A credit tenant loan (CTL) is a real estate loan that is secured by the obligation of a single investment grade company to pay debt service by means of rental payments under a high quality lease or through a recourse loan obligation.
Requirements for a credit tenant loan include investment grade tenant, fully amortizing preferred, or up to 35% of the loan balloon, and bond, absolute net, or double net lease. Typical attributes of a credit tenant loan include debt service coverage as low as 1.0x-1.05x rent (depending on lease quality), and high loan-to-value ratios based on MAI appraised value. CTL also includes potentially all property types and uses, depending on the strength of credit tenant. Physical condition assessments are required for double net leases only and seismic reports are required in areas with seismic risk. While transaction ratings and specialty insurance to cover casualty and condemnation risk is not required, phase I environmental and MAI appraisals are required. CTL prefer locations in primary and secondary markets, but may permit tertiary markets depending on credit quality. Investment grade tenants can be public or private companies, national or regional in operation, and must have the ability to get audited financial statements.
A credit tenant loan is $2 million and up and can rate lock at application. CTLs are fully amortizing or covered balloon exposure at maturity. Special purpose entity or single asset entity is preferred, but not mandatory, as well as trustee structure, depending on each transaction. Construction permanent loan capabilities have different guidelines, with up to 18 months for construction period and a minimum loan of $7 million. A long-term credit tenant loan program enables a borrower to receive the highest loan proceeds that a property’s rent payments can handle. The fixed rent payments defined in the lease generally amortize the greater part of the balance of the loan during the term of the lease, which is usually 20 years. A single-tenant lease property’s qualifications are similar to CTL’s program, but the tenant should be rated BBB- (Standard & Poor’s) or Baa3 (Moody’s) or better. Credit tenants with BBB- or Baa3 ratings may also qualify for financing. Special provisions may be available to facilitate sales.
At Ocean Pacific Capital, for over 31 years, we have understood the commercial financing industry inside and out. Please give us a call today at 1-800-595-1474 or fill out our online commercial application.
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Daily Oil & Gas and Wall Street Journal News
7/15/20
Otakikpo JV, a joint venture of Green Energy International Ltd., Abuja, and Lekoil Ltd., London, signed definitive agreements to advance Otakikpo marginal field development in OML 11 in Nigeria’s Niger Delta.
Beach Energy Ltd., Adelaide, and Bridgeport Energy Ltd., Sydney, were awarded two new exploration permits in the inshore sector of Otway basin of southwest Victoria.
Talos Energy along with Block 7 partners and Petróleos Mexicanos (Pemex) have 120 working days to submit a Unitization and Unit Operating Agreement to Mexico's Ministry of Energy for Zama field development.
Reconnaissance Energy Africa Ltd. (ReconAfrica) completed a subsurface evaluation delineating large prospective conventional hydrocarbon bearing structures throughout the entire Kavango basin.
Equinor has awarded Aibel a portfolio agreement for modification tasks at Oseberg fields in the Norwegian North Sea.
Wall Street Journal
Commercial News
7/15/20
WSJ.com: US Business
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Searching for Video? Google Pushes YouTube Over Rivals Facebook and other competitors host the same videos, but engineers have made changes that effectively preference YouTube?owned by Google?over other video sources. Journal tests show YouTube usually ends up first and takes most of the slots in Google Search video carousels, prime results real estate.
U.S. June Consumer Prices Rose Sharply U.S. consumer prices rose sharply in June while states were broadening efforts to reopen, with costs snapping back for products and services that were hit hard by the coronavirus pandemic.
