperwork ready so that the process moves without hurdles.
Repayment – One thing that some people forget to remember is that these loans are short term and require payment within a short amount of time. This is not like a mortgage or student loan, the repayment options are limited and require high rate of interest. Interest on these loans can be quite high, but remember the piece of mind that you will garner as a result. If you remember nothing else from the above tips, remember that you have to repay the loan within a short span of time, and the interest is quite high. This is not to discourage, it’s so that you’re making a proper decision.
Cash depot loans are available for anyone that is in a financial bind. If you’re dealing with the curves that life can give you, you need to look into this lending option. The money will be given to you in less than 48 hours, and you can pay your bills, stay current and proceed with your life. Not only can you get peace of mind, you will also rebuild your credit slowly but surely. You won’t regret the decision to get a loan; it’s just a matter of remembering the aforementioned tips.
If your car insurance is due for renewal and you are considering buying another policy then this article will provide you with important facts that you should know about. Car insurance policies are getting increasingly expensive and you should do all that you can to reduce your costs. How much you have to pay for your car insurance is dictated by a variety of factors as they apply to you and your vehicle.
In this article we will examine coverage limits, your age, gender and marital status, your location and insuring other household members. All of these factors will have a great influence on how much you will have to pay for your policy.
Coverage limits are generally dictated by the price that you are willing to pay for your insurance. A higher level of coverage will generally result in higher premiums. The best way to find a good value policy is to comparison shop. Nowadays it is generally accepted that the best way to do this is by using a car insurance comparison website.
Your age, gender and marital status will have a great effect on the auto insurance rates that you are offered. Insurers rate drivers using a variety of criteria, if you are a young single male driver you will usually have to pay higher rates. If you are a middle-aged female married driver then your rates will be lower. Insurers calculate the best car insurance rates for you by comparing levels of risk. Those groups which are statistically more likely to be involved in an accident have to pay correspondingly higher rates.
Location plays an important part in deciding how much your premiums will cost. Drivers who live in an urban environment will usually pay more than those from a rural area. This is because drivers who live in cities and heavily populated areas are more likely to be involved in an accident, or to have their car stolen or vandalized. Insurers generally offer better rates if you’re able to demonstrate that you keep your vehicle in a garage at night. You may also be able to improve the security arrangements of your automobile by fitting an alarm, immobilizer and steering wheel lock.
Insuring other household members will have an influence on the cost of your policy and the best car insurance rates that you offered. If you have teenage family members living with you and they are added to your policy, then your costs will increase. This may still work out cheaper than if your teenage driver were to have a separate policy in their own name.
In conclusion, there are a variety of different factors which can affect your ability to be offered the best insurance rates. Some of these are coverage limits, how old you are, whether you are male or female and whether you are married or single. Your rates will also be affected by the area where you live and whether other household members are included in your policy.