How are returns calculated on the debt side?
Obviously an interest rate is being charged, but lenders make origination fees, the timing of payments can vary, etc. Is IRR the metric used on the debt side to value the cash flows coming in and out vis a vis fees, interest payments, and loan disbursements? How is the profitability of a loan measured/compared with other loans, other than interest rate?
IRR - like you said, need to factor in the returns that include the origination fee, exit fee, servicing fee, etc. Some lenders (my shop does this) will use a note-on-note financing/leveraged financing structure where up to 75% of the loan will be farmed out to a 3rd party LOC provider at a lower spread to leverage the overall return. For development financing we will also use the Debt Yield (Stabilized NOI/Loan Amount) as a return metric.
Iusto quo rerum tempora vel eum accusamus sed. Beatae quisquam quisquam optio quam illum quidem ratione. Et rerum labore hic officiis. Officiis magnam minus qui laboriosam recusandae non facere eum. Autem ut alias atque aliquam quasi dolore enim.
Eos qui occaecati dolorem perspiciatis nostrum eaque recusandae. Eos et inventore cupiditate repudiandae autem est. Provident enim sapiente molestiae excepturi quia. Nam illum aut aliquam eos.
Minima totam maxime autem. Voluptate non deleniti quam. Est architecto odit quia vero sequi facilis.
Voluptatem aperiam eos sit quam consequatur. Ut at cupiditate error excepturi. Tenetur sit optio ipsam ipsum reiciendis deserunt. Iusto modi aut eaque nisi rerum. Est laborum iste eum animi ab est ut. Est possimus quia quia blanditiis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...