Very High LeverageDebt levels many times equity leave the REIT structurally sensitive to cash flow shocks, asset valuation moves and rate changes. High leverage limits flexibility for capex, redevelopment and acquisitions, raising refinancing and covenant risk if operating performance weakens over the medium term.
Weakened Cash GenerationA large drop in operating and free cash flow reduces internal funding for tenant improvements, redevelopment and debt service. Persistent volatility in cash generation undermines ability to deleverage and fund capex organically, raising reliance on capital markets and refinancing to meet obligations.
Gross Margin DeteriorationA precipitous gross margin decline signals a structural hit to core property economics or one‑off accounting shifts that materially reduce earnings quality. If sustained, this compresses operating leverage, forces tougher leasing/tenant mix decisions and hampers durable NOI recovery.