The Credit Tenant Lease Lending Process Explained by an Expert

Credit Tenant Lease (CTL) Lending – An Expert Explains the Process

Credit Tenant Lease (CTL) Lending – An Expert Explains the Process
By Vincent Remealto

Credit tenant lease (CTL) financing is a unique and highly specialized type of lending designed to fund the purchase, refinance or construction of real estate that is triple net leased (NNN) to a single investment grade tenant.

The CTL process is quite different from traditional commercial mortgage lending. The lease rather than the real estate itself is the primary collateral that backs the loan and the lending process is in reality an investment banking transaction.

Qualifying the Tenant

The fist step in the CTL process is to determine whether or not a given tenant will qualify. The company that backs the lease is required to be “investment grade”. This simply means that they need a good credit rating by one of the major rating agencies. For example any company rated BBB+ or higher by Standard & Poors should be eligible. The drug store chain Walgreen’s is an example of a typical credit tenant, Walmart and Home depot also credit worthy firms that are big in the NNN space.

Analyzing the Lease

Next the banker will want to do a comprehensive analysis of the lease. They must understand the exact extent of the landlord’s responsibilities (if any) and calculate the value of the building based on the income it will generate. They will also check to make sure the length of the lease period conforms to their CTL criteria. They will scour the document for any provisions or clauses that might undermine their ability to perfect a security interest in the property.

Executing an Application

Only after the tenant and the lease pass muster will the borrower formally apply for a CTL mortgage. The application details the loan amount, the interest rate, the term of the loan and makes a good faith effort at estimating loan expenses. If everything is in order the borrower signs the application and places a deposit with the bank.

Underwriting the Loan

After the application and deposit are received the banker will begin underwriting the loan. Third party reports such as appraisals, environmental reports and title work are ordered and the numbers are crunched. The borrower’s finances are also scrutinized during underwriting. CTL loans are non-recourse but the bank will verify that the sponsor has the financial wherewithal to get the deal done.

Issuing a Private Placement Mortgage Bond to Fund the Loan

The investment bank will issue a new private placement mortgage backed bond and link it to the target property. They fund the loan by selling the bond to fixed income investors.

Issuing the Loan Commitment

Once the mortgage bond is sold the loan is fully funded and the banker will issue a formal and binding loan commitment. Exact and final terms will be spelled out and locked in. The borrower will be asked to accept or decline the loan.


If the commitment is signed by the borrower, the closing and dispersing of the funds can happen as fast as lawyers can draw up documents and schedule a closing date. All the paperwork is reviewed and signed, the mortgage is recorded and the deal is wrapped up.

CTL loans can be completed from-start-to-finish in as little as 45 days, but 60 days is the typical time frame.

MasterPlan Capital LLCCommercial Mortgage Loans – Private and Institutionally Funded – CTL Loans From $3mm – Equity Financing – Asset Management – Simple, 1 Page Commercial Mortgage Application Online – Prompt, Professional Service – The author, Vincent Remealto, is a commercial real estate valuation and underwriting analyst for MasterPlan Capital.

Article Source:—An-Expert-Explains-the-Process&id=4466680


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2 Responses to “The Credit Tenant Lease Lending Process Explained by an Expert”

  1. Scott Underberg Says:

    My name is Scott Underberg, and I am a real estate investor/agent from North Central Iowa. I am very interested in purchasing property to lease to the federal government. I have taken the first couple of steps into contracting. I have been studying like mad figuring out the intricacies of the process. I have not ever ran across anything, however, that says that I can or cannot have a property under contract to purchase and lease it to the government. It seems to me that under the CTL style of financing and the terms of leasing property to the fed I would have plenty of time to purchase a property under the contingency of landing the government lease. I have not attempted this yet. I would like to know if your firm would be willing to provide a type of pre-approval letter for the purchase contract bound by the terms of that lease to qualify.
    In closing, I would enjoy doing business with your firm. You have a very impressive history of success. Maybe we will have success in the future together!! Thank you very much for your time and consideration.


    • MasterPlan Capital LLC Says:

      You can not market a building (for sale or lease) until you control it, that-is-to-say you must have an equity interest in the building before you attempt to lease it up.

      No CTL lender can give even a conditional approval on a building based on the fact that you will try to lease it to the government. We underwrite the lease so it follows that the lease must exist before we can approve the loan.

      Your heart is in the right place but you are trying to reinvent the NNN investing process. Either buy a building that is already leased to a credit tenant or win a contract to build a pre-leased building. Otherwise you are just going to waste your time and lose your good faith deposits.

      You can visit our web site ( ) and click on “Contact Us” at the top of the page if you have questions.

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