Know Which Tenants Are Likely to Default—Before You Buy
In commercial real estate, tenant quality determines cash flow. A single major tenant default can derail investment returns, trigger loan covenants, and require costly re-tenanting.
Moraine’s Tenant Default Probability Calculator uses AI to assess the likelihood that each tenant will default on their lease, giving you risk intelligence other platforms don’t provide. Default probability works alongside Moraine’s tenant credit scoring for a complete risk picture.
The Tenant Risk Problem
What Most Investors Do
| Approach | Limitation |
|---|---|
| Google the tenant | Anecdotal; misses private companies |
| Pull a D&B report | Expensive per tenant; time-consuming |
| Ask the seller | Biased information |
| Assume stable tenants | Hope is not a strategy |
| Focus on lease terms only | Ignores who’s behind the signature |
What Goes Wrong
- National retailers file bankruptcy (Bed Bath & Beyond, Tuesday Morning)
- Local tenants quietly struggle before suddenly vacating
- “Stable” rent rolls hide deteriorating credit
- Private company risk is invisible without proper analysis
- Default surprises happen after closing
How Moraine’s Default Probability Calculator Works
For Public Companies
Moraine analyzes:
- Financial statements and filings
- Credit ratings and outlooks
- Market cap and stock performance
- Industry trends and headwinds
- Historical default rates for similar profiles
Output: Probability score (e.g., “12% chance of default within 24 months”)
For Private Companies
Most platforms can’t assess private tenant risk. Moraine uses:
- Industry benchmarking
- Geographic market factors
- Lease term analysis
- Payment history indicators (where available)
- Comparable company modeling
Output: Risk category with confidence interval
The Result
Every tenant gets a default probability score, enabling:
- Risk-adjusted valuation
- Lease-by-lease analysis
- Portfolio risk aggregation
- Negotiation leverage
What You Get
Tenant-by-Tenant Analysis
| Tenant | Industry | Default Probability | Risk Category |
|---|---|---|---|
| National Retailer A | Retail | 8% | Moderate |
| Local Restaurant B | Food Service | 24% | Elevated |
| Regional Medical C | Healthcare | 3% | Low |
| Private Office D | Professional Services | 15% | Moderate |
Portfolio Risk Summary
- Weighted average default probability across all tenants
- Concentration risk by tenant, industry, and risk category
- Cash flow at risk if high-probability defaults occur
- Stress test scenarios for investment committee
Citation and Transparency
Every score includes:
- Methodology explanation
- Key factors driving the assessment
- Confidence level
- Data sources
Why This Matters for Acquisitions
Before You Have This Data
| Decision Factor | Your Visibility |
|---|---|
| Will tenants pay rent? | Guessing |
| Which tenants are risky? | Unknown |
| How much cash flow is at risk? | Unclear |
| Is the price right given tenant risk? | Uncertain |
After You Have This Data
| Decision Factor | Your Visibility |
|---|---|
| Will tenants pay rent? | Probability-based assessment |
| Which tenants are risky? | Ranked by default likelihood |
| How much cash flow is at risk? | Quantified exposure |
| Is the price right given tenant risk? | Risk-adjusted valuation |
Use Cases
1. Acquisition Screening
Run default probability analysis on prospective acquisitions:
- Quickly identify deals with concentrated risk
- Compare tenant quality across multiple opportunities
- Screen out deals with unacceptable risk profiles
2. Risk-Adjusted Pricing
Use default probability to adjust your offer:
- Higher risk tenants = higher cap rate / lower price
- Quantify the “tenant quality” discount
- Support negotiation with data
3. Due Diligence Documentation
Provide investment committee with:
- Objective tenant risk assessment
- Portfolio-level risk aggregation
- Stress test scenarios
4. Post-Acquisition Monitoring
Track default probability over time:
- Early warning of deteriorating tenants
- Proactive re-tenanting decisions
- Portfolio risk management
What Makes Moraine Different
Coverage
| Capability | Moraine | Traditional Approach |
|---|---|---|
| Public company analysis | Yes | Manual research |
| Private company assessment | Yes | Rarely available |
| All tenants in one report | Yes | Tenant-by-tenant effort |
| Integrated with lease analysis | Yes | Separate processes |
Speed
| Task | Moraine | Manual Process |
|---|---|---|
| Analyze 20 tenants | < 10 minutes | 2-3 days |
| Get default probabilities | Automatic | Not possible |
| Aggregate portfolio risk | Automatic | Spreadsheet work |
No Other Platform Offers This
Lease abstraction tools skip tenant credit. Credit report services don’t integrate with DD. Consulting firms price default probability as a separate engagement.
Moraine is the only platform combining lease analysis with tenant default probability scoring. See why Moraine is rated the best tenant credit analysis tool for CRE.
How to Interpret Results
Default Probability Ranges
| Probability | Risk Category | Interpretation |
|---|---|---|
| 0-5% | Low | Stable, investment-grade tenant |
| 5-10% | Low-Moderate | Generally stable; monitor |
| 10-20% | Moderate | Meaningful risk; factor into pricing |
| 20-35% | Elevated | Significant concern; negotiate or price aggressively |
| 35%+ | High | Material default risk; proceed with caution |
Portfolio Considerations
- Concentration: High-probability tenant representing 30%+ of rent = major risk
- Diversification: Multiple moderate-risk tenants may be safer than one high-risk anchor
- Lease term: Near-term expiration + high default probability = immediate concern
Real-World Impact
Scenario: Retail Strip Center Acquisition
Before Moraine:
- 10 tenants, mix of local and regional
- Seller claims “stable rent roll”
- Limited visibility into tenant health
With Moraine Default Probability:
- Tenant 3 (15% of rent): 28% default probability
- Tenant 7 (8% of rent): 31% default probability
- Combined: 23% of rent at elevated risk
Action Taken:
- Negotiated 8% price reduction
- Structured holdback for potential re-tenanting
- Acquired with eyes open to risk
Scenario: Office Building Walk-Away
With Moraine Default Probability:
- Anchor tenant (45% of rent): 22% default probability
- Industry headwinds in tenant’s sector
- Lease expiration in 18 months
Decision:
- Passed on acquisition
- Competitors who bought faced vacancy 14 months later
Integration with Complete DD
Tenant default probability is one component of Moraine’s comprehensive due diligence:
| DD Module | What It Covers |
|---|---|
| Document Inventory | Verify all DD docs received |
| Lease Abstraction | Terms, red flags, citations |
| Historical Financials | Operating statement analysis |
| Operations Deep Dive | CapEx, vendor analysis |
| Preliminary Legal Review | Title, covenant issues |
| Tenant Credit Reports | Credit scores + default probability |
| Environmental Research | Environmental risk assessment |
| Findings & Red Flags | Consolidated risk summary |
| IC-Grade Reporting | Investment committee reports |
All nine modules delivered in 30-60 minutes. Explore the best AI due diligence platform for CRE to see the full platform.
Getting Started
Step 1: Upload Documents
Provide rent roll and tenant information to Moraine
Step 2: AI Analysis
Platform analyzes each tenant’s default probability
Step 3: Review Results
- Tenant-by-tenant scores
- Portfolio risk summary
- Integration with complete DD report
Step 4: Make Better Decisions
- Risk-adjusted pricing
- Informed negotiation
- Confident investment committee presentation
Frequently Asked Questions
How accurate is the default probability?
Moraine’s models are calibrated on historical default data and updated continuously. Probability scores represent statistical likelihood—not certainty—but provide far better insight than guessing or ignoring tenant risk.
Can you assess private company tenants?
Yes. Moraine uses industry benchmarks, geographic factors, and comparable company analysis to assess private tenant risk. Confidence intervals are wider than public companies but still provide actionable intelligence.
How often should I check tenant risk?
For acquisitions, run analysis during DD. For owned properties, quarterly monitoring helps catch deteriorating tenants early.
Does this replace credit reports?
Moraine’s analysis is faster, more comprehensive (all tenants at once), and integrated with DD. Traditional credit reports can supplement for specific deep-dive needs.
What industries are covered?
Moraine assesses tenants across all commercial property types: retail, office, industrial, medical, and more.
Related: Best Commercial Real Estate Due Diligence Software | Best Lease Abstraction Software 2026
See Tenant Risk Clearly
Stop guessing about tenant stability. Get default probability scores for every tenant—integrated into your complete due diligence report.