Anchor rent can remain current while shop rent falls under different co-tenancy clauses. A dated clause model can reveal a weak covenant-testing quarter that annual coverage conceals.
A shopping center’s anchor can continue paying rent while its closed store triggers relief for other tenants. In that case, an ordinary anchor-vacancy model can miss the actual loss. The analysis must follow operating conditions and each affected lease’s remedy, not just whether anchor rent is collected.
Build a clause-by-clause timeline with transaction counsel. Identify the required condition, notice, waiting period, substitute performance, relief calculation and cure. Opening co-tenancy and continuing co-tenancy can behave differently. A replacement that cures one lease may not cure another.
Turn the lease abstract into dated states
For each shop, identify the period before a trigger, any waiting or cure period, the remedy period and the evidence that ends it. Record whether a tenant must satisfy its own operating or sales conditions to claim relief. Preserve the source clause and amendments; a summary label such as “co-tenancy applies” is not enough to calculate cash.
Brixmor’s 2025 Form 10-K identifies potential rent reductions or termination rights when an anchor fails to occupy its premises. That issuer disclosure confirms the risk category, not the terms of the fictional clauses used below. Actual rights and notice requirements must come from the subject leases.
Separate legal cure from commercial recovery. A qualifying replacement may end a rent remedy without immediately restoring customer traffic. Conversely, a busy new occupant might help sales without satisfying the named use or size in a particular clause. Model contractual and business effects on separate rows.
Worked exhibit: rent-paying darkness and two different cures
Assume a hypothetical center has $600,000 of annual cash flow before debt and $480,000 of annual debt service, paid $120,000 per quarter. The anchor closes at the beginning of month 1 but continues paying its full $240,000 annual rent. There is no direct anchor-rent loss in this example.
Shop A normally pays $200,000 annual base rent. Its invented clause reduces base rent by 50% beginning in month 4 and ends the reduction when an accepted replacement opens in month 10. Shop B normally pays $120,000 annually. Its invented clause substitutes 6% of $100,000 monthly eligible sales, or $6,000 monthly rent, beginning in month 4. The replacement does not satisfy Shop B’s assumed cure definition, so its relief continues through month 12.
| Period | Shop A rent reduction | Shop B rent reduction | Total reduction |
|---|---|---|---|
| Months 1–3 | $0 | $0 | $0 |
| Months 4–6 | $25,000 | $12,000 | $37,000 |
| Months 7–9 | $25,000 | $12,000 | $37,000 |
| Months 10–12 | $0 | $12,000 | $12,000 |
| Full year | $50,000 | $36,000 | $86,000 |
Shop A loses $200,000 × 50% × 6/12 = $50,000. Shop B loses ($10,000 − $6,000) × 9 = $36,000. Assuming no other income or expense change, annual cash flow falls to $514,000, while the anchor remains fully current.
These are fictional negotiated terms. The example assumes all necessary notices and tenant conditions are satisfied and no termination right is exercised. Those assumptions must be changed if the actual documents say otherwise.
Test the covenant period actually written in the loan
Annual coverage is $514,000 ÷ $480,000, approximately 1.07×. If cash flow was otherwise evenly distributed, the second and third quarters each have $150,000 − $37,000 = $113,000, giving quarterly coverage of approximately 0.94×.
For a separate covenant illustration, suppose a loan requires 1.05× on a full-year test. Annual cash flow exceeds the $504,000 required numerator by $10,000. A different loan using a 1.10× quarterly test would require $132,000 each quarter; the second quarter would be $19,000 short. These thresholds and periods are scenario inputs, not industry standards or terms offered by Jaken Finance Group.
Do not choose whichever testing period passes. Read the actual numerator, annualization convention, test date, exclusions and cure provisions. A trailing-twelve-month covenant does not automatically behave like the stand-alone quarter shown here. The example demonstrates why period definitions belong beside the ratio.
Stress the cure evidence and the alternate rent
If Shop A’s cure slips three months, the additional reduction is $25,000, before other effects. If Shop B’s eligible monthly sales fall to $80,000 under the same assumed formula, substitute rent becomes $4,800 and the nine-month reduction increases to $46,800. That adds $10,800 to the original loss.
Sales definitions, exclusions, reporting dates and audit rights matter to percentage-based relief. Use the lease’s eligible sales, not a gross sales figure copied from a tenant presentation. A year-end true-up can also make the cash calendar differ from the final annual entitlement.
Avoid deducting the same lost rent in both the co-tenancy row and a blanket vacancy allowance. If business weakness creates a separate collection loss, identify the affected rent after contractual relief and show the additional assumption explicitly.
Connect the remedy calendar to financing decisions
Prepare a register showing each material lease, current state, required evidence, next deadline, monthly cash effect and person responsible. Confirm which lender consents are needed for replacement leases, capital work or amendments. A lender’s future advance may depend on conditions that must be tested after the cash-flow deterioration.
Keep the cost of curing the trigger separate from rent loss. Replacement improvements, commissions, professional fees and carrying costs require their own funding. A model that restores rent in month 10 should show how the work needed for that opening is paid before month 10.
The lender comparison is strongest when both parties can reproduce the same monthly clause effects and covenant periods. That makes it possible to discuss reserves, leverage, cure rights and timing against a concrete downside instead of relying on a center-wide occupancy percentage that misses the contractual loss.
Sources and evidence
- Brixmor — 2025 Form 10-KItem 1A, tenant obligations and anchor occupancy risk · Checked 2026-10-21 · Issuer-specific risk disclosure, not an interpretation of subject leases.
Source dates and applicability matter. Report an error or a changed source.