Credit Tenant Lease (CTL): The Ultimate Guide for U.S. Investors (2025)
A Credit Tenant Lease (CTL) is one of the most secure and predictable commercial real estate investments in the United States. Popular among high-net-worth investors, REITs, developers, and financial advisors, CTLs offer bond-like income backed by investment-grade tenants.
What Is a Credit Tenant Lease?
A Credit Tenant Lease (CTL) is a long-term commercial lease backed by an investment-grade corporate tenant such as Walgreens, FedEx, Bank of America, or Verizon.
Key Features
- Tenant has strong credit rating (AAA to BBB).
- Long-term leases (10–25 years).
- Rent payments act like corporate bonds.
- Financing based on tenant credit, not property value.
- Very stable, passive rental income.
How CTLs Work (Explained Simply)
- A company signs a long-term corporate lease.
- Investor purchases the property.
- Bank examines the tenant’s credit rating.
- A CTL loan is issued (90–100% LTV).
- Lease payments cover principal + interest.
- At the end of lease/loan, investor owns the building fully.
CTL vs NNN Lease
| Feature | CTL | NNN Lease |
|---|---|---|
| Tenant credit | Investment-grade | Varies |
| Risk | Very Low | Low-Medium |
| Loan Type | Bond-based CTL financing | Standard commercial loan |
| Lease Term | 20–30 years | 5–20 years |
Benefits of CTL Investments
- Nearly guaranteed rent from strong corporate tenants.
- Up to 100% financing based on tenant credit.
- Absolute NNN → No maintenance or landlord duties.
- Predictable monthly passive income.
- High resale liquidity due to low risk.
Risks of CTLs
- Single tenant — if tenant defaults, income stops.
- Lower cap rates (because risk is low).
- Hard to re-tenant highly customized buildings.
CTL Financing (How Banks Structure It)
In CTL financing, banks treat rent payments like a bond stream.
| LTV | 90%–100% |
| Collateral | Lease payments |
| Loan Term | Same as lease |
| Interest Rate | Slightly higher than corporate bond yield |
Cap Rates & ROI (2025)
- Walgreens: 4.75% – 5.25%
- FedEx: 5.50% – 6.00%
- Bank Branches: 4.25% – 5.00%
Total Expected Return: 6–10% annually (very stable).
Top Investment-Grade Tenants (USA)
- Walgreens
- CVS
- FedEx
- Bank of America
- Starbucks
- Dollar General
- 7-Eleven
Real CTL Deal Examples
Walgreens CTL Example
- Price: $5.2M
- Lease: 25 years
- Cap Rate: 5%
- Financing: 95% CTL loan
Best YouTube Videos on CTL
Watch these for deeper understanding:
- Video 1 — CTL Explained
- Video 2 — Corporate Leases
- Video 3 — CTL Financing
- Video 4 — Net Lease Investing
- Video 5 — Real Estate Finance
FAQ
Is CTL better than NNN?
CTLs are safer because they involve investment-grade tenants, but cap rates are slightly lower.
Are CTLs good for beginners?
Yes, especially through syndications or fractional ownership.
Are CTLs recession-proof?
They are among the most recession-resistant real estate assets.
