CTL / Credit Tenant Lease Loans – Here are the 6 Things Needed to Qualify

Credit tenant lease (CTL) financing is a highly specialized form of investment banking designed specifically to fund the purchase, refinance or development of single tenant, triple net (NNN) leased real estate. CTL is a unique lending platform where the buildings lease rather than the real estate itself is the primary collateral backing the loan.

Specialty Investment banking firms originate a commercial mortgage loan then issue private placement bonds that are directly secured by the income that the lease guarantees. The bonds are sold to institutional fixed income investors and the proceeds are used to fund the mortgage. The transaction is administered by a third party trustee throughout the life of the loan.

A CTL loan is often the perfect capital solution for savvy NNN real estate investors who are building, buying or pulling equity out of single tenant real estate holdings. CTL is very desirable, long-term, high leverage, fixed rate, non-recourse financing. But not every deal qualifies for CTL. Here are 5 key factors that must be present in-order for a deal to qualify for CTL:

• Stand Alone Real Estate

The real estate must be separate and distinct (from a legal standpoint) from its surroundings. Detached single purpose structures work best but any real property that is classified as a separate tax parcel should qualify. So a drug store inside a mall won’t work while that same drug store next to, or even attached to a mall might.

• Single Tenant

The building (or land, in-the-case-of a ground lease) must be leased to a single tenant who is alone responsible for paying the rent each month.

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• Investment Grade Tenant (BBB- / Ba1 or better)

The bonds that fund CTL loans are sold to institutional investors. Many of them are highly regulated entities such as insurance companies, pension funds, commercial banks or trusts; they have strict investment guidelines that they must adhere to. To qualify for CTL a buildings tenant must be credit worthy or “investment grade”. Generally, to be considered for CTL financing the tenant must have a credit rating of BBB- or higher by Standard & Poors or Ba1 by Moody’s.

• Triple Net (NNN) Lease

The property needs to be leased on a triple net (NNN) basis. Although some double net (NN) deals might qualify, NNN is optimum. In-short, there can be no significant landlord responsibilities included in a lease if it is expected to qualify for CTL financing.

• Long-Term Lease (10+ years)

CTL loans are fully amortizing loans with terms that are “coterminous” with the lease. Short leases would mean rapid amortization which would mean mortgage payments too big to make sense. Realistically, there has to be a least 10 years left on a lease to make a CTL loan plausible.

• Large Loans ($3MM+)

Over the long run CTL lending can be much less expensive than conventional borrowing because sponsors don’t have to refinance every 3, 5, 7 or 10 years or come up with large balloon payments every time a loan term expires. However, the initial expenses involved in closing a CTL loan do tend to be a bit higher. For this reason CTL lending is suitable for large loans and doesn’t work well for small balance lending. Our firm, for example, will not consider CTL for anything less than $3,000,000.00. That-being-said; because there are no restrictions on loan-to-value (LTV) CTL bankers can offer loans up-to 100% of value, so larger loans on big deals or large portfolios of NNN real estate, are not necessarily out of reach and are, in-fact, attainable for many real estate investors.

If a single tenant NNN real estate transaction meets these criteria a CTL loan can fund and close in as little as 45 days (60 days is typical). If the transaction fits, CTL is a fast and efficient capital solution for buyers, owners and builders alike.

— For more information on CTL lending or to apply for a credit tenant lease loan, please visit MasterPlan Capital LLC online ( Click here: Commercial Mortgage Lender )or call us at 1-800-727-5140 —

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3 Responses to “CTL / Credit Tenant Lease Loans – Here are the 6 Things Needed to Qualify”

  1. K Rogers Says:

    100% CTL Financing. In todays market, is this still viable today ?? I have a few government Triple N Leases that I would like to secure.
    If indeed this capability exist now, please touch basis as I take it the above listed criteria is applicable today as of April 4, 2011.
    Look forward to an email response at your earliest convenience. Thanks
    K Rogers

  2. Payal Gandhi Says:

    can u name a few drugstores that qualify for a CTL financing?

    • MasterPlan Capital LLC Says:

      Walgreens and CVS both qualify but we are in the market for Walgreens leases. We are not looking for CVS at this time. – MPC

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