What can be a result of a tenant defaulting on lease obligations?

When a tenant defaults on lease obligations, it typically leads to a reduction in the REIT's rental income. This is because the REIT relies on the rental payments from tenants as a primary source of revenue. A default means that those payments are not being made, which can directly impact the financial performance of the REIT. This reduction in revenue can also lead to ripple effects throughout the organization, potentially affecting its ability to meet financial obligations, pay dividends, or invest in property improvements.

Moreover, a default may require the REIT to spend additional resources on legal proceedings or on the process of finding new tenants to fill the vacant space, further stressing its financial situation. Therefore, the consequence of tenant default is significant, making the reduction in rental income a clear and direct outcome of such an event.