Covenant is a term that refers to a business’s creditworthiness or bank-ability.
Talking specifically to CRE, tenants that are more creditworthy, reduce risk to the landlord. Low credit risk tenants are called bank-able tenants.
Strong covenant tenants enable the landlord to borrow more (higher LTV) on better terms from the banks.
Since interest is a massive cost to property funds, the lower the cost of borrowing, the lower the rental the landlord has to charge to make the same return.
Generally a landlord’s preference is for strong covenant tenants on long leases (say 5 years plus) on high guaranteed escalations.