LIVE CASE STUDY, 5/13 | Waiting to refinance? Learn how a misread on the market cost one CRE owner an extra $17k a month.
LIVE CASE STUDY, 5/13 | Waiting to refinance? Learn how a misread on the market cost one CRE owner an extra $17k a month.
Use our Quick Quote Yield Maintenance Calculator to get an accurate estimate of the cost of your loan exit in only a few minutes.
Yield maintenance provisions are complex. If you aren’t careful, you could end up paying more than necessary. We offer unbiased advice and unsurpassed expertise so that you can make an informed decision.
Defease With Ease | Thirty Capital will provide you with a custom Yield Maintenance Report so you can make an informed decision about whether to accept a lender’s payoff number or contest it.
No. Prepayment provisions in loan documents vary significantly from lender to lender and loan to loan. Each provision specifically dictates yield maintenance methodology, index references for the discount rate, timing for when to identify the reference rate, and calculation of the discount rate, among other details. There is no standard provision used by lenders. In fact, a savvy drafter can make subtle changes to a yield maintenance provision that dramatically effect the amount of the prepayment penalty a borrower pays upon prepaying the loan. Many lenders have a handful of models that they force each yield maintenance provision into even if it’s not exactly accurate. As a result, lenders can come up with prepayment penalties that are not exactly tied to the specific language, which means their calculation could be lower or higher than one tailored to the specific yield maintenance provisions in the loan documents.
Some common examples of different methodologies that are all referred to generically as Yield Maintenance are (i) the Net Present Value of future payments method, (ii) the interest differential times PV factor method, (iii) the Net Present Value of interest differential based on prepaid balance method, (iv) the Net Present Value of interest differential based on amortizing balance, and (v) the Yield Maintenance Penalty = the cost of a defeasance portfolio method. Within each of these five common categories, there can be myriad iterations resulting from small language tweaks and interpretations.
Chances are you can never prepay a CMBS loan at a par or at a discount with any Yield Maintenance prepayment provision. Yield Maintenance provisions typically have a minimum 1-3% prepayment floor that is triggered if the calculation results are below the floor. In other words, most yield maintenance provisions require the borrower to pay the greater of the yield maintenance penalty or a percentage of the loan balance (usually 1-3%).
That’s where we come in. As an industry leader in the field of defeasance and yield maintenance calculations, we provide the knowledge and transparency needed to ensure our clients are treated fairly.
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