Credit Tenant Lease Loans (CTLs): A Timeline: How Fast Can I Close?
I am often asked how quickly a Credit Tenant Lease Loan (CTL) can be closed. CTL Financing is a simplified method of lending against long-term triple net leased (NNN) real estate to an investment-grade lessor such as Walgreens, Home Depot or Wal-Mart. Because CTL loans are non-recourse loans, bankers don’t have to spend as much time researching a borrower’s credit. With CTL, the lease is the main collateral backing the loan. Most CTL loans can be completed, start to finish, in approximately 60 days.
I have constructed a timeline below that should help NNN investors understand the steps involved in CTL loans and how long each step typically takes.
Initial quote: 1-3 days
Based on some basic information you provide to the banker, they provide you with a preliminary financing quote. This quote will estimate the maximum loan amount they are willing to offer, give you an idea of current rates, and review some of the main fees and expenses you may incur.
Term Sheet/Application: 3-5 days
If you decide to continue with the CTL process, the investment bank will review the leases and collect information about you. Usually within 5 business days, they should be able to issue you with a very detailed term sheet that will act as your formal request. This is a very important document that should be read carefully; it describes the rights and responsibilities of each party to the loan and will form the basis of your particular CTL mortgage.
Fee lock: 1-3 days
The bank will enter the market and lock in your particular interest rate. Because CTLs are long-term, high-leverage financing, this generally involves them hedging their interest rate risk. Your rate will be guaranteed and fixed for the life of your loan.
Subscription: 35-45 Days
Third-party reports, such as appraisals and environmental studies, will be ordered and analyzed as they arrive. Lease will be verified, title work done and numbers processed. In the meantime, the deal will be financed through the issuance and sale of a private placement mortgage-backed bond to fixed income investors. This is the most time-consuming aspect of CTL loans (and of all commercial mortgage loans), but it can usually be accomplished in about a month.
Close: Immediately
Once the last item on the underwriting checklist is complete, the loan can be closed as quickly as the attorneys can draft the documents and schedule it.