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Senior-secured construction Loans to 6S Development for the construction of commercial retail properties to be triple-net leased to credit tenants. Typically 12-36 month maturities.
Triple Net Leased properties are, within Real Estate, some of the safest possible collateral types. Maker is effectively financing the construction of a building that will be leased to a retail tenant, so it does not benefit directly from the rental payments from that tenant.
Maker does benefit indirectly: if a reliable tenant (good credit) has signed a lease contingent upon the compliant construction of a retail building, as long as the developer delivers the agreed-upon product, the tenant is locked into a long-term lease.
A bank or financial institution is very likely to issue a loan against this property once the lease begins and the tenant is paying. This financial institution will “take out” Maker’s construction loan, making us whole. So Maker’s exposure to the end asset is de-risked by the commitment from a credit tenant to pay rent as per the lease.
6s Capital draws DAI from a revolving credit facility provided by Maker.
Credit Tenant: A large company with a public credit rating. Usually a credit tenant lease is guaranteed by the tenant’s parent company. In the case of 6S’ business, credit tenants include O-Reilly’s Auto Parts and Tesla.
Triple-Net Lease (NNN): The tenant, as opposed to the landlord, is responsible for real estate taxes, building insurance, and maintenance. Because the landlord does not have to be overly involved in monitoring a NNN property, such passive investments serve a similar role to a bond in an investor’s portfolio.
Page last reviewed: 2022-10-05
Next review due: 2023-10-05