Long-Term Credit Tenant Loan Program
CapLease pioneered the development of long-term self-amortizing financing for non-bond net-lease properties in 1994. Our net-lease team is considered expert at structuring long-term financings that meet borrower requirements.
The Long-Term CTL Loan Program enables a borrower to receive the highest loan proceeds that a property's rent payments can support. The fixed rent payments defined in the lease generally amortize the majority of the loan balance during the term of the lease (usually 20 years).
What determines a single-tenant lease property's qualification for a long-term credit tenant loan?
CapLease will underwrite a long-term credit tenant loan if the property has a:
- Credit tenant. The tenant should be rated BBB- (S&P) or Baa3 (Moody's) or better. Certain tenants rated BB (S&P) of Ba3 (Moody's) may also qualify for financing. If the tenant is unrated, CapLease will determine if the tenant has an acceptable implied credit rating.
- Long-term lease. Typically a long-term net lease will have at least 12 years remaining on the initial lease term.
- Net Lease. NN, NNN, or bond leases are acceptable, provided they do not contain unusual rent abatement or lease termination or assignment provisions.
- Separate tax lot. Each CTL property must be legally separated from any adjacent property by a subdivision or condominium declaration.
Patented 10-Year CTL Loan Program Expands Borrower Financing Options
This unique, patented program was developed to provide the benefits of long-term CTL financing for borrows who prefer a shorter loan term and for properties that do not meet the criteria for our long-term mortgage product, for example, because of a shorter lease term or a lower rated tenant. For more information on the 10-Year CTL Loan Program, contact the investment manager responsible for your geographic region at (212) 217-6300.
CapLease is a principal portfolio lender.
CapLease is a portfolio lender that holds loans on its balance sheet for the long term. As such, CapLease quotes loans on a "principal" basis: Upon satisfactory completion of due diligence, CapLease is committed to funding the loan at the agreed-upon price and terms. Once a loan is made, CapLease retains the loan in its portfolio and borrowers know who to contact if an issue arises.
A net lease, as contrasted with a real estate operating lease, is one in which the tenant is required to pay all or substantially all of the expenses normally associated with the ownership of the property (such as utilities, taxes, insurance, and routine maintenance) during the lease term. In effect, the tenant occupying the leased property (usually as a single tenant) acts in much the same manner as the owner of the property. Accordingly, the owner receives rent "net" of these expenses, and the cash flow associated with the lease is predictable for the term of the lease.
Under a net lease, the tenant usually agrees to lease a property for a long term (typically 10 to 25 years). The tenant's ability to terminate the lease or abate rent due to real-estate driven events, such as a casualty or failure by the landlord to fulfill its obligation under the lease, is significantly, or completely, restricted. By contrast, a typical real-estate operating lease requires the landlord to perform all maintenance and pay taxes and insurance. If the landlord does not, the tenant has the right to withhold rent or cancel the lease.
Tenant is wholly responsible for all aspects of the property and the operation thereof during the lease term, including liability for casualty and/or condemnation events. All base rent is payable by Tenant without any right of abatement or offset under any circumstance. Tenant indemnifies Landlord against all liabilities arising from Tenant's use or occupancy of the property.
In the event of a casualty and/or condemnation event, the Tenant must purchase the property for at least the then-unpaid principal balance of the loan, plus accrued interest and loan prepayment penalties. Lease enhancement policies are not required with respect to a bond lease.
Similar to a bond lease, except the Tenant may have the right to terminate the lease or abate rent due to an event of casualty to, or condemnation of, a portion or all of the property. Lease enhancement policies, arranged by CapLease at the borrower's expense, are required in such instances to insure over the risk of rent abatement or lease termination.
Similar to a NNN lease, except the Landlord will have certain limited ongoing obligations with respect to the property. The failure to perform these defined obligations could result in the Tenant having the right to abate rent or terminate the lease. Typically, such obligations include maintenance, repair, and replacement obligations for the roof, structure, and parking. Under a double net lease, additional debt service coverage and maintenance and repair reserves are required. Additionally, lease enhancement policies are required to insure over the casualty and/or condemnation risk(s). |
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