Operating evidence and financing
What this package helps you examine
Industrial debt depends on the tenant cash flow that survives through the loan horizon and on the cost of keeping the building usable. A long lease can still conceal termination rights, reimbursement gaps or a costly replacement tenant. Present an explicit lease-to-maturity calendar and a funded rollover case rather than relying on the current occupancy percentage.
Translate leases into accepted income
Abstract base rent, recoveries, free rent, escalations, renewal options and termination provisions tenant by tenant. Separate a signed lease from rent commencement and actual collections. Reimbursements should reconcile to recoverable expenses and lease limitations; recovering a cost does not make the cost disappear. For small-bay properties, identify whether delinquency is spread across tenants or concentrated in a few connected businesses.
Test usable collateral and replacement costs
Record clear height, loading, power, yard rights, fire protection and other features relevant to the actual users. Those features are evidence questions, not automatic value credits. Check legal use and environmental history for the contemplated operation. A tenant-specific fit-out may require removal or alteration before another tenant can occupy the space; budget downtime, work, leasing fees and carrying costs together.
Align rollover with the balloon
Place lease expirations, termination elections and renewal-notice dates beside loan maturity and extension deadlines. A refinance case should identify which income is still documented when the next lender reviews the property. Model a tenant loss with an explicit recovery date and funded re-leasing work. The OCC refinance-risk framework supports testing repayment and refinance assumptions; it does not establish a universal minimum lease tail.
Use the workbook
- Use Assumptions!D5 for Base (1) or Downside (2), and the labeled scenario input rows. Enter source data in Lease Schedule!D10:L12; preserve formula cells and an untouched workbook copy.
- Use the Lease Schedule for tenant cohorts. Expiration is the first unpaid old-lease month; month 13 means no expiry in the twelve-month horizon. Inspect downtime, free rent, recoveries and dated TI/commission payments.
- Reconcile Operations to Summary. Apply the entered lender adjustment separately to the modeled cash flow. Sizing uses amortizing debt service, while first-year payments reflect the entered interest-only period.
- In Assumptions, replace illustrative value, LTV, DSCR, debt yield, rate, amortization and requested ceiling with the intended scenario. Review capacities in Debt and Funding. The smallest modeled capacity does not establish eligibility or approval.
- Closing equity includes the entered opening cash and restricted reserves. Additional operating cash need is measured after that opening cash, so do not add it twice. Inspect monthly cash and remaining principal at maturity.
- Read Review for model conventions and limitations. Save each scenario with its supporting evidence and date; actual lender definitions, legal rights and professional findings control the transaction.
Questions to prepare for a lender
Which tenant income survives beyond maturity?
Lease abstracts, complete amendments and a dated expiration/option calendar.
Can reimbursements actually be collected?
CAM or operating-expense reconciliations, caps, exclusions and tenant payment history.
How concentrated is the repayment source?
Tenant and related-party exposure schedule with current financial evidence where available.
What must be spent before replacement rent starts?
Broker-supported downtime assumptions, work scope, contractor bids and leasing commission agreement.
Is the proposed use supported by the collateral documents?
Title, zoning/use evidence, environmental reports and specific easement or yard rights.
What funds a delayed renewal or takeout?
Monthly cash plan, available sponsor funds and documented extension conditions.
03 / Prepare
Build the evidence file
Use this as a preparation checklist. The lender determines the documents, definitions and review conditions for the actual transaction.
Cash flow and operations
- Tenant rent roll with leased area, contractual rent and rent commencement.
- Complete leases, amendments, guaranties, options and termination provisions.
- Monthly billed rent, collections, aging and security-deposit ledger.
- Expense recovery reconciliations with caps, exclusions and disputed balances.
- Property operating statements and actual tax, insurance and utility support.
- Rollover schedule with downtime, new rent, improvements and commissions.
Property and collateral
- Survey, title exceptions and access, truck-court or outdoor-storage rights.
- Legal-use evidence for actual tenants and proposed alternative occupants.
- Environmental history and reports with open conditions and reliance requirements.
- Condition review for roof, slab, loading, fire protection and mechanical systems.
- Power-service documentation and responsibility for tenant-specific upgrades.
- Capital scope identifying removable equipment versus real-property improvements.
Sponsor and execution
- Tenant concentration analysis and sponsor experience in the local industrial segment.
- Borrower ownership and authority documents with guarantor identity.
- Verified post-closing liquidity after other property and business commitments.
- Portfolio debt and contingent obligations that could compete for rollover cash.
- Property-management and leasing responsibilities, including replacement arrangements.
- Equity funding evidence and approvals for the downside leasing budget.
Closing and funding
- Estoppels or other tenant confirmations requested by the lender.
- Current payoff, release requirements and realistic notice periods.
- Lease-consent, assignment or nondisturbance requirements identified by counsel.
- Reserve and holdback terms with accepted completion evidence.
- Insurance, casualty restoration and business interruption assumptions.
- Loan maturity, extension deadlines and a monthly funding bridge.
Watch for these assumptions
- Do not assume an unexercised renewal option is committed rent.
- Tenant-paid costs can return to the owner during vacancy; carry the expense as well as lost rent.
- A large single-tenant building and a small-bay portfolio require different concentration and re-leasing assumptions.
- A collateral feature supports debt only through accepted value or cash flow; do not assign an unsupported premium.
- Lower first-year TI and leasing-commission spending caused by delayed occupancy is not a cost saving. Obligations scheduled after month 12 fall outside this forecast and require separate funding analysis.
Before you rely on the result
- Identify the first lease or financing deadline that requires an irreversible decision.
- Fund tenant improvements and downtime before assuming replacement collections.
- Test the refinance using documented remaining income, not only today's occupancy.
Scope and limitations
- Educational analysis; not a financing offer, appraisal, legal opinion or program eligibility determination.
- Workbook figures and thresholds are illustrative editable assumptions, not current lender quotes or universal underwriting standards.
- Document requests depend on the lender, transaction, jurisdiction and property; address unresolved issues with the relevant qualified professional.
Sources and applicability
These references support the stated asset and risk context. The questions and document lists are preparation tools, not a statement that every lender requires or accepts the same package. Actual contracts, applicable rules and the chosen lender determine the transaction requirements.
- OCC Bulletin 2024-29 — Refinance RiskTransaction-Level Risk Management and Risk-Rating Considerations · Checked 2026-10-21Bank supervisory framework; no universal lease-tail or extension requirement is inferred.