Glossary

Lease Coverage Ratio (Senior Housing / Skilled Nursing)

Also known as: rent coverage ratio (healthcare)

The ratio of a facility's operating cash flow (typically EBITDAR or EBITDARM) to its annual base rent obligation under a triple-net operator lease, used by landlords to monitor an operator's ability to pay rent.

Unlike a debt-service coverage ratio, which lenders track against a mortgage, lease coverage ratio is the landlord's own early-warning system on a master-leased portfolio, often reported facility-by-facility and rolled up to a portfolio-wide weighted average in REIT investor disclosures. A declining trend -- even above 1.0x -- signals eroding operator margins from wage inflation, occupancy softness, or reimbursement cuts well before an actual rent default, and portfolio leases often include cross-default and cross-collateralization provisions specifically so a landlord can act on early coverage deterioration across a pool of facilities rather than waiting for a single-asset default.