NOI vs. EBITDA
NOI vs EBITDA explained — NOI is a property-level income measure, EBITDA is company-level; in a sale-leaseback the tenant's EBITDAR must cover the rent.
By Michael Laudino, LFO Capital LLC · Published 2026-06-17
NOI is a property-level number — the revenue a single asset produces minus its operating expenses. EBITDA is a company-level number — a business's earnings before interest, tax, depreciation, and amortization. One measures a building; the other measures an operating enterprise, and conflating them is a common underwriting error in single-tenant deals.
NOI deliberately stops at the property line. It is revenue less operating expenses, and it excludes debt service, capital expenditures, depreciation, income tax, and corporate overhead. Those exclusions are the point: NOI isolates the asset's earning power so it can be capitalized into value independent of how any particular owner finances or taxes it.
EBITDA sits a level up, inside the tenant's business. It strips out interest, tax, depreciation, and amortization to show the cash an operating company generates before financing and accounting noise. In a single-tenant or sale-leaseback structure, that company is the source of the landlord's rent — so the tenant's EBITDA, and more precisely its EBITDAR (EBITDA before rent), is what has to cover the lease.
The discipline is to keep the two on their proper sides of the deal. The landlord earns the rent as NOI; the tenant services that rent out of its EBITDAR. Rent coverage — tenant EBITDAR divided by rent — tells you whether the income you're capitalizing is durable. A clean property NOI built on a tenant whose EBITDAR barely clears the rent is thin income dressed up as safe income. Build the full income picture in a pro forma and underwrite both levels. More context in our underwriting hub.
Worked example — sale-leaseback rent coverage
| Line | Amount |
|---|---|
| Property NOI (landlord earns) | $700,000 |
| Tenant EBITDAR (services the rent) | $980,000 |
| Rent coverage ($980,000 ÷ $700,000) | 1.40x |
The discipline: the landlord books the $700,000 as NOI, but it is the tenant's $980,000 of EBITDAR that pays it — 1.40x coverage is what makes that income durable.
Frequently asked questions
Is NOI the same as EBITDA?
No. NOI is a real-estate, property-level measure — revenue minus operating expenses for a single asset, excluding debt service, capex, depreciation, and income tax. EBITDA is a corporate measure — a company's earnings before interest, tax, depreciation, and amortization across the whole business. They live at different levels: one values a building, the other values an operating company.
What is EBITDAR and why does it matter in a sale-leaseback?
EBITDAR is EBITDA before rent — earnings before interest, tax, depreciation, amortization, and rent. In a sale-leaseback the tenant's EBITDAR is the pool of cash available to pay the rent that becomes the landlord's NOI, so rent coverage is calculated as tenant EBITDAR divided by rent. It isolates whether the operating business can actually service the lease.
Which figure should a landlord underwrite — NOI or the tenant's EBITDA?
Both. The landlord earns NOI, but that NOI is only as durable as the tenant's ability to pay it, so you underwrite the tenant's EBITDAR-to-rent coverage alongside the property income. Strong NOI from a tenant whose EBITDAR barely covers the rent is fragile income, not safe income.
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