Tenant Improvement Financing

The Tenant Improvement Financing Program is a proven, patent pending, low-cost, lease-backed financing structure that provides up to 99% of the funds needed to complete fitout and/or tenant improvements (TIs) for all commercial property types. This allows landlords to either offer lower occupancy costs or generate higher effective rents.

Without cost-effective, third party financing, TIs have historically been inefficiently funded by landlords and/or tenants. Today’s challenging economic environment further exacerbates this problem.

Based upon a proprietary finance structure similar to a credit tenant lease transaction, the TI loan is secured by a separate, bondable TI lease which fully amortizes over the lease term and offers the following key features:

• Non-recourse to the landlord
 
• Interest rate tied solely to the tenant’s credit rating
 


Landlord Benefits

• Landlord provided with additional capital to supplement
first mortgage financing
 
• Increases leasing activity for landlord in a competitive
environment by providing the ability to offer more competitive
rental rates
 
• Landlord generates higher effective rent due to lower cost
of capital and also increases NPV of lease income and IRR
through reduced capital outlay for TIs.
 
• Landlord can allocate capital to investments in core and
shell assets rather than to TIs.
 
• Competitive rates versus mezzanine financing.


Tenant Benefits

• 100% lease financing, zero out of pocket cost to tenant
 
• Lower after-tax occupancy costs
 
• Tenant can allocate capital into its core businesses,
rather than into TI
 
• For Sale-Leaseback: Mismatch in book vs. tax
amortization/depreciation is removed.



Typical Transaction

Square Feet: 150,000                  Landlord Yield: 10.0%
TI Lease Term: 10 Years            TIFG Fee: 500bps      
NBV of TI: $11MM                          Legal Fees: $75,000
Indicative Rate: 4.75%                SPV Setup: $15,000

All-in Rate: 5.75% (inclusive of closing costs and fees)

All-in TI Annual Rent: $1,476,963 or $9.85/sf (based on 150,000 SF)


What is a TI Lease?

A TI Lease is a non-terminable, separate, legally enforceable lease from the landlord requiring a tenant to pay rent to an owner for the use of Tenant Improvements installed in a leased property. Under the TIFG structure, the rent paid by the tenant covers the entire debt service of the TI loan. This lease arrangement is commonly referred to as “bond-type”.