Tenant Lease Financing
Putting tenant leases to work for corporate-leased property owners
 Program Overview

Cornerstone Capital Corporation can provide sophisticated and valuable financing services for commercial property owners based on the value of their tenant leases. The Credit Tenant Lease (CTL) Program provides low-cost, permanent property financing to corporate-leased property owners. It is a fast, easy way to get maximum loan amounts without pledging equity. This strategy has multiple benefits for property owners requiring financing of at least $10 million, including:

  • Joint ventures and property purchase options customized for developer needs
  • Non-recourse owner financing
  • Competitive interest rates
  • Forward commitments with rates locked up to 24 months prior to funding
  • Debt service coverage ratios as low as 1.0 to 1.0
  • Long-term commitments for 15-25 years

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 How the Credit Tenant Lease (CTL) Program Works
The Credit Tenant Lease Program enables you to use your tenant leases as loan collateral, streamlining the underwriting process and putting the value of those net leases to work for you. Cornerstone Capital Corporation lends at competitive rates because the loan is secured by lease payments from a rated corporate tenant.

Any developer or investor owning single-tenant office, retail, warehouse or industrial properties leased to corporations can benefit from this program.

Tenant Profile
Corporate tenants with acceptable leases should have an actual or implied senior unsecured debt rating of BBB- or better.

Lease Requirements
Ideally, the lease is a bondable "hell or high water" lease, which binds the tenant to all obligations without the ability to terminate or abate rent.

Triple net-leases and double net-leases, in which the tenant pays for all or substantially all taxes, insurance, maintenance and operating costs, may be eligible for the CTL Program. In the case of triple net-leases or double net leases, Cornerstone Capital Corporation will identify and help obtain the appropriate structure changes, insurance coverage or reserve provisions necessary to create bond equivalence quality. The initial lease should be for a minimum of 15 years.

Property Requirements
Retail stores, offices, warehouses and industrial property can be financed through the CTL program. Property should be single tenant and constructed on an independent tax lot for real estate tax purposes.

Loan Characteristics
Total loan amounts should be a minimum of $5 million. Usually 100% of the project's cost can be financed by the loan as compared to traditional financing that generally provides only 80% of the total project costs. Furthermore, debt service coverage ratios can be as low as 1.0 to 1.0.

Generally the loan is structured to fully amortize within the initial lease term. Cornerstone Capital Corporation can offer extended amortization coverage to provide loan proceeds larger than what can be fully amortized over the initial lease term. Extended amortization enables Cornerstone Capital Corporation to customize the loan proceeds or periodic cash flows to the property owner's needs.

The loan is collateralized with a first lien on the property and an assignment of the lease payments. The borrower is free from any personal liability.

Ownership
The structure of the lease and the loan frees the owner from most landlord responsibilities. With CTL financing, the owner creates a bankruptcy-remote special purpose entity, which becomes the actual property owner and lessor. Because of significant experience in creating these structures, Cornerstone Capital Corporation can easily assist in the proper formation of this entity.

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 What can be financed?
  • Retail stores
  • Single-tenant corporate headquarters
  • Single-tenant offices
  • Warehouse and distribution facilities
  • Research and technical centers
  • Industrial properties
  • Production facilities
  • Medical facilities
 Who Can Participate?
  • Developers
  • Corporate-leased property owners
  • Any corporation, partnership, individual or other investor approved by Cornerstone Capital Corporation

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 Financing Options
Cornerstone Capital Corporation provides a variety of financing options that may be tailored to your situation. Construction may be planned, in process, or completed.

Immediate Financing
Cornerstone Capital Corporation provides immediate permanent financing for those properties where the tenant is already occupying the property and rent payments have begun.

Forward Commitment
If construction is planned or in progress, a forward commitment is available to lock-in attractive interest rates for up to 24 months in advance of permanent financing.

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 Merchant Banking Services
Purchase of Properties
In order to provide developers with cash at the time of project completion, Cornerstone Capital Corporation is purchasing properties in attractive locations net-leased to credit tenants.

Joint Venture Investments
Through joint ventures, Cornerstone Capital Corporation can typically finance more than 100% of costs by recognizing the owner's equity contribution. This allows the owner to receive cash on a tax-deferred basis while still maintaining a 50% interest in the project. Such a partnership can provide a more attractive after-tax alternative than a sale of the property.

Extended Amortization
When Cornerstone Capital Corporation provides permanent financing through this CTL program, it also can guarantee balloon payments on CTL loans requiring proceeds larger than what can be amortized during the initial lease term. The amount of extended amortization will depend on the tenant, location, land cost and project cost. When appropriate, the balloon risk will vary from 25% to 35% of the loan proceeds, subject to committee approval. Through extended amortization, Cornerstone Capital Corporation tailors financing and repayment terms to the needs of the property owner.

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Program Benefits

  • Non-recourse owner financing
  • Joint Ventures and property purchase opportunities with Cornerstone Capital Corporation
  • 100% loan-to-value funding
  • Forward commitments with rates locked up to 24 months prior to funding
  • Debt service coverage ratios as low as 1.0 to 1.0
  • Long term commitments for 15-25 years
  • Lower transaction costs by combining construction and permanent financing
  • Quick response and fast turnaround on loan request
  • Competitive interest rates similar to investment-grade debt pricing

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Application, Closing and Funding Procedures

  • Owner sends full project and lease documentation to Cornerstone Capital Corporation for review
  • Cornerstone Capital Corporation completes a credit evaluation for the project, generally within 2 days, to determine suitability for the Credit Tenant Lease Program.
  • Cornerstone Capital Corporation issues a Term Sheet highlighting the general terms and conditions of the loan for the owner's review and approval.
  • Once an agreement on the terms has been reached, Cornerstone Capital Corporation issues an Application Letter to the owner.
  • Owner accepts and signs Application/Letter within 10 days of issue. Owner returns Application to Cornerstone Capital Corporation with an expense deposit.
  • Cornerstone Capital Corporation approves and countersigns the Application, creating a commitment to lend.
  • Loan documents are generated and distributed to Lessee, Owner and Cornerstone Capital Corporation. All due diligence, including title insurance, appraisal, engineering surveys and environmental reports occur simultaneously with document generation and review. This generally takes 45 days.
  • Owner establishes a bankruptcy-remote, special purpose entity, which becomes Lessor of property and borrower of the loan.
  • Assuming there are no issues with the lease, title, environmental report, engineering survey or appraisal, the loan can be closed within 45 days of Cornerstone Capital Corporation's receipt of the executed Application Letter.
  • Funding can take place immediately at closing or up to two years after closing.

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