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What Are the Benefits of Hiring Investment Grade Tenants?

If you happen to own a property that is for rent, then you know how important investment grade tenants are. Investment grade tenants provide landlords with several financing choices.

Investment grade tenants are usually companies that have their very own investment grade rating that is made by a specific rating agency. 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 are the basics of investment grade rating?

It is the investment grade ratings of a tenant that help credit tenant leaders decide if the tenant can avail of loans and sell them to investors. Investment grade simply means that you have reached a minimum rating of BBB-. 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. The industry of credit tenant financing also includes the participation of sates and cities.

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 simply means that there is no risk of personal liability because this kind of loan greatly depends on the value of the lease.

How do you transact sale leasebacks?
Direct financing is made possible on the part of the credit tenants if they get themselves involved in sale leaseback transactions. If you own a property and have a investment grade rating of your own, then this means that you can simultaneously sell your property and then lease it back. 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 offer credit tenant financing opportunities, and it does not necessarily mean that they are the ones who are now taking over the landlord’s responsibilities. Typically, credit tenant leases comprise three net terms. This implies that it is the responsibility of credit tenants to pay for their taxes, insurance, and maintenance costs. The loan terms should be based upon the entire lease duration. These obligations are directly the responsibility of the tenant, so no landlord will have to carry this kind of burden. 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.

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