Credit Tenant Lease “CTL”

Mississippi commercial real estate loan

Maximize Loan Proceeds for Credit Tenant Lease “CTL”:

Investors looking to maximize the loan proceeds when financing a commercial properties supported by a long term lease from a tenant that carriers investment grade public credit rating from Standard & Poors  and/or from Moody’s Investors Services might consider Credit Tenant Lease (“CTL” loans.

Here are some of the benefits of Credit Tenant Leases:


  • Higher leverage or loan to value (“LTV”), with constraints up to 100% of the value. A typical commercial real estate lender will want 20% to 35% cash down.  Under a Credit Tenant Lease loan structure you are limited to the value of the real estate and further constrained by the items listed below.


  • The Debt-Service-Coverage Ratio (“DSCR”) can be as low as 1.00x with bondable and NNN lease terms. When the landlord has certain obligations or expenses such as maintenance of the roof and parking lot the lender will require some additional cash flow going back to the landlord to address these landlord obligations and thus the DSCR might be closer to 1.05x or 1.10x. The higher the interest rate everything else being equal the lower the DSCR.  For current rates go to Current Commercial Rates.

Term and Amortization:

  • The term and amortization can go as high as 30-years.

How much down payment is required?

Does this mean you could borrow enough money to finance 100% of the purchase price of a single tenant property supported by a long term lease from a tenant that carrier’s public investment grade credit ratings?  Theoretically yes.  However, to qualify as a true Credit Tenant Lease loan transaction you must be able to fully amortize the loan over the primary lease term.  Therefore, without having some inside such as you developed the property and has sweat equity in the project we have not seen a project that did not require substantial down payment.  It is best to plan on putting down at least 20% from most of the transaction we have seen in recent years.

What are the investment Grade Credit Ratings:

As mentioned above the Tenant must carry investment grade credit ratings to qualify as a CTL transaction. Moody’s Investment Grade Ratings are Baa3 and above.  Standard and Poors (S&P) Investment Grade ends with the BBB- rating.  Non-investment grade ratings are Ba1 for Moody’s and below and BB+ for S&P and below.

When checking the credit ratings it is important to note the trend or forecast.  For example, if S&P shows a rating of BBB- (this is the lowest level still considered investment grade) and reports a “negative” trend this tenant might be subject to a downgrade to the next level BB+ which is no longer investment grade.  For example, look what has happened to giant companies such as Sears and how technology impacted Blockbuster.  Both of these companies carried investment grade ratings at one time.

Residual Value Insurance (“RVI”):

It might be possible to borrow additional dollars over what the lease might be able to retire over the remaining term of the lease (we cannot use lease option extensions that have not been officially extended by the tenant).  If the balloon balance is over $1 million and the resulting loan to the dark value is 50% or less we could consider placing Residual Value Insurance to protect the lender by paying the loan off at the end of the Loan Term.

Below is a sampling of single tenants that carry investment grade credit ratings.  This is by no means the complete list of all tenants, just a sampling.  Also, ratings change from time to time. Be sure to update the Tenant credit ratings when considering your investment.  The ratings below are mostly as of the first of 2019 calendar year.

If you need a loan on a property that is supported by a long term lease but the tenant does not have public credit ratings we can help.  See the sample list of tenants that lenders are actively lending on.  CTL structures are available on the Tenants listed below.

List of many Investment Grade Tenants:

Tenant Name S&P ratings except as noted
7-Eleven, Inc. A1-Moodys
Advance Auto Parts, Inc. BBB-
Arbor Drug Store BBB+
Auto Zone, Inc. BBB
Bahama Breeze BBB
Bank of America A
BB&T Corp A-
Bed Bath & Beyond, Inc. BB+
Bed, Bath & Beyond BBB
Big Lots, Inc. BBB-
BP America AA-
Bridgestone Corporation A2-Moodys
Brinker International BBB-
Capital One Financial Corp BBB+
Chase Bank A+
Chevron Corporation AA-
Circle K Stores BBB
CitiBank A+
Conoco A-
Costco Companies A+
CVS Caremark Corporation BBB+
Darden Restaurant, Inc. BBB
Delhaize Group S.A. BBB
Dollar General Corporation BBB
Dollar Tree Stores, Inc. BBB-
Eckerd’s Drug Store BBB+
Exxon AA+
Family Dollar Stores, Inc. Baa3-Moodys
Fifth Third Bank BBB
Food 4 Less BBB
Food Lion BBB
Fred Meyer BBB
Fresenius Medical Care AG BBB-
Fresh & Easy A-
Fresh & Wild A+
Giant Foods BBB
Harris Teeter BBB
Home Depot, Inc. A
Homegoods Stores BBB-
J.P. Morgan Chase A+
Key Bank BBB+
Kohl’s Corporation BBB-
Koninklijke Ahold N.V. BBB
Kroger BBB
La-Z-Boy N/R
Long John Silvers, BB
Long’s Drug Store BBB+
Lowe’s Companies A-
McDonald’s Corporation BBB+
Mobile AA+
Nordstrom BBB+
Olive Garden BBB
O’Reilly Automotive, Inc. BBB
Owens Corning BBB-
Pep Boys BBB-
Phillips Petroleum A-
Pizza Hut BB
PNC Bank A
Polo Ralph Lauren BBB+
Publix Super Markets, Inc A
Rare Hospitality BBB
Raytheon Company A-
Revco Drug Stores BBB+
Ross Stores A-
Ross Stores BBB
Royal Dutch Petroleum A+
Safeway BBB
Sam’s Club AA
Shell Group A+
Sherwin-Williams Company BBB
Smith’s BBB
Staples BBB
Starbucks Corporation BBB+
Taco Bell BB
Target Corporation A
TD Bank AA-
Texaco AA-
TJX Companies, Inc. BBB-
T-Mobile BBB+
Total SA A+
Unocal AA-
US Bancorp A+
Valero Energy Corporation BBB
Verizon BBB+
Walgreen Co. BBB
Wal-Mart Stores, Inc. AA
Walt Disney Co. A
Wells Fargo AA-
Whole Foods A+
Wild Oats A+
Winners BBB-
Yum! Brands, Inc. BB


Below are Tenants in high demand from our lenders.

Quality Tenants without ratings No Public Ratings MAX LTV MAX Amortization
Aaron Rents N/R 75.0% 15
Aldi, Inc. Private 75.0% 20
BJ’s Restaurants, Inc. N/R 75.0% 15
CarMax, Inc. N/R 75.0% 20
Casey’s General Stores N/R 75.0% 15
Cheesecake Factory, Inc. N/R 75.0% 15
Chick-Fil-A Private 75.0% 15
Chipotle Mexican Grill, Inc. N/R 75.0% 15
Dick’s Sporting Goods, Inc. N/R 75.0% 15
Grand Lux Café N/R 75.0% 15
Hibbett Sports, Inc. N/R 65.0% 15
Hobby Lobby Stores, Inc. Private 75.0% 15
Krispy Kreme Doughnuts, Inc. N/R 75.0% 15
NAPA Genuine Parts Company N/R 80.0% 20
Panda Express Private 75.0% 15
Panera Bread Company Private 75.0% 15
Quik Trip, Inc. N/R 75.0% 15
RaceTrac Petroleum, Inc. Private 75.0% 15
Royal Farms Private 75.0% 15
Sheetz Private 75.0% 15
Spouts Farmers Market, Inc. NR 65.0% 15
Texas Roadhouse, Inc. N/R 75.0% 15
Tractor Supply N/R 75.0% 15
Trader Joe’s Private 75.0% 20
Two Farms, Inc. Private 75.0% 15
Ultra Salon N/R 75.0% 15
Wawa, Inc. Private 75.0% 15
Weis Markets, Inc. NR 75.0% 20


We are here to help, call with any questions or email the details on a property you are seeking funding for.

Mike Caffrey

Phone: (913) 402-7077