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CREDIT TENANT LEASE

A credit tenant loan is a loan that is secured by a property that is leased to a credit tenant. The lease should be a NNN lease. A credit tenant is a company that has a Moody's credit rating of Baa3 or higher or a S&P credit rating of BBB- or higher.

These properties may be a past of a retail center. For example typically pharmacies, super markets and department stores may be credit tenants. A ground lease to a bank and some restaurants as well as a post office and other government buildings may be credits.

Credit leases also occur in office properties and industrial properties. A sale lease back transaction may be a credit lease. Each case has to be examined individually.

CREDIT TENANT LOANS

Loans secured by Credit Tenant Leases are not underwritten like real estate loans. They are underwritten like bonds. They are based on the credit of the tenant and the stream of payments that will be made by the tenant. The credit of the property owner is not involved in the underwriting.

The LTV may be 100%. The maturity can be the lease term and the amortization may be longer than the lease term based on the residual value of the real estate and lease extension options.

In general a loan secured by a Credit Tenant Lease will be lower in interest rate, longer in maturity and have a higher LTV than a conventional real estate mortgage.

CREDIT TENANT LEASE LOAN

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