A tenant opening after a forbearance deadline may improve the property without creating a timely refinance. Connect the lease milestones, rent receipts, lender evidence period and peak cash need to the actual agreement end date.
Hypothetical forbearance ending June 30. A property’s $5 million loan is subject to a written forbearance arrangement covering May and June. The agreement’s conditions and legal effects are assumed established for the case; no further relief is automatic. The borrower expects a new tenant to rescue the refinancing plan.
The tenant is scheduled to open July 15. Under its hypothetical lease, cash rent begins August 1 after the stated initial free-rent interval. The proposed refinance lender requires two full months of received rent from that tenant before accepting its income in this particular file. August and September would be the first two qualifying months if payments arrive as expected.
The earliest modeled refinance is therefore October 1, subject to the rest of the closing process. A requested extension only through July 31 would end before the first rent receipt, much less the required two-month evidence period.
Put each milestone on the same calendar
| Milestone | Hypothetical date | What it establishes |
|---|---|---|
| Current forbearance ends | June 30 | Existing agreed period ends |
| Remaining tenant capital payment due | July 1 | $80,000 cash use |
| Tenant opens | July 15 | Physical business opening, if documented |
| Cash rent begins | August 1 | First scheduled rent payment |
| Second full rent month completes | September 30 | Evidence period can be evaluated |
| Earliest modeled refinance | October 1 | Conditional on lender acceptance and all closing requirements |
An opening date, a rent commencement date and a lender’s accepted evidence date are different. The borrower should not replace any of them with a single “leased” label. A delay in inspections or tenant work can move more than one date and increase funding needs.
The interagency workout statement emphasizes realistic repayment evidence, effective legal arrangements and monitoring. It does not obligate a lender to extend a forbearance or suspend remedies while a proposal is under discussion. Counsel should confirm the actual agreement’s deadlines and required actions.
Calculate cash through the evidence period
Before the tenant pays, monthly cash flow available for debt service is $25,000 and required monthly interest is $45,000. The property loses $20,000 each month. It has $100,000 of unrestricted cash at the start of May, leaving $60,000 after May and June.
Assume a separately proposed arrangement would permit the borrower to continue through September 30, with the October 1 payoff mechanics expressly addressed. It requires a $30,000 fee paid July 1. This is a hypothetical alternative, not an effective modification. The borrower must also pay the remaining $80,000 tenant capital cost on July 1.
July still loses $20,000 because opening does not trigger immediate cash rent. Beginning in August, the tenant adds $30,000 of monthly net cash after its associated operating costs. Total monthly cash flow becomes $55,000, leaving a $10,000 surplus after the same $45,000 interest in both August and September.
| Cash movement after June 30 | Balance without added equity |
|---|---|
| Opening unrestricted cash | $60,000 |
| July 1 capital payment and proposed fee | −$50,000 |
| After July operating deficit | −$70,000 |
| After August surplus | −$60,000 |
| After September surplus | −$50,000 |
The ending deficit is $50,000, but the peak additional cash requirement is $70,000. Supplying that amount before the July uses leaves zero at July-end, $10,000 at August-end and $20,000 at September-end. A real plan should also specify any required minimum operating cushion and intramonth timing; those could increase the need.
Test why the refinance depends on evidence
Before the new tenant qualifies, accepted annual cash flow is $300,000. At 1.25× DSCR and a 9% annual debt-service constant, gross debt capacity is approximately $2,666,667. After 2% new-loan costs, proceeds are $2,613,333, leaving a $2,386,667 gap against the $5 million payoff.
After qualifying the full tenant cash flow, accepted annual cash flow would become $660,000. DSCR capacity rises to about $5,866,667, but a separately stipulated collateral limit caps gross proceeds at $5.5 million. After 2% costs, net proceeds are $5.39 million, leaving $390,000 before excluded payoff charges or reserves.
That projected surplus is conditional on the tenant paying, the lender accepting the evidence and the whole financing closing. It cannot fund July’s capital payment. Nor should the remaining $20,000 operating cash be assumed distributable merely because the refinancing calculation shows a surplus.
Make the extension request match the real dependency
The borrower should present the lease, completion schedule, occupancy evidence, expected rent receipts, proposed lender’s evidence requirements and the full cash bridge. The requested period must cover the actual dependency chain and payoff logistics, with a fallback if the tenant or lender timeline moves.
Under these facts, a July 31 extension does not reach a credible takeout. A longer effective arrangement and at least $70,000 of timely additional cash are needed even in the successful base schedule. The decision turns on documented dates and accessible funding, not simply on whether the property looks improved after the tenant opens.
Sources and evidence
- Interagency policy statement on prudent CRE loan accommodations and workoutsIV. Long-Term Loan Workout Arrangements · Checked 2026-10-21 · June 2023 policy statement. Does not entitle a borrower to an accommodation or impose the hypothetical terms.
- OCC — Commercial Real Estate Lending, version 2.0Income-Generating Capacity, printed pp.42–43; construction and lease-up monitoring, pp.45–48 · Checked 2026-10-21 · Bank supervisory context. March 2022 publication, with March 20, 2025 reputation-risk edits. All case amounts, thresholds and contractual conditions are invented teaching assumptions.
Source dates and applicability matter. Report an error or a changed source.