Construction Financing + Forward Payment:
- No need for a conventionanl construction loan
- Funds to build the project are used from the CTL financing
- Letter of Credit (LOC) provided during construction for the loan amount plus 3%
- The LOC is waived if the lease contains a date certain rent commencement
- Loan proceeds for construction are funded to the bank providing the LOC
- The LOC bank administers the construction draws
- The bank issuing the LOC has a first lien on the property during construction and the bond investor's primary collateral is the LOC
- The loan is interest-only during the construction period
- The loan term includes the construction period plus the initial lease term
- No additional spread is added for the forward component of the loan
- The average life of the loan increases by the length of the interest-only period
- After rent commencement and upon receipt of all due diligence, the LOC is released and the first lien on the property is assigned to the bond investor
- Funds held in escrow at the bank for money not drawn down for construction will earn interest at a short term reinvestment rate, thus reducing the All in Cost of Capital
Forward Commitments for Permanent Loan:
- Forward commitments available for certain credits with an add on to the spread