For construction financing of single- or dual-tenant medical office buildings, credit tenant lease (CTL) offers an intriguing option for developers. A healthcare system or a large healthcare-related company would fit the criteria for consideration.
With CTL financing, the lease rental income is leveraged as the basis for repayment of the loan. In fact, the rental payments are assigned and paid directly to the lender. Because the CTL structure more closely resembles a bond rather than a real estate loan, the interest rate on the note will be determined by the creditworthiness of the tenant(s) rather than the value of the underlying real estate and creditworthiness of, or credit enhancement from, the borrower. The higher the creditworthiness of the tenant(s), the lower the interest rate on the loan.
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