The rent coverage ratio clause typically specifies the minimum ratio of a tenant's income or revenue to their rent obligations that must be maintained to ensure financial stability and mitigate default risk. This clause serves to protect landlords by ensuring that tenants consistently generate sufficient income to cover their rental payments.
Rent Coverage Ratio Rent coverage ratio means the ratio of tenant-reported or, when unavailable, management’s estimate based on tenant-reported financial information, annual EBITDA and cash rent attributable to the leased property (or properties, in the case of a master lease) to the annualized base rental obligation as of a specified date.
As of September 30, 2022, the Company’s portfolio consisted of 1,572 freestanding net lease properties with a weighted average lease term of 14.0 years and a weighted average rent coverage ratio of 4.2x.
Rent Coverage Ratio (x) Rent Coverage Ratio (x) ≥ 2.00x: 73.2%
RENT COVERAGE RATIO For purposes of calculating our portfolio weighted-average EBITDARM coverage ratio (“Rent Coverage Ratio”), we excluded credit-rated tenants or their subsidiaries for which financial statements were either not available or not sufficiently detailed. These ratios are based on latest available information only. Most tenant financial statements are unaudited and we have not independently verified any tenant financial information (audited or unaudited) and, therefore, we cannot assure you that such information is accurate or complete. Certain other tenants (approximately 15% of our portfolio) are excluded from the calculation due to (i) lack of available financial information or (ii) receipt of significant COVID-19 relief funds that may cause reported coverage to differ materially from underlying performance. Additionally, our Rent Coverage Ratio adds back physician distributions and compensation. Management believes all adjustments are reasonable and necessary.
We developed our assumption for initial annual rent of $35.0 million by dividing the trailing twelve months EBITDAR as of September 30, 2018 for the SCC Facilities (approximately $45.5 million) by a rent coverage ratio of 1.3, which is the rent coverage ratio we would typically target for a new triple net lease of a skilled nursing facility.
The Rent Coverage Ratio (RCR) is a financial metric used to evaluate the ability of a property to generate enough income to cover its rental expenses. It is calculated by dividing the Net Operating Income (NOI) of the property by the total rent liabilities. The ratio provides insight into the financial health and viability of a rental property or real estate investment.
The Rent Coverage Ratio is particularly useful in the following scenarios:
To express the Rent Coverage Ratio, you use a simple formula:
[ \text{Rent Coverage Ratio} = \frac{\text{Net Operating Income (NOI)}}{\text{Total Rent Liabilities}} ]
For example:
A property has a Net Operating Income of $100,000 and annual rent liabilities of $80,000. The Rent Coverage Ratio would be calculated as follows: [ \text{Rent Coverage Ratio} = \frac{100,000}{80,000} = 1.25 ]
The Rent Coverage Ratio commonly appears in:
Try our AI contract analysis and extract important clauses and information from existing contracts.
< <
Dive deeper into the world of clauses and learn more about these other clauses that are used in real contracts.
"Representations and warranties are contractual statements made by one or both parties, asserting certain facts and conditions as true at the time of the agreement. These affirmations serve to allocate risk and establish grounds for potential legal remedies if the assertions prove to be false or misleading."
The retroactive effectiveness clause stipulates that the terms and conditions of a contract will be considered effective from a date prior to the actual execution date of the agreement. This allows any actions taken within the specified retroactive period to be covered and governed by the contract, providing legal validity to pre-contractual conduct.
The "Return of Company Property" clause mandates that an employee must return all company-owned items, such as equipment, documents, and keys, upon termination of their employment or upon request by the employer. Failure to comply with this clause may result in deductions from final paychecks, legal action, or other penalties as outlined by the employer's policies.
Fill out the form and we will get in touch with you to give you a personal, customized demo of fynk.
Greetings!
I'm Markus, co-founder of fynk. After you've submitted the form, I'll swiftly get in touch with you.
Also, right after you submit your details, you can pick a time that works best for you for our meeting.
