As a commercial real estate investor, it’s essential to understand the various financing options available to you. One such option is Credit Tenant Lease (CTL) financing. CTL financing is a unique form of commercial real estate financing that is commonly used in net-leased properties. In this article, we’ll explain what CTL financing is and how it can benefit commercial real estate investors.

What is Credit Tenant Lease (CTL) Financing?

CTL financing is a type of commercial real estate financing that is secured by a long-term lease with a high credit quality tenant, such as a national retailer or a government agency. The lease is typically a triple net lease, which means that the tenant is responsible for paying for all operating expenses, including property taxes, insurance, and maintenance.

In a CTL financing transaction, the lender provides a loan to the borrower based on the value of the long-term lease with the tenant. The borrower then uses the loan proceeds to finance the purchase or development of the property. The loan is secured by the long-term lease with the tenant and the property.

Benefits of CTL Financing

There are several benefits of CTL financing for commercial real estate investors. One of the primary benefits is that the financing is typically non-recourse, which means that the borrower is not personally liable for the loan. Instead, the loan is secured by the long-term lease with the tenant and the property.

Another benefit of CTL financing is that the loan terms are typically longer than traditional commercial real estate loans. The loan term can range from 10 to 30 years, depending on the length of the lease with the tenant. This longer loan term can provide greater stability for the borrower and help to reduce the risk of default.

CTL financing can also be an attractive financing option for investors who are looking to purchase or develop properties with high credit quality tenants. Because the financing is secured by the long-term lease with the tenant, lenders are often willing to provide a higher loan-to-value ratio than traditional commercial real estate loans.

Conclusion

CTL financing is a unique form of commercial real estate financing that can be a beneficial option for investors. It offers several benefits, including non-recourse financing, longer loan terms and higher loan-to-value ratios. If you’re interested in learning more about CTL financing or other commercial real estate financing options, contact GILKO CAPITAL. Our team of experts can help you navigate the complex world of commercial real estate financing and find the best financing solution for your needs.