Tenants, terms, rollover
Retail & mixed-use
Neighbourhood centres, unanchored strips, single-tenant net lease and ground-floor retail beneath apartments.
Retail is a lease-by-lease asset. The income is only as long as the leases, so underwriting spends most of its time on a rollover schedule: who expires when, at what rent, and what it costs to replace them.
What this programme covers
- Neighbourhood and community centres, unanchored strip, single-tenant net lease
- Mixed-use where retail is the ground floor of a residential or office building
- Rollover schedule, tenant sales where reported, and a market rent comparison
- Leasing and tenant-improvement reserves sized against the expiry schedule
Debt yield binds most retail deals, because the same NOI supports far less debt at a 10% floor than at 8%.
Test it on your numbersWhat underwriting actually reads
The rollover schedule
Every lease plotted against the loan term. Concentrated expiry inside the term costs leverage; expiry beyond it earns some back.
Rent versus market
A tenant paying well above market is a rollover risk, not a strength. Underwritten rent is capped at market for space expiring inside the term.
Tenant credit and sales
Where sales are reported, occupancy cost as a share of sales says more about renewal probability than a credit rating does.
Co-tenancy and exclusives
Clauses that let a tenant leave or abate when a neighbour does are read in full, not summarised.
Who it suits
- Owners of one to five centres
- A net-lease acquisition with a long remaining term
- Refinancing after a re-tenanting
- Not this programme: Enclosed regional malls and single-tenant space with under three years of term remaining.
Illustrative scenarios in this class
- S-02 — illustrativeUnanchored neighbourhood strip$4,960,000 · Debt yield bindsA 10% debt yield floor sets the loan at exactly ten times NOI. LTV would have permitted 70% and coverage 1.30× would have permitted more still; the floor is what binds, and it binds first.
- S-09 — illustrativeGround-floor retail beneath 22 apartments$3,640,000 · Debt yield bindsBlended assets get blended floors. The residential income supports a 8.5% floor and the retail a 10%; weighted by NOI the file underwrites at 10% and sizes at ten times income.
Questions on this programme
Does a vacant anchor kill the deal?
It changes it. Vacancy is underwritten at zero income with the carry cost deducted, and the loan is sized on what remains — which is usually a bridge structure rather than permanent debt.
How are percentage rents treated?
Excluded from underwritten NOI unless there is a multi-year history, and then only at the trailing minimum.