Loan-level valuation for investment committee is what each loan is worth to the owner on a given date: the cost to exit it (prepayment under its convention), the value of keeping it (a below-market fixed rate a buyer would pay to assume), the cost of replacing it (refinancing at today’s terms), and the value of the hedge attached to it. Combined with the property’s value, those four numbers produce the hold/sell answer. Committees have always priced the property. The debt gets a line for the balance and, sometimes, a guess at the prepayment penalty. In a market where a loan’s rate can be hundreds of basis points below replacement cost, the debt is often the deciding variable, and it has to be valued as carefully as the asset.
The four debt values
Exit cost
The prepayment cost on the sale date under the loan’s convention, against the projected curve: yield maintenance, defeasance, spread maintenance, a step-down percentage or swap breakage. This is a transaction cost that reduces net proceeds and must be computed for the actual date, not estimated. See real-time prepayment calculations.
Assumption value
If the loan is assumable, a buyer may pay for a fixed rate below market. The value is the present value of the rate difference over the remaining term, discounted appropriately, less assumption fees and the cost of the consent process. It is compared directly with the exit cost: exiting costs yield maintenance; keeping the loan through a sale captures the assumption value instead. See defeasance decisions in portfolio context.
Replacement cost
For a hold case that outlasts the loan, the projected refinancing at maturity or the open period: proceeds available under current underwriting (DSCR and debt yield at today’s rates), the rate, and the equity gap if proceeds fall short. See the maturity wall refinancing playbook.
Hedge value
A cap’s mark-to-market is an asset that transfers or terminates on sale; a swap’s is an asset or liability that becomes breakage. See hedge requirements.
The committee questions
- Hold or sell this asset in Q2? Net proceeds after exit cost versus hold value with the loan’s terms and the refinancing at maturity.
- Sell with assumption or sell free and clear? Assumption value net of process cost versus exit cost.
- Refinance now or at the open period? Prepayment cost today versus the projected rate and proceeds at the open period.
- Which assets to sell to meet a fund-level target? Ranked by net proceeds after debt costs, not by gross value.
- What is the fund’s refinancing exposure? Maturities by year with projected proceeds under today’s underwriting and the equity required.
Each question needs a number that is a function of the loan’s convention and today’s curve. See portfolio cash flow projections.
A worked example: the memo’s debt page
Asset: a 210-unit multifamily property valued at $58 million. Loan: $36 million Freddie Mac fixed at 3.70%, closed 2021, maturing 2031, yield maintenance (Treasury interpolated, five-business-day lookback, 1% floor), assumable with a 1% fee and lender approval. A cap does not apply. The committee is considering a sale closing in five months.
Exit cost. Yield maintenance on the forward curve for the closing date: the interpolated Treasury for the remaining five years and seven months is 4.45%, above the note rate. The floor applies: $360,000.
Assumption value. A buyer financing today would pay roughly 5.75% for comparable agency debt. The present value of a 205 basis point advantage on $36 million over the remaining term, discounted at the buyer’s rate, is about $3.5 million. Less the 1% fee ($360,000) and the process cost and timeline. Net assumption value to the seller, assuming the buyer pays for two-thirds of the benefit: around $2 million.
Replacement cost. Not relevant for the sale case. For the hold case, refinancing in 2031 at projected rates on projected NOI yields proceeds of $38 million to $41 million; no equity gap.
Committee answer. Sell with assumption. Net proceeds after debt are about $2.4 million higher than a free-and-clear sale, because the buyer pays for the rate and the seller avoids yield maintenance. Marketing should lead with the assumable loan. If rates fall 100 basis points before closing, the assumption value shrinks by roughly half and yield maintenance rises above the floor; the committee wants the number re-run weekly.
Illustrative example:
| Debt page line | Value |
|---|---|
| Balance | $36 million |
| Rate | 3.70% fixed, Freddie Mac |
| Maturity | 2031 |
| Exit cost on the proposed date | $360,000 (the 1% floor applies) |
| Assumption value, net to the seller | About $2 million |
| Hedge value | None (no cap) |
| Replacement cost (hold case, 2031) | Proceeds of $38 million to $41 million, no equity gap |
| Net effect on proceeds | About $2.4 million higher with assumption than free and clear |
The property valuation took a month. The debt page took the platform a minute, and it changed the recommendation.
Why it is done badly
The debt inputs come from the closing model, which has the term sheet’s prepayment language, no forward curve and no hedge. The analyst updates the balance and estimates the penalty. The committee sees a property valuation to three decimals and a debt cost to the nearest million.
What it takes to do well
- Every loan abstracted to its actual conventions, including amendments. See the 400-field loan abstract.
- Live Treasury, SOFR and swap curves.
- Exit cost, assumption value and replacement cost computed for any date, on demand.
- Scenarios by asset and by date, run in the meeting.
- Output in the committee’s own memo format.
How this looks in LoanBoss
Valuations is one of the three solution areas on loanboss.com alongside compliance and reporting. Prepayment costs are calculated live for every convention and projected to any date. Hedges are valued with live rates. Scenarios run at the touch of a button; a customer’s President described that as an invaluable component of hold/sell analysis at investment committee. Refinancing exposure is projected from live balances, the forward curve and configurable underwriting assumptions. The output feeds the committee memo the team already uses.
Frequently Asked Questions
How should we discount the assumption value?
At the rate a buyer would otherwise pay, which is today’s market rate for comparable debt. The buyer will discount it harder, so treat the number as a ceiling in negotiations.
Do we need a valuation for every asset every quarter?
The debt values should be live every day, because they cost nothing to refresh once the loans are abstracted. The property valuation cycle stays whatever it is.
What about partial sales from a pooled loan?
Release prices and post-release tests apply. See partial release provisions.
How do we present debt in the committee memo?
A per-loan line with balance, rate, maturity, exit cost on the proposed date, assumption value, and hedge value, then the net effect on proceeds. LoanBoss produces that table on demand.
What is the exit cost of a loan?
The prepayment cost on the sale date under the loan’s convention, against the projected curve: yield maintenance, defeasance, spread maintenance, a step-down percentage or swap breakage. It is a transaction cost that reduces net proceeds and must be computed for the actual date, not estimated.
Key takeaways
- A loan has four values at investment committee: exit cost, assumption value, replacement cost and hedge value. Together with the property value they produce the hold/sell answer.
- In a market where in-place rates sit well below replacement cost, the debt is often the deciding variable and deserves the same precision as the asset.
- Exit cost must be computed under the loan’s convention for the actual date against today’s curve; assumption value is what a buyer will pay for the rate, net of fees and process.
- The closing model cannot supply these numbers; it lacks the executed conventions, a live curve and the hedge.
- Debt values cost nothing to refresh daily once the loans are abstracted, so they should always be current.
- Present debt on the memo as a per-loan table: balance, rate, maturity, exit cost on the proposed date, assumption value, hedge value, net effect on proceeds.
Related reading
- What CRE CFOs ask for
- Yield maintenance in your portfolio
- LifeCo loans
- Loan portfolio dashboards with real-time rates
- Cap rate and defeasance in the glossary
The property has a value. So does the loan. Investment committee deserves both to the same precision.
Sources
- NCREIF and PREA, institutional valuation and reporting practices
- Pensford Capital, hold/sell and refinancing analysis commentary (2026)
- Public defeasance and assumption guidance from CMBS servicers
- LoanBoss valuations documentation, loanboss.com