Megalytics, Inc. is a cutting-edge analytics firm that empowers landlords and real estate investors with predictive insights. Our proprietary scoring system accurately ranks Commercial Real Estate (CRE) potential tenants against their industry median, helping landlords assess the risk of tenant default on lease agreements.

The Problem. Landlords often struggle to effectively assess the risk of potential tenant default. Traditional methods such as credit score analysis and financial statement evaluation can provide some insights, but often lack qualitative insights that help refine predictive capability and fail to account for industry-specific risk factors. These methods often fall short in warning landlords about the true risk of default.

The Megalytics Solution. Our solution is a game-changer. The Megalytics Viability Assessments (“MVAs”) proprietary scoring system ranks CRE potential tenants against their industry peers, providing a comparative analysis of their financial stability and default risk. This robust system combines financial analysis with other industry-specific risk factors, allowing for a comprehensive, predictive view of potential tenant default.

Case Study: Predicting Tenant Default Consider the example of a tenant who was initially scored as a moderate-risk candidate, in 2020, by our system. The score indicated a higher likelihood of lease default as compared to other tenants in the industry. As the tenancy progressed, a second score, in December 2022, revealed an even greater risk, highlighting further deterioration in the tenant’s overall condition. This decline in the tenant’s score was a strong signal of operational distress leading to a potential default, which culminated in the tenant filing for bankruptcy and defaulting on their lease agreement.

Impact and Implications Our scoring system provided an early warning to the landlord about the tenant’s deteriorating financial health and escalating risk of default. Armed with this insight, the landlord had the opportunity to proactively address the situation and mitigate potential financial losses. Without the potential predictive capability of our scoring system, the landlord may have been caught unaware by the tenant’s bankruptcy, facing potential financial and operational repercussions. Our system also provided the landlord with Risk Mitigations Options (“RMOs”) that can further mitigate the risk of default.

Conclusion This case study illustrates the power of Megalytics’ scoring system as a alternative predictive tool for assessing tenant default risk. It underscores the critical importance of utilizing robust, analytics in the management of tenant risk. As landlords continue to navigate the increasing complexities of the CRE landscape, tools like Megalytics’ proprietary scoring system will be indispensable in their risk management toolkit.

Don’t let tenant risk disrupt your operations. Explore our MVA reports and uncover valuable insights today! Contact us at info@megalytics.net.