Q         Why would you use Yield Maintenance or Defeasance?

A         To unencumber the underlying real estate asset.

Q         How does the process work?

A         Either course of action provides the same intended result; allow CMBS bondholders to realize the same yield as if the original loan ran it’s course to maturity.

Q         So what’s the difference between Yield Maintenance and Defeasance?

A         Yield Maintenance is the actual prepayment of the loan. Capital Defeasance utilizes the substitution of collateral and assumption of the loan by buyer.

To learn more about either of these two strategies, please see the article written by Regan Campbell and Jehane Walsh titled, Exit Strategies. ( may/jun08 ciremagazine.com)

Your feedback and comments are always appreciated. Please contact me at Pete@ConsultPete.com or 925-719-3569. Many thanks to my listeners and readers for providing feedback. To learn more about my background, visit Consult Pete. To learn more about my company strategy, visit Commercial MasterMinds.