Archive for the ‘NNN Investing’ Category

Developers can use credit tenant lease (CTL) finance to fund construction of new NNN leased real estate – This article Outlines 2 Simple Methods

October 18, 2011

Investors and developers of single tenant net leased real estate know the benefits of NNN investing. This unique type of real estate can provide a safe and dependable stream of monthly income for decades to come.

But securing a construction loan for any commercial real estate has been exceedingly difficult over the last four years.

The President of MasterPlan Capital LLC, Glenn Fydenkevez, has written an interesting and informative article outlining two ways CTL loans can be used for ground-up construction financing.

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The two methods are, A CTL loan coupled with a Stand-by Letter of Credit, and a Forward Commitment for a CTL loan. If you develop NNN real estate or are considering undertaking a net leased, single tenant building project, this piece will be worth your time.

READ THE ARTICLE HERE or you may contact us with any questions you may have on CTL or other aspects of commercial real estate finance.

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The Truth About 100% LTV Credit Tenant Lease (CTL) Lending

May 26, 2011

As credit tenant lease bankers we often get questions regarding the possibility of 100% financing for single tenant, triple net (NNN) properties.

Is 100% CTL financing possible?

The answer is yes, it’s possible but…

Like most CTL bankers we place no restrictions on loan-to-value (LTV) nor do we restrict loan-to-cost (LTC) on CTL construction loans. So, in theory, it is possible to secure a 100% leveraged CTL loan.

But please consider the following. While we don’t limit loan balances due to LTV, we do have strict debt-service-coverage ratio (DSCR) criteria. Our firm requires at least a 1x DSCR and we may require as-much-as 1.05x depending on the final deal structure. So the rent you collect must cover the mortgage payment. We will lend up to 100% of the value (lease fee valuation) but we won’t write you a loan with monthly mortgage payments bigger than the monthly rent.

Further, CTL loans are generally self amortizing loans with terms coterminous with the term of the lease. So the shorter the lease term, the shorter the amortization schedule and the lower the loan balance.

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Also, when buying a net lease property investors must keep in mind the fact that the seller has likely already considered the option of refinance before deciding to sell. No one will sell you a NNN or NN building for the same amount they can borrow. In-other-words if you can borrow a million dollars from me to buy a building the current owner can also borrow the same one million in a refi. They won’t go through the hassle and expense of selling unless they can earn a premium.

So, while it is very true that there are no LTV restrictions on CTL loans, new investors should not assume that they can buy quality net leased assets without a fairly significant capital commitment.

Net lease real estate is an excellent form of fixed income investing and CTL is an excellent capital solution for net lease investors but, there are no free lunches in the commercial real estate industry. Those who believe otherwise will inevitability be disappointed. 

The author of this post, Vincent Remealto, is an analyst for MasterPlan Capital LLC. Feel free to contact him with questions about CTL or other aspects of commercial real estate finance.

Why Sell a Single Tenant, NNN Asset When you can get a High Leverage Credit Tenant lease Refinance Loan Instead?

May 6, 2011

An interesting and informative article asks why sell when you can CTL?
When compared to attempting to sell a NNN leased, single tenant building, CTL can be highly favorable and is often the better choice. CTL offers the largest loan balances in the commercial mortgage industry (to 100% LTV), and unlike sales proceeds, there is no tax bill due.
Click Here To Read the article

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

Hanley Investment Group Moves 5 Walgreens Locations for $35MM

May 3, 2011

April was a good month for Hanley Investment Group Real Estate Advisors.

Among other transactions Hanley sold five Walgreens pharmacies for gross proceeds to their clients of over thirty five million dollars.

Retailtraffic.com has the story.

Credit Tenant Lease (CTL) Lending; MasterPlan Capital LLC—

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Credit Tenant Lease Loans – Large ($15b) Fixed Income Fund Seeks CTL Deals – MasterPlan Capital Expands CTL Offerings

May 2, 2011

We are very pleased to announce that, through a strategic partnership, with a large fixed income fund, MasterPlan Capital can now offer “portfolio” CTL lending against stand alone real estate that is triple net (NNN) leased to a single, investment grade tenant.

By originating loans that are to-be underwritten, funded and held by a single, specific fund, we can offer significantly lower effective rates and greatly lower the costs associated with CTL finance.


This portfolio financing represents a welcomed addition to, not a replacement of, our private placement bond CTL platform that funds loans by underwriting and selling bonds to various investors.

The CTL Portfolio Platform has fairly strict criteria and underwriting standards but, for deals that qualify, the financial benefits can be substantial.

With portfolio lending there is no need to create and sell bonds. This lowers the overall cost by eliminating investment banking functions and the commissions paid to bond traders. Further, the Fund has “in-house” counsel which can lower legal fees by many thousands of dollars.

Collateral:
• Retail, Office, Industrial, Warehouse, Distribution Centers
• Stand Alone (separate tax parcel) real estate
• Single Tenant
• NNN, NN or Bondable
• Investment Grade Tenant
• External or NAIC Ratings NOT necessary.
• Located in Population Centers
Minimum:
• $5,000,000.00+ (prefer $15,000,000.00+)
Parameters:
• Debt-service-coverage ratio (DSCR): 1.05X
• Loan-to-value (LTV): Not Restricted (Subject to DSCR)
• Can Provide 100% Financing (subject to DSCR)
Terms:
• Coterminous (through 30 years)
• Self Amortizing
• Fixed Rate
• Non-recourse
Rates:
• Priced Like a Bond rather than a Mortgage
• Based on Interpolated US Treasury + a Very Small Spread.
• Extremely Competitive Resulting in Largest Possible Loan Balances

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For More Information Click Here: Contact Us About Credit Tenant Lease CTL Lending , or for fast, personal service call 1-800-727-5140 x# 101. Leave a meaasge that includes the best way to reach you and the best time to be in touch.

Realty Income to buy Diverse Net Lease Portfolio for $544mm

April 1, 2011

The REIT Realty Income Corp (NYSE:O), is under contract to buy a portfolio of 33 single tenant, NNN leased properties for $544,000.000.00

In keeping with the firms core business discipline, much of the lease income being acquired will come from retailers, however several office, distribution and even manufacturing assets are included in the deal.

The portfolio is diversified across seventeen states and comprises 3.8mm sq/ft of leasable space.

Retail tenants include movie theaters leased to AMC, Cinemark and Regal and pharmacies leased to Walgreens. Tenants leasing office space include T-Mobile, Novus International and Solae. FedEx, International Paper and Caterpillar are among the tenants in the portfolio with leased distribution facilities. Manufacturing plants NNN leased to Coca-Cola and MeadWestvaco are also included in the deal.

There is about $291mm in debt currently encumbering the portfolio. Realty Income will pay off the lion’s share (~$223mm) right after the deal closes the remaining (~$68mm) will be dealt with some time in the future when existing yield maintenance per-payment penalties are more manageable.

The transaction is expected to close late in the first half of this year.

For Information on credit tenant lease (CTL) loans or to apply for CTL or other commercial real estate  financing click here or call Glenn Fydnekevez at 800-727-5140 x 101

Credit Tenant Lease (CTL) Financing for Single Tenant, Triple Net (NNN) Real Estate Investing – The Perfect Capital Solution for a Unique Real Estate Investment

March 30, 2011

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By Glenn Fydenkevez – President, MasterPlan Capital LLC

There are two principle reasons to invest in commercial real estate; current income today, and capital appreciation over time. For real estate investors primarily concerned with income, triple net (NNN) real estate investing has proven to be a very attractive option.

Single Tenant NNN Investing

In the world of commercial real estate the initials “NNN” refer to the fact that a parcel of real estate is leased to a tenant on a “triple net” basis. In-short NNN owners have virtually no landlord responsibilities. They don’t have to plow the driveway when it snows, repair the roof if it leaks or fixed clogged toilets when visitors use too much TP. A NNN property owner’s only responsibility is to collect the rent and pay the mortgage; everything else is falls to the tenant.

Savvy real estate investors and Wall Street Investment bankers understand that owning NNN leased real estate is more closely related to fixed income investing than it is to traditional real estate investing. With this knowledge it’s a short hop to credit tenant lease (CTL) finance.  Through the magic of investment banking, specialized CTL bankers turn NNN leases into bonds and turn those bonds into cash.

Credit Tenant Lease Finance (CTL)

The concept behind CTL is easy to understand even while the actual CTL process is quite intricate. First, mortgage specialists originate a commercial mortgage loan. Next, investment bankers create and issue private placement bonds that are directly secured by the NNN lease on the target property. Finally brokers and bond traders sell the bonds to institutional fixed income investors like insurance companies, commercial banks, trusts, and pension funds. The proceeds from the bond sale are used to fund the mortgage and go to the borrower at closing. The entire loan is administered by an independent trustee throughout the life of the deal.

The investors who buy CTL bonds depend on the income the bonds produce, and the bonds, in turn, depend on the income guaranteed by the NNN lease that stands behind it. It follows that the financial strength of the tenant is paramount. To qualify for CTL financing the tenant must be considered “investment grade”. Usually this means that they need a high credit rating from one of the major rating agencies. CTL finance companies generally require tenants to have a BBB- (or higher) rating from Standard & Poors or a Ba1 (or better) from Moody’s before they will underwrite a CTL loan.

CTL finance and NNN investing work together like they were made for each other because in-fact they were. CTL is not the only way to finance single tenant, NNN real estate but it is definitely the most synergetic.

High Leverage

CTL bankers make no restrictions on loan-to-value (LTV) or loan-to-cost (LTC) when deciding how much money they will lend against a particular lease. 100% financing and even cash out financing is realistically possible when buying, building or refinancing with CTL. Bankers only require that the rent collected covers the mortgage payment. Debt-service-coverage (DSCR) ratios are exceedingly low, ranging from 1.05x right down to 1x. There is no question that CTL offers the highest loan balances in the commercial mortgage industry. (high LTV / LTC, and cash-out refi are almost unheard of in the realm of institutional financing in today’s credit environment).

Fixed Rate, Long Term, Fully Amortized

The majority of CTL loans are fixed rate, self amortizing loans with a term “coterminous” with the term of the lease (The loan is paid off when the lease expires). Long term, fixed rate mortgages, while commonplace in residential finance, are rare indeed in the commercial property sector. Long, stable loans allow sponsors to budget for the long haul. Mortgage payments don’t change and there are no looming balloon payments to plan for. Plus investors avoid the expense and hassle of refinancing every 3, 5,7 or 10 years.

Non-Recourse

The primary security that backs a CTL loan is the monthly income that the NNN lease produces. CTL bankers will not require borrowers to personally signature guarantee each loan, nor will they aggressively pursue the borrower if the tenant defaults. CTL lending is based on the strength of the tenant and the structure of the lease, not the wherewithal of the landlord.  

Assumable

Virtually all CTL loans are assumable by a subsequent buyer for a small (usually 1%) fee. So, not only will an original owner never be forced to refinance but, if they decide to sell, they can offer their buyer the benefits of a CTL loan for less then the cost of a new mortgage.

Streamlined Process

We’ve said that CTL lending is highly specialized and intricate, and it is, but it is also standardized. If a deal meets CTL criteria, the funding can happen very quickly and very efficiently. CTL loans have been known to close, from-start-to-finish, in as little as 45 days and it is rare for a loan to take more than 60 days to underwrite, fund and close. NNN investors can go from decision to closing table in about a third of the time it takes to close a bank loan.

Income and Tax Planning

Income is the main reason individuals and institutions buy single tenant, NNN, credit tenant real estate, but it is by no means the sole reason. Sophisticated real estate professionals acquire NNN assets for other reasons as-well. Savvy investors use NNN to take advantage of the unique tax benefits that real estate can provide. By adjusting the amount of leverage they use they can manipulate the amount of cash-flow a building produces and make the income and deprecation tax laws work for rather than against them. NNN is also often used as a vehicle for 1031 exchanges when investor’s desire continued income without having to manage a property or pay large capital gains taxes on a recent sale.

Construction and Development

Builders and developers like NNN real estate as-well, because they know they can stick to construction of a building without ever worrying about managing it. And with CTL financing readily available, they have the confidence that comes with knowing they can cash-out whenever they want.

Cash-out Refinance

One of the most attractive aspects of CTL finance is that it allows credit tenant property owners to execute cash-out refinance loans. As we mentioned above there are no LTV restrictions on CTL loans. If an investor bought right and has equity in a NNN asset, they can pull out up-to 100% of its value. Refinancing with a self amortizing CTL loan avoids all the fuss, bother, expense and time associated with selling, yet still allows owners to realize full value.

A Great Fit

For the sophisticated, income orientated real estate investor there is no better asset class than single tenant, investment grade, NNN real property. And for NNN investors there is no method of financing better suited to NNN than CTL.  

About the Author: Glenn Fydenkevez is President of MasterPlan Capital LLC. He has over 20 years Wall Street experience and has been an officer at one of the worlds largest investment banks. About MasterPlan Capital LLC: MasterPlan Capital is a privately held commercial mortgage lender and real estate investment banking firm offering private and institutionally funded commercial mortgage loans, credit tenant lease (CTL) financing and other services to property owners and developers in the lower 48 states.

To get answers to your questions about CTL lending or other aspects of commercial real estate finance, call MasterPlan Capital at:                                                    1-800-727-5140 xtn 101

Walgreens Beats Profit Estimates – Shares Rally

December 23, 2010

Via Proactiveinvestors :

Despite an inventory write-down and restructuring costs, Walgreen’s (NYSE:WAG) first quarter beat analyst estimates as gross margins increased. 

First quarter profit for the drug store chain increased nearly 19% year-over-year to $580 million, or 62 cents per diluted share. Restructuring costs related to the company’s affected its bottom line by about 3 cents per diluted share. 

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For the quarter ended November 30, total sales increased 6% year-over-year to $17.3 billion while same store sales edged up by 0.8%.  Prescription sales, which makes up about 66% of sales for the quarter, climbed 5.3% overall and 0.9% at stores opened for at least a year.  

The results trumped analyst estimates of a profit of 54 cents on revenues of $17.30 billion. 

“Our performance was driven by our continued focus on gross profit margins, cost control and the strategic slowing of our new store openings. As a result of improved merchandising, including promotions and pricing, we saw significant increases in gross profit margins in the front end, “said Greg Wasson, CEO of Walgreens.

Gross margins increased 80 basis points compared to the year-ago period to 28.5%.

During the quarter, Walgreens provided about 5.6 million flu shots, making it the largest flu shot provider in the U.S. beside the federal government.  But the number was less than expected, prompting the firm to take a 2 cents per diluted share inventory write-down.

During the quarter, the company opened or acquired about 121 new drugstores. 

Looking ahead, the company cautioned that “persistent high unemployment makes this a challenging retail environment during the holiday season”.  Christmas sales and the flu season are often key drivers for the company’s second quarter results.

As of 12:58 pm EST, the company’s shares have rallied 7% to trade at $39.49.

Credit Tenant Lease (CTL) Lending is Alive and Well

November 18, 2010

Why Credit Tenant Lease (CTL) Loans Are Closing While Other Financing Is Stalled
By Vincent Remealto, MasterPlan Capital LLC

In today’s volatile commercial real estate lending environment, people want to know what’s working and what’s not.

While there is an ongoing liquidity crisis for land loans and most development projects, we are seeing some loosening in funding for income producing commercial buildings with cash flow that covers the debt service. In particular, one bright spot has been credit tenant lease financing or CTL lending.

CTL loans are a unique kind of commercial mortgage that is designed to finance commercial real estate that is triple net leased (NNN) on a long-term basis to an investment grade tenant. CTL financing is a highly specialized type of commercial real estate investment banking and is generally not offered by typical banks or brokers.

The CTL segment of the real estate finance industry is relatively healthy compared to traditional commercial mortgage lending. In-fact, once CTL term sheet is drawn up and agreed, to it is exceedingly rare that a banker fails to fund the loan and close the deal.

There are several important reasons that CTL loans are closing at a brisk pace while other loans are being rejected or never reaching the closing table.

Unlike standard commercial mortgages, CTL loans are non-recourse loans that are primarily backed by the terms of the lease and the strength of the tenant rather than the financial wherewithal of the borrower and the intrinsic value of the real estate. In-short, if the lease and the tenant pass muster, the loan will close.

CTL loans can be originated with up-to a 100% loan-to-value (LTV) ratio that is subject to a very small debt-service-coverage ratio of about 1.01. These relaxed ratios make it easier for cash strapped investors to come up with the cash necessary to get a deal done.

Also, CTL loans are funded by the investment bank issuing and selling corporate bonds in the private placement market. The investment grade bond market has remained remarkably strong throughout this recession and funding loans in this manner is much easier than trying to pry money away from a bank or an insurance company.

Because CTL loans are only written against buildings NNN leased to strong tenants, it is much easier to get purchase, refinance and even construction & development loans funded and closed. All that is necessary is an investment grade tenant, such-as Walgreens, Wal-Mart, Target, or the US Government and a triple net lease that spans at-least 10 years.

This debt crisis and the corresponding recession have been painful for everyone especially for real estate investors in-need of dependable financing. The pain continues in many sectors but credit tenant lease financing remains strong and reliable.

The author Vincent Remealto, is an analyst for MasterPlan Capital LLC.  About MasterPlan Capital: MasterPlan Capital LLC is a dynamic, privately held commercial real estate investment banking firm offering commercial mortgage loans, credit tenant lease (CTL) financing and other services to commercial real estate investors in the lower 48 states. Clients can apply for a commercial mortgage online. All inquires will receive prompt, professional service.

Walgreens Credit Tenant Lease (CTL) Lending Back-on-Track

May 5, 2010

Late last year I reported that credit tenant lease financing for Walgreens stores was becoming increasingly hard to find. The shortage was not because Walgreens was not credit worthy nor was it due to the credit crunch that has gripped the banking industry for the last 20 months. Walgreens CTL loans were unavailable due to their extreme popularity and incredible demand.

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CTL loans are funded by investment bankers who issue private placement mortgage backed bonds and sell them to fixed income investors. The investors, mostly insurance companies, endowments and retirement funds, had purchased so many Walgreens bonds that they were full to capacity and could not take on anymore Walgreens debt. At the time I described Walgreens as a “victim of its own success”.

Well I’m happy to report that, for now, CTL lenders are once again lending against new and existing Walgreens stores as-well-as Walgreens development projects.

Followers of WAG know that the drug store chain has drastically curtailed their expansion plans. This slowdown in new store openings has in-turn, reduced the demand for new Walgreens mortgage bonds and has helped alleviate the CTL logjam that was preventing banks from underwriting WAG deals.

The stock market recovery has also contributed to the new-found liquidity in Walgreens mortgage debt. As the market grows so-to does the portfolios of the investors who buy WAG paper. The corresponding increase in the value of their portfolios has mitigated the problem of being overweight WAG bonds allowing them back into the market.

Also Walgreens bond buyers have raised their interest rate requirements slightly to account for the additional risk to their funds. This small risk premium is not due to a credit problem with Walgreens, but is derived from the disproportionately large Walgreens positions they hold.

So the combination of the slowdown in the Walgreens expansion, the rising stock market and a modest interest rate hike, have made Walgreens CTL lending possible again. This is truly good news for commercial real estate investors and bankers alike, but I’d recommend that those looking to finance a Walgreens purchase, refinance or construction project strike while the iron is hot. CTL financing is dependable, long-term, high leverage, non-recourse financing, but, as we saw during the last quarter of last year, Walgreens CTL loans can be discontinued without notice.

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Commercial Mortgage Lender; MasterPlan Capital LLC – Commercial Mortgage Loans from $1mm+, CTL loans against NNN leased properties from $3mm+. Apply for a commercial mortgage online.