A Basic Knowledge on Investment Grade Credit Tenants
A special financing offer for the landlords is what is called as the investment grade credit tenants and this is what you need to know first.
There is a rating agency that gives an investment grade rating for the company called as the investment grade credit tenant. If there is a property that is rented by the credit tenant then what will happen is that the lenders will offer a special financing. It is actually on the value and the tenant in its lease payments in the future wherein the focus of the special financing is placed. The focus of the investment grade tenants is not on the credit of the landlord or the real estate.
The rating of the tenant will as a matter of fact be the basis of the lenders of investment grade tenants. This is to make sure that the loans will be sold to institutional investors and securitize the loans. A rating of at the very least a BBB- is what you need to know about the investment grade. There are a lot of investors that would invest in similar products and bonds as well. As a matter of fact, the states and cities rank as well as participants in the investment grade credit tenants.
On the part of the landlords, if they have investment grade credit tenants it would mean that they can avail of the long term loans. When they have the loans, they have the option to be able to refinance the property or even buy a property. When it comes to the loans they can actually be structured in a way that it will now be non recourse to the owner of the property. At the end of the day, pushing through with this option will now mean that the personal liability of the landlord will now be removed. The reason why this can happen is because of the fact that the underwriters will be relying on the lease value.
The investment grade credit tenants also has the option to be able to obtain direct financing. To enter into the sale leaseback transaction is as a matter of fact how this can be done. What the lenders with the investment grade credit tenants do is that they can sell and lease to an investor. What happens now is that the property owner will be able to earn cash on favorable terms. They will also be able to have a higher loan to value. What you need to know about this is that you will not be able to find this in the traditional commercial real estate loan.
Therefore, the property owners that are in need of loans as soon as possible can avail of the investment grade credit tenants. The investment grade credit tenants will be able to avail of the benefits.
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