Should a buyer review tenant financial statements before purchasing an income-producing commercial property?

Yes, and it's one of the more overlooked steps in commercial due diligence. A rent roll tells a buyer what a tenant is supposed to be paying, but it says nothing about how financially stable that tenant actually is or how likely they are to keep paying it. Reviewing a tenant's financial statements, where the lease or the tenant is willing to provide them, gives a much clearer picture of the income stream's real durability, particularly for tenants paying percentage rent or representing a large share of the property's total income.

This matters most for smaller or single-tenant properties, where one tenant's financial trouble can have an outsized effect on the property's income, and for retail tenants whose sales, and therefore percentage rent, genuinely fluctuate with their business performance. A strong rent roll on paper can mask a tenant that's actually struggling, which only becomes apparent once you look past the lease document itself.

Buyers should request financial statements or, at minimum, sales reporting history for material tenants as part of due diligence, and factor tenant financial health into how conservatively they underwrite the property's future income, rather than relying solely on current, contracted rent figures.