Debt Service Coverage Ratio

[Karan Arora]

I understand the DSCR is calculated by diving net operating income by the debt service amount. The questions is that my lender wants to use the tax return of the owning entity to come up with this net income amount. They say that they will add up the depreciation and the interest amounts back to the income but this restricts me in fully expensing any capital expenses and forces me the account for them as assets and depreciate.

I am also thinking about the asset management fees which are usually below the net operating income and I believe the lender should not be using this asset management fees against us when calculating the DSCR. Am I correct here? Any ideas on how to tackle this situation?