Underwriting Standards
Structured financial evaluation standards applied to all acquisition opportunities.
Purpose
Algonquian Real Estate applies defined underwriting standards to ensure acquisitions meet conservative financial, operational, and risk management thresholds.
No property advances to formal offer without documented underwriting review.
Core Financial Metrics
Debt Service Coverage Ratio (DSCR)
Target stabilized DSCR: ≥ 1.25x
Loan-to-Value (LTV)
Target leverage range: 70–75%
Vacancy Assumption
Minimum underwriting vacancy: 5–8%
Expense Normalization
Expenses are evaluated against historical performance and market benchmarks to prevent underestimation.
Stress Testing Procedures
Each acquisition is evaluated under conservative sensitivity scenarios, including:
• Interest rate increase sensitivity (+100 basis points)
• Elevated vacancy scenarios
• Increased maintenance cost assumptions
Transactions must remain financially viable under reasonable stress conditions.
Reserve Requirements
Minimum post-closing liquidity:
• 3–6 months PITI equivalent
• Operating reserve allocation
• Capital expenditure contingency when applicable
Reserve levels may be increased based on asset age, condition, or risk profile.
Property Review Criteria
In addition to financial metrics, each asset is evaluated based on:
• Neighborhood stability
• Tenant profile and lease structure
• Deferred maintenance exposure
• Insurance considerations
• Regulatory and compliance exposure
Properties presenting elevated unmanaged risk may be declined regardless of financial performance.
Decision Framework
Acquisition decisions are guided by:
• Cash flow durability
• Capital preservation
• Long-term ownership viability
• Risk-adjusted return
The objective is consistent execution — not accelerated expansion.
Summary
These underwriting standards serve as minimum thresholds and may be applied more conservatively based on asset-specific risk factors.
Structured underwriting discipline is foundational to sustainable portfolio growth.