Interest Coverage Ratio — Woodfine Corporate

A minimum 1.2x interest coverage ratio constrains every Woodfine Direct-Hold asset — no new debt may be issued that would reduce operating-income-to-interest coverage below this floor. The constraint is self-imposed by the corporate entity as a fiduciary discipline; no external lender covenant requires it. It operates alongside the Fiduciary Data Mandate and the Equity Transfer Model as the third structural commitment applied per asset.

[edit]Key takeaways

Every Direct-Hold asset must maintain operating income covering interest by at least 1.2×, blocking any new debt that would push coverage below this floor.
The 1.2 threshold is self-imposed corporate discipline rather than an external lender covenant, giving a 20% operating buffer against vacancy, maintenance spikes, or short-term tenant disruption.
Because the ratio applies per legally isolated asset vehicle, a debt-service shortfall in one asset cannot propagate to others or be masked by cross-subsidy from a stronger asset.

[edit]What the ratio measures

ICR is the ratio of earnings before interest and taxes (EBIT) to total interest obligations. An ICR of 1.2 means the portfolio generates 1.2 dollars of operating income for every dollar of interest owed. At exactly 1.0, income covers interest exactly. Below 1.0, the portfolio cannot service its debt from operating income without drawing on capital reserves.

The 1.2 floor provides a 20% operating buffer. A vacancy rate increase, a maintenance expense spike, or a short-term tenant disruption can reduce income without breaching the interest obligation.

[edit]Why 1.2

The 1.2 threshold is a deliberate structural choice, not a regulatory minimum. Traditional commercial real estate lending typically requires ICR covenants in the 1.2–1.4 range. At 1.2, the corporate entity accepts a tighter margin in exchange for higher borrowing capacity — maximizing the deployable asset base while maintaining the mathematical assurance that operating income covers debt.

[edit]Relationship to asset protection

The ICR floor is the primary mechanism by which the Direct-Hold architecture protects physical assets from foreclosure. A corporate entity that allows its ICR to fall below 1.0 enters a state where debt service depends on capital drawdowns — a structurally unstable condition that the absence of a redemption queue would otherwise leave unmitigated. The 1.2 constraint prevents this by design.

A foreclosure event in one asset vehicle cannot propagate to others because each asset is legally isolated. The ICR applies per-vehicle — it cannot be satisfied by cross-subsidizing a weak asset with a strong one.

A portfolio that maintains 1.2x ICR indefinitely avoids forced asset sales triggered by debt-service shortfalls, preserving long-term equity value without requiring capital injections. The discipline is consistent with the perpetual equity model applied to fractional investment units.

[edit]See also

topic-direct-hold-framework — the ownership structure that the ICR constraint protects
topic-redemption-elimination — why no cash reserve pool exists alongside the ICR floor
topic-fiduciary-data-mandate — the parallel data-sovereignty discipline applied to every Direct-Hold asset