Amerifund Commercial Corp.


CTL Financing Programs for Single Tenants




  • Healthcare

  • Financial Institutions

  • Industrials

  • Insurance

  • Utilities

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The Single Tenant Industry is under a world of change, yet very few see the changes that are certain to occur over the next 5-10 years. Without foresight and the knowledge that single tenant financing should be as close as possible to fully amortized over the firm lease term, most will perish.

DEVELOPERS, the ones that hold their single tenant developments after completion, will lose their investment and credit. Developers that sell projects before completion or shortly after completion, will lose their universe of potential buyers.

BUYERS will come to the realization there are better investments after their single tenant moves out on them, leaving the buyer with a substantial balance on the financing. In addition, the low cap rate environment today is a complete disaster waiting to happen.

OWNERS, those that have not refinanced as described above, will join the ranks of developers and buyers who did not see the future. Owners, however, are in the worst position, as their single tenant lease is already in place, whereas developers can negotiate new single tenant leases to allow for fully amortized debt and buyers can simply move onto other investments.

REAL ESTATE BROKERS who depend on single tenant sales, will lose their lifeblood.

FINANCIERS, who have thrived on single tenant developments, acquisitions and refinances, will be forced to re-focus on multi-tenant properties.

Now for a little peek into the near future. On 02-25-16, the Financial Accounting Standards Board ("FASB") adopted its new lease accounting guidelines. Operating Leases, the single tenant leases that have been commonplace for years because single tenants insisted on leases being off-Balance Sheet, will officially become a liability on the single tenant's Balance Sheet as of 12-31-18. All existing single tenant leases to major companies and non-profits will be affected, as the new FASB guidelines are retroactive. Thus, the advantage of a lease being off-Balance Sheet is no longer there for the single tenant.

The single tenant's CFO is primarily concerned with improving the company's bottom line on its P&L. For years, as a trade-off for a lease being off-Balance Sheet, the CFO allowed Operating Leases that reduced the bottom line, as the entire lease payment was expensed out. Now that an Operating Lease is a liability on the single tenant's Balance Sheet (on-Balance Sheet), there is no longer an advantage to a company utilizing an Operating Lease on a company facility.

For facilities that the company plans to occupy for the long-term, the company will own the facility either through its own low-rate financing or a low-cost Finance Lease provider. This will dramatically improve the company's bottom line and Balance Sheet over time, as opposed to an Operating Lease.

Existing facilities under an Operating Lease can be replaced with a new facility that the company will own, wherein the company enjoys all the above benefits of ownership.

New facilities that are being leased today under an Operating Lease are being done so either because either (1) the company has not yet put much thought into the better alternative or (2) the company plans on vacating the facility at the end of the lease term, especially for new 10 to 15 year leases.

Once developers, buyers and owners recognize that a signifcantly longer amortization on financing is likely a death sentence, they will insist on higher rent based on a fully amortized financing structure, which in turn, will accelerate the move for single tenants away from Operating Leases and to the many benefits of the company owning its facilities.

In the next 5-10 years, it will be apparent to most that Operating Leases are "dead".



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