Most commercial real estate is valued by its location, comps, and the property itself. But with a Credit Tenant Lease (CTL), the script flips. Instead of the building being the star, the lease becomes the deal. In fact, lenders treat a CTL almost like a bond — predictable payments, credit-backed security, and low risk of default.

If you’ve ever wondered how investors buy buildings leased to Costco, Walgreens, or even the Social Security Administration with seemingly “mailbox money” returns, you’re looking at the power of Credit Tenant Lease financing.

What Is a Credit Tenant Lease (CTL)?

A Credit Tenant Lease is a long-term lease (often 20+ years) with a tenant that has investment-grade credit. These are household-name companies or government agencies that lenders view as rock-solid. Because the tenant is so reliable, financing shifts from being property-driven to lease-driven.

In practice, that means:

• Traditional CRE loan → Value based on property, comps, and market rents.

• CTL loan → Value based on the tenant’s credit rating and lease cash flow.

Lenders underwrite CTLs the same way bond buyers look at corporate bonds: steady, predictable, and backed by credit strength.

Examples of Credit Tenants:

• U.S. Government agencies (SSA, IRS, GSA)

• Costco

• Walgreens

• Starbucks corporate (not a franchise location)

Why CTL Financing Is Unique

1. Lease is everything → The entire loan is underwritten on the lease terms.

2. Bond-like security → CTLs are structured as if the rent is a bond coupon payment.

3. Loan sizing → Instead of appraised comps, proceeds are based on the net present value (NPV) of lease payments and tenant creditworthiness.

4. Loan structure → CTL loans are usually fully amortizing, tied to the lease term. That means the loan burns off evenly with no big balloon payment.

In short: a Credit Tenant Lease loan is one of the safest, most predictable financing tools in commercial real estate.

CTL and DSCR: What Makes It Different?

In normal commercial lending, a lender requires a Debt Service Coverage Ratio (DSCR) of at least 1.20x. That means net income must cover loan payments with a 20% cushion.

But in a CTL:

• The lease payments are essentially bond-like guarantees from an investment-grade tenant.

• Since the tenant’s credit is so strong, lenders often relax the DSCR requirement.

• Some CTL loans are structured with DSCR at exactly 1.0 → rent payments match debt service, no extra cushion needed.

👉 This is why CTL loans can sometimes finance up to 100% of the acquisition price. The lender isn’t relying on you or the property; they’re relying on the lease cash flow + tenant credit rating.

Is 100% Financing Really Possible with a CTL?

Yes — in the right circumstances. Here’s how:

• The lease must be long-term (often 15–25 years remaining).

• The tenant must be investment-grade (think AA bond rating or better).

• The lease must be net lease structured (tenant covers taxes, insurance, maintenance).

• Loan term matches lease term → lender knows they’ll be repaid in full through the rent stream.

It’s not common in most of CRE, but with CTLs, lenders may finance the entire purchase price, since the investment is seen more like buying a bond than buying a risky property.

How CTL Differs from NNN Lease

A CTL lease often looks like an NNN lease, but with one big caveat: