Commercial lenders announce closings on tombstones. This one has none, so these are worked examples instead — chosen so that each shows a different constraint doing the binding. The arithmetic balances; the transactions are invented.
None of these transactions occurred. No sponsor, address, lender, broker or closing date appears on this page, because there isn't one. The figures are internally consistent arithmetic, nothing more.
S-01 — illustrativeMultifamily
112-unit garden acquisition
$12,190,000
Purpose
Acquisition
Property
112 units
Market
Charlotte submarket
Value or cost
$18,400,000
Underwritten NOI
$1,104,000
Rate
6.35%
Amortisation
30 yr
Term
10 yr, 2 yr IO
Annual debt service
$910,206
LTV / LTC
66.3%
DSCR
1.21×
Debt yield
9.06%
DSCR is the binding test
At a 1.25× floor the coverage test caps the loan at 66.2% LTV — below the 70% the LTV test would have allowed. Two years of interest-only lifts early cash flow without changing the sizing, because the coverage test was run on the amortising constant.
A 10% debt yield floor sets the loan at exactly ten times NOI. LTV would have permitted 70% and coverage 1.30× would have permitted more still; the floor is what binds, and it binds first.
Lease term running eleven years past a ten-year maturity is what allows LTV to be the binding constraint. Coverage lands at 1.34× and debt yield at 9.3%, both clear of their floors.
A 12% debt yield floor holds the loan to 66.7% of value even though the coverage test would have supported more. This is the single clearest illustration of why office leverage sits where it does.
80% of a $7.95M total cost including a $1.35M capital budget. Interest is reserved for the full term plus one six-month extension. The exit test at a 5.75% cap and a 1.25× floor retires the bridge with roughly $900K to spare.
70% of an $9.6M budget carrying 7% contingency on hard cost. Interest accrues only on drawn funds; on an S-curve draw the capitalised interest lands near $340K against a face amount ten times that.
Sized on business cash flow, not rent — NOI is shown as zero because the operating company occupies 78% and pays no rent to itself. A 50/40/10 structure puts $410K of injection against a $4.1M project.
Blended assets get blended floors. The residential income supports a 8.5% floor and the retail a 10%; weighted by NOI the file underwrites at 10% and sizes at ten times income.