Developer KDC is going to market for roughly $3.5 billion in credit tenant lease financing to fund AT&T’s new global headquarters in Plano, Texas — a deal so large it would dwarf virtually every comparable transaction on record, Bloomberg reported last week.
CGA Capital and CBRE are arranging the debt, which is expected to carry a weighted average life of 18.7 years, according to people familiar with the matter who asked not to be named. JPMorgan Chase already provided a $400 million construction loan to KDC in May, CRE Daily reported, and state filings reviewed by CRE Daily show ground is set to break at the 54-acre campus at 5400 Legacy Drive on December 1, with completion targeted for March 31, 2029.
To understand why the deal’s scale matters, it helps to understand how credit tenant lease financing works. Rather than sizing a loan around the appraised value of a building, a CTL lender underwrites the creditworthiness of whoever has signed the lease. PGIM, one of the most active participants in the CTL space, describes these transactions as structures in which loan proceeds are calibrated to the present value of the tenant’s future rental obligations — the underlying real estate is collateral, but it isn’t the investment thesis. Repayment flows from rent, not from the building’s market price. That makes a CTL deal function more like a very long corporate bond secured by a specific property than a conventional commercial mortgage…