📊 Definition
Fixed-Charge Coverage Ratio (FCCR) measures the property's ability to cover all fixed obligations including debt service, capital expenditures, and other required payments. It's a more comprehensive coverage metric than DSCR.
The Formula
Expressed as a ratio (e.g., 1.15x)
Example Calculation
A property with NOI, debt service, and capital obligations:
Where Does the Data Come From?
FCCR requires comprehensive financial data:
- NOI: From property income statements
- CapEx Reserves: Replacement reserves for major systems
- Debt Service: Principal + interest payments
- Other Fixed Charges: Ground leases, required reserves, HOA fees, tax obligations
Lenders specify which fixed charges to include in FCCR calculations.
Who Uses This Metric?
Conservative Lenders
Use FCCR instead of DSCR for properties with significant fixed obligations beyond debt service. Ensures all required payments are covered, not just loan payments.
Ground Lease Properties
FCCR is standard for properties on ground leases because DSCR ignores lease payments. $100K annual ground lease is a real cash obligation that must be covered like debt service.
Portfolio Managers
Monitor FCCR to ensure properties generate enough cash flow to cover all obligations. FCCR < 1.0x means the property can't cover fixed charges from operations.
Why This Metric Matters
1. Comprehensive Coverage Metric
DSCR only covers debt. FCCR includes CapEx reserves, ground leases, and other obligations. Property can pass DSCR but fail FCCR if fixed charges are high relative to NOI.
2. CapEx Reality Check
Including CapEx reserves prevents overleveraging. Lenders require $300/unit/year reserves on older properties. On 200 units, that's $60K—reducing cash flow available for debt service.
3. Ground Lease Adjustments
Ground leases are debt-like obligations but not captured in DSCR. FCCR properly accounts for these payments, preventing overleveraging on ground lease properties.
💡 Pro Tip
When underwriting acquisitions, always calculate both DSCR and FCCR. Also monitor interest-only coverage during bridge loan periods and debt yield for rate-independent analysis. DSCR may look strong, but FCCR reveals if the property truly generates enough cash after all fixed obligations. This prevents nasty surprises post-closing.
Many portfolios only calculate FCCR at underwriting, then lose track of it as markets and expenses change. BubbleGum BI keeps DSCR and FCCR updated from your income statements and loan data so you can spot emerging coverage issues early at both the asset and portfolio level.
Frequently Asked Questions
How is FCCR different from DSCR?
DSCR = NOI ÷ debt service. FCCR = (NOI - CapEx) ÷ (debt service + other fixed charges). FCCR is more conservative—subtracts CapEx from numerator and adds fixed charges to denominator. FCCR is always lower than DSCR.
What fixed charges are included in FCCR?
Debt service (always). CapEx reserves (almost always). Ground lease payments (if applicable). Required reserves (replacement, tax escrows). Sometimes: HOA fees, master lease obligations, mandatory improvement escrows. Varies by lender and loan terms.
What's a typical minimum FCCR?
Typically 1.15-1.20x (vs. 1.20-1.25x for DSCR). Lower because it's more comprehensive. Some conservative lenders require 1.25x FCCR, which effectively means 1.35-1.40x DSCR equivalent.
Should I use DSCR or FCCR for underwriting?
Calculate both. Use DSCR for standard loan sizing. Use FCCR to ensure property truly supports debt after all obligations. If FCCR is too tight (<1.15x), reduce leverage even if DSCR looks good.
How do I improve FCCR?
Increase NOI (same as improving DSCR). Reduce debt service (lower loan amount or rate). Use our DSCR calculator to model improvements. Minimize fixed charges (negotiate lower ground lease, reduce required reserves). Buy fee-simple properties to avoid ground leases entirely.
Track All Fixed Obligations
BubbleGum BI calculates both DSCR and FCCR via our financial dashboard, ensuring you account for all fixed charges. Use our DSCR calculator to model loan capacity.
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