Are Credit Tenant Lease (CTL) Loans More Expensive Then Traditional Commercial Mortgages? A CTL Investment Banker Explains.

Savvy income orientated real estate investors have long known the benefits of single tenant, triple net (NNN), credit tenant investing. NNN investors enjoy the high monthly income and potential tax benefits that come with owning commercial real estate without having to deal with any of the hassles of being a landlord.

Credit tenant lease (CTL) finance is a specialized form of lending designed to work hand-in-glove with NNN real estate. CTL is not, however, inexpensive capital. Because CTL lending is actually a sophisticated form of investment banking the process tends to be a little more costly then traditional methods of commercial mortgage lending.

The process is fairly straight-forward. First, investment bankers issue private placement bonds that correspond with and are secured by the income that a NNN lease produces. Next, the bonds are sold to fixed income investors, such as insurance companies, pension funds, and regional banks. Finally, the proceeds of the bond sale are used to fund the CTL loan to the buyer (or owner) of the NNN real estate. The loan and the bond are serviced by a third party Trustee throughout the life of the deal.

The large majority of CTL expenses are exactly the same as the expenses in conventional commercial mortgage lending. The added costs (as-compared-to conventional lending) are due to the fact that the Investment Bankers, the Bond Brokers and the Trustee all need to be compensated for their services. In addition, the intricate and somewhat complex nature of CTL finance translates into higher legal and documentation fees as-well.

Click Here / Apply for A CTL Loan or call 800-727-5140 x 101

Developers, owners and buyers of NNN properties have been willing to pay the extra costs associated with CTL lending because it has proven to be a highly dependable source of capital; if the tenant is credit worthy and the lease is long term NNN, funding is almost assured. And, beyond the efficiency and dependability of CTL loans, they are also attractive because of the high leverage that is possible with CTL. Bankers put no restrictions on loan-to-value (LTV) ratios or loan-to-cost (LTC) ratios. Unlike other commercial mortgage bankers, CTL lenders will lend up-to 100% of a given property’s value as long as the rent collected covers the mortgage payment.

In-short, CTL is reliable, long-term, fixed rate, high leverage, non-recourse financing that offers the highest loan balances in the commercial real estate industry. Those attributes are well worth paying a little more for.

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