Credit Tenant Note Program Unveiled

KeyCorp's real estate capital business and The Norseman Group have launched a credit tenant note program that will allow commercial property owners to monetize their property investments.It will provide financing to commercial properties "with lease terms that are too short to fully leverage the tenant's credit." The program will allow property owners to create "an additional, secondary source of capital by leveraging income from triple-net or bond leases," the Cleveland-based KeyCorp said. The plan is ultimately to bundle the credit tenant notes as assets, securitize them, and sell them to institutional investors. The program structure will enable Key to underwrite single-tenant properties with triple-net or bond leases of 15 years or less, based on their remaining net lease income, the company said. The program, which is nonrecourse for the property owner-borrower, allows them to "monetize 100% of the excess cash flow after servicing senior debt requirements." The program does not have any restrictions on loan-to-value ratios, no lien on the real estate, and carries less refinancing risk than mezzanine financing, according to Key.