What governs your proceeds
These are the tests we run on every file: LTV, DSCR, debt yield, LTC, sell-out and release, global DSCR, MADS and days cash. Which one binds, and how often, by asset class.
- Every file we size runs against up to every test at once. The most restrictive one wins, and it’s rarely the one a sponsor expects.
- Debt yield governs most often on stabilized multi-family and office acquisitions priced off pre-2023 comps.
- LTC governs most bridge and construction files, not LTV, because the exit hasn’t happened yet.
- Sell-out and release governs for-sale development; a strong pre-sale number does more for proceeds than a lower rate.
Every test, on every file
Every file that comes across our desk gets run against every test its asset class and deal type carry, not just the one the sponsor came in expecting, and the most restrictive one governs.
The every test, in one credit box
LTV and LTC bound leverage against value and cost. DSCR and debt yield test whether in-place income supports that leverage. Sell-out and release govern for-sale development, where the collateral is units, not cash flow. Global DSCR, MADS and days cash apply to going-concern and non-profit borrowers, where the operating business, not the real estate, is what a lender is underwriting.
"The sponsor almost always names the test they expect to govern. It’s our job to find the one that will, before the lender does."
Why this is worth publishing
A sponsor who knows which test is going to bind before they go to market can do something about it, document NOI, size the pre-sale number, build the operating cash-flow case, rather than finding out from a term sheet that came back short. That’s the whole value of underwriting before placement, made visible.