Debt Yield Calculation
Just wondering how each institution calculates Debt Yield...do you normally include a vacancy factor and structural reserve in a pro-forma calculation of Debt Yield? If no, why not?
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Vacancy factor yes - the calculation is NOI over loan amount, you have to take vacancy to get there.
Structural reserve is going to be firm dependent - most lenders will deduct some sort of reserve to be conservative.
There is a huge difference between your loan covenant debt yield triggering cash management and your ACTUAL debt yield
NOI or net cash flow after replacement reserves and TI/LC reserves divided by the loan amount.
Depends on the lender. Either (i) debt yield on NOI or (ii) net cash flow debt yield (including TI/LC/CapEx reserves) are what you’ll like want to look at. CMBS, for example, will usually calc debt yield including those reserves.
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