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 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. Lenders typically provide financial assistance to tenants depending on their landlord’s credit or the value of the real-estate, but when it comes to credit tenants, everything now depends on the tenant himself as well as the value of the lease payments he will be making in the following months.
So, what is investment grade rating all about?
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 basically implies a minimum rating of BBB-. A lot of investors opt to make investments with products and bonds that are backed by investment grade tenants such as Home Depot and Walgreens. The industry of credit tenant financing also includes the participation of sates and cities.
So, how do you get credit tenant loans?
If you are a landlord that has a credit tenant, then you are eligible in availing long-term loans to refinance or purchase a particular property. Such loans can follow a non-recourse structure for the sake of the landlord. In simple terms, landlords will not have to face any personal liability threats because the terms of the loan is based on the lease value.
What is the significance of sale leaseback transactions?
When credit tenants get themselves involved in sale leaseback transactions, they can immediately do direct financing. 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.
Some credit tenant lease terms you should know about
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. Most credit tenant leases have three net terms. This simply means that credit tenants should shoulder whatever insurance, maintenance costs, and taxes they must pay. 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. Quite simply, all they have to do during the real estate project process is just collect checks and not get themselves involved actively.
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