What kind of income do economic covenants in a lease primarily affect?

Economic covenants in a lease primarily affect the income generated by the real estate asset because these covenants define specific financial obligations and restrictions related to the use of the property. They can stipulate minimum income levels that the tenant must achieve or limit the tenant’s ability to change their operations, which directly impacts the revenue generated from the leased space.

By securing certain income thresholds and financial standards, economic covenants help landlords assess the viability and profitability of their investment. Such provisions can provide assurances that the tenant will generate sufficient income to fulfill lease obligations, thereby protecting the landlord's revenue stream.

While other elements of the property, such as operating expenses and maintenance costs, are important for overall financial management, economic covenants specifically relate to the tenant's capacity to produce income from the property, which in turn influences the asset's overall market value. Therefore, the impact of economic covenants is most direct on the income generated by the real estate asset.