Rent Rolls at Risk - Assessing Commercial Leases
Proper assessment of your prospective borrower's future cash flow from rental income involves both a qualitative and quantitative analysis of the underlying leases. Understanding these key drivers will allow a lender to properly prepare a rental rate sensitivity analysis to stress test projected income.
Topics include:
- Reviewing leases, lease summaries and lease abstracts to extract necessary data
- Understanding the relationship between the Landlord and each Tenant
- Evaluating potential conflicts between the Landlord’s Lender and a Tenant’s Lender (and their economic consequences)
- Assessing the financial strength of the Tenant and any credit support for its lease obligations
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Five Focus Points for Commercial Lease Due Diligence
Proper assessment of your prospective borrower's future cash flow from rental income involves both a qualitative and quantitative analysis of the underlying leases. A sample “Lease Abstract Form” is provided to facilitate the compilation of relevant information. This article discusses five key aspects of a commercial lease which drive this analysis.
September 2017
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Robin Russell
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