Thursday, May 7, 2009

An innovative solution to cash-flow difficulties

We have some pretty smart people write for Midwest Real Estate News, Illinois Real Estate Journal and Minnesota Real Estate Journal, commerical pros who really understand the ins and outs of the challenging commerical real estate business.

Our columnists are one of our greatest assets. The information they provide can be invaluable.

William Cotter, a partner with the law firm of Coman & Anderson, PC, in Lisle, Ill., is one of these commercial industry experts. You can check out his column on the power of master leases on the Web site.

A master lease is a creative tool that owners can use to help shore up a cash-flow shortfall at their commerical projects. It's a complicated issue, and one that I can't do justice to in a blog post, but here is an excerpt from Cotter's column that explains it better than I can:

"In general terms, the master lease is simply a lease of all or some portion of a commercial project by a creditworthy 'master tenant.' This legal structure provides supplemental or secondary rent stream for the project. The master tenant will usually be the project owner, or an affiliate of the project owner (for example, a member in the owning LLC, or a subsidiary company). The obligations under a master lease are assigned to the lender as collateral."

Master leases can be used in a couple of ways. Property owners seeking to finance a commercial project, always a struggle these days, can use the master lease as a credit enhancement. Property owners can also use the master lease as a financial inducement to a buyer.

Like I said, Cotter explains it in far more detail. Check out his column: A master lease might be a tool that you can use.

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