What Are the Benefits of Hiring Investment Grade Tenants?
If you own a property and offer it for rent, then you should consider seeking investment grade tenants. Investment grade tenants offer landlords numerous financing options they can choose from.
Investment grade tenants get to receive an investment grade rating from any rating agency, and they are usually big, reputable companies. Rather than focusing on the landlord’s credit or the value of the real estate when lenders provide financial assistance, they now make sure that it is based on the credit tenant renting the property as well as the value of his or her lease payments in the succeeding months.
So, what is investment grade rating all about?
Investment grade ratings are the basis of credit tenant lenders to secure loans for the tenant as well as sell them to investors. Getting a minimum rating of BBB- is what investment grade is all about. The majority of investors only choose to invest in products and bonds that are being back up by tenants with investment grade such as Home Depot and Walgreens. States and cities are also participating in this credit tenant financing industry.
So, what are credit tenant loans?
Long-term loans to refinance or purchase the property a certain landlord wants is now made possible if they have a reliable credit tenant. Such loans can follow a non-recourse structure for the sake of the landlord. This basically implies that the landlord will not be at risk of personal liability because these loans depend more on the lease value.
How do you transact sale leasebacks?
When credit tenants get themselves involved in sale leaseback transactions, they can immediately do direct financing. Owners of properties who have an investment grade rating can put their real estate property in the market for investors, and can then lease them again. Opposite with the typical commercial real estate kind of loan, any property owner can increase their cash by obtaining a higher loan-to-value amount in favorable terms.
What are credit tenant lease terms?
Institutional investors only take the task of offering credit tenant financing, they do not necessarily take any of the responsibilities being expected of any property owner or landlord. There are three net terms that comprise credit tenant leases. This implies that it is the responsibility of credit tenants to pay for their taxes, insurance, and maintenance costs. The loan terms must be in tandem with the duration of the lease. All of these obligations greatly rely upon the tenant, meaning this burden is no longer a responsibility of the landlord. On the part of both the investor and the landlord, credit tenant lease terms have the same function as that of a corporate bond. What they just basically do during the entire duration of the real estate project is not get involved actively and just collect the check.
Refer to: internet