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 estimate the 1-year and 5-year default probability for each tenant. 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
Output: Estimated 1-year and 5-year default probability, anchored to S&P, Moody’s, or Fitch ratings where one exists
For Private Companies
Most platforms can’t assess private tenant risk. Moraine uses:
- Industry context
- Geographic market factors
- Lease term analysis
- Publicly available information about the company
Output: Proprietary AI assessment with an estimated 1-year and 5-year default probability
The Result
Every tenant gets an estimated default probability, enabling:
- Risk-adjusted valuation
- Lease-by-lease analysis
- Portfolio risk aggregation
- Negotiation leverage
What You Get
Tenant-by-Tenant Analysis
Sample values, for illustration of the format only:
| 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:
- Key factors driving the assessment
- Supporting 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. Pre-Closing Re-Checks
Re-run the analysis if the rent roll or tenant mix changes before closing:
- Early warning of deteriorating tenants
- Updated risk-adjusted pricing
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 | Built in one pass; review time remains | Days of manual research |
| Get default probabilities | Automatic | Manual research |
| Aggregate portfolio risk | Automatic | Spreadsheet work |
See the best tenant credit analysis tool comparison 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
Integration with Complete DD
Tenant default probability is one component of Moraine’s due diligence modules:
| 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 | 0-100 credit score, implied rating, estimated default probability |
| Environmental Research | Environmental risk assessment |
| Findings & Red Flags | Consolidated risk summary |
| IC-Grade Reporting | IC-ready Excel outputs |
Moraine builds a first-draft model from documents in minutes; review time remains. 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?
The default probability is an AI-estimated 1-year and 5-year figure, not the output of a statistical or calibrated model. Treat it as a screening signal and review it with a qualified underwriter alongside the lease terms and source documents.
Can you assess private company tenants?
Yes. For private tenants, Moraine produces a proprietary AI assessment using industry, geographic, and lease-term context. With less public information available, treat the estimate as less certain than for rated public companies.
How often should I check tenant risk?
Run the analysis during acquisition due diligence, and again if the rent roll or tenant mix changes before closing.
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 supports office, retail, and industrial properties today, and assesses the tenants in those rent rolls.
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.