Defease With Ease & Thirty Capital Financial: Updated Look, Same Unmatched Services!
Defease With Ease & Thirty Capital Financial: Updated Look, Same Unmatched Services!
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.
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.
“No matter where we looked, whether it was referrals from other lawyers or referrals from fellow self-storage operators, we always end up at Thirty Capital Financial. With the timely flow of information and sharing of data, I couldn’t be more pleased with the wonderful work of Thirty Capital Financial.”
“My firm has engaged Thirty Capital Financial for more than 15 multi-state transactions. Your professionalism and vast knowledge has put our clients at ease.”
“This was one of the simplest financial transactions I have participated in during my 25+ years in the real estate industry. All I had to do was sit back and watch. The process took only 2 weeks and was handled in a very professional manner.”
Ask about defeasance, yield maintenance, or interest rates hedging.
Provide your email address to receive regular market perspectives, research, and news from Thirty Capital Financial.
"*" indicates required fields
"*" indicates required fields
"*" indicates required fields
