Document ID: chunk:federal_register_of_legislation:F2024L01074:body:0:p58
Version: federal_register_of_legislation:F2024L01074
Segment Type: other
Provision Reference: 
Character Range: 171484–176049

a sustained period of financial stress (e.g. increase in interest rates, downturn in economic growth). The property is likely to default only under severe economic conditions.                                                                        During an economic downturn, the property would suffer a decline in revenue that would limit its ability to fund capital expenditures and significantly increase the risk of default.                                                                                                                    The property's financial condition is strained and is likely to default unless conditions improve in the near term.
Cash-flow predictability

For complete and stabilised property                            The property's leases are long-term with creditworthy tenants and their maturity dates are scattered. The property has a track record of tenant retention upon lease expiration. Its vacancy rate is low. Expenses (maintenance, insurance, security and property taxes) are predictable.           Most of the property's leases are long-term, with tenants that range in creditworthiness. The property experiences a normal level of tenant turnover upon lease expiration. Its vacancy rate is low. Expenses are predictable.                                                                               Most of the property's leases are medium-term rather than long-term with tenants that range in creditworthiness. The property experiences a moderate level of tenant turnover upon lease expiration. Its vacancy rate is moderate. Expenses are relatively predictable but vary in relation to revenue.  The property's leases are of various terms with tenants that range in creditworthiness. The property experiences a very high level of tenant turnover upon lease expiration. Its vacancy rate is high. Significant expenses are incurred preparing space for new tenants.

For complete but not stabilised property                        Leasing activity meets or exceeds projections. The project should achieve stabilisation in the near future.                                                                                                                                                                                         Leasing activity meets or exceeds projections. The project should achieve stabilisation in the near future.                                                                                                                                                                                                  Most leasing activity is within projections however, stabilisation will not occur for some time.                                                                                                                                                                                                         Market rents do not meet expectations. Despite achieving target occupancy rate, cash flow coverage is tight due to disappointing revenue.

For construction phase                                          The property is entirely pre-leased through the tenor of the loan or pre-sold to an investment grade tenant or buyer or the ADI has a binding commitment for take-out financing from an investment grade lender.                                                                                    The property is entirely pre-leased or pre-sold to a creditworthy tenant or buyer or the ADI has a binding commitment for permanent financing from a creditworthy lender.                                                                                                                                    Leasing activity is within projections but the building may not be pre-leased and take-out financing may not exist. The ADI may be the permanent lender.                                                                                                                                                 The property is deteriorating due to cost overruns, market deterioration, tenant cancellations or other factors. There may be a dispute with the party providing the permanent financing.
Asset characteristics
Location                                                        The property is located in a highly desirable location that is convenient to services that tenants desire.                                                                                                                                                                                          The property is located in a desirable location