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Market Intelligence
Monitor underwriting criteria, LTV caps, and DSCR requirements
Data as of Q4 2025 · Sources: Federal Reserve, FRED, CoStar, CBRE Research
Average DSCR requirements have improved to 1.28x from 2024's 1.35x, reflecting normalized lender appetite. Investment-grade tenants (A-rated or better) achieve 1.25x+ DSCR minimums. Secondary-tier tenants require 1.35-1.45x. Deteriorated/repositioning assets require 1.50x+ DSCR. Triple-net structure (tenant pays operating expenses) supports lower DSCR requirements compared to gross-lease comparables.
Maximum LTV for investment-grade NNN portfolios at 62% average, up from 60% in 2024. Primary market trophy properties achieve 65%+ LTV. Secondary market properties capped at 55-60% LTV. Debt fund lenders more aggressive, offering 65-70% LTV with higher rate compensation (50+ bps). Traditional bank lenders conservative at 55-60% LTV. Leverage availability closely tied to property location and tenant credit quality.
Debt service reserves averaging 9 months (vs 12 months peak in 2023), representing improvement in confidence. Tenant improvement (TI) reserves required for major leases near expiration. Lease renewal risk triggers additional reserves. Typical covenant package includes maximum debt service coverage ratio (annual), minimum DSCR (quarterly), and loan-to-value monitoring. Interest-only periods eliminated—standard amortization from year-one across lender universe.
AAA-rated tenants (Realty Income portfolio companies) achieve 1.20x DSCR, 65% LTV, 6-month reserves. A-rated tenants achieve 1.25x DSCR, 62% LTV, 9-month reserves. BBB-rated tenants require 1.40x DSCR, 55% LTV, 12-month reserves. Non-investment-grade requires 1.55x+ DSCR, 45-50% LTV, 18-month reserves. This tiering ensures appropriate risk pricing relative to tenant quality.
NNN underwriting standards have cycled dramatically over past decade. Pre-2008, DSCR minimums were 1.10-1.15x and LTV approached 75-80%. Financial crisis tightened to 1.50x+ DSCR and 50% LTV by 2009-2010. Recovery 2011-2015 normalized to 1.25-1.35x DSCR and 60-65% LTV. Pre-pandemic 2019 peaked at 1.15-1.20x DSCR and 70% LTV. Pandemic shock re-tightened to 1.50x+ and 45-50% LTV. Current 1.28x DSCR and 62% LTV represents normalized conditions between cycle extremes. Standards should remain stable if economic conditions hold.
Data and analysis on this page are for informational purposes only and do not constitute investment, financial, or tax advice. Figures may be estimated from publicly available sources and should be verified with primary data providers (CoStar, MSCI RCA, CBRE, FRED) before use in investment decisions. Past performance does not guarantee future results.