Q: What is important financial information to the lender (underwriter) regarding the tenant occupying the property?
A: Lenders will evaluate a tenant by many financial measurements and each lender has a different set of financial criteria that they analyze. Most lenders look at the “Net Worth” or if a public company, the “Shareholders Equity”. Both of these financial measurements are excellent indicators of the staying power of the tenant if sales slow down. Lenders also look to the bond rating of the tenant. Generally, Standard and Poors is the rating agency of choice. An important criteria which lenders review is if a tenant is investment grade or less than investment grade. Any company which has an S & P rating which is equal to or above BBB- is considered investment grade. Any company which has a rating which is equal to or less than BB+ is considered less than investment grade. Investment grade tenants will be offered lower interest rates (lower spreads) than less than investment grade since the risk of insolvency is much less for investment grade tenants. While most of our transactions are within investment grade ratings, we work with several lenders who underwrite less than investment grade tenants with specific requirements.