Funded the mezz on a 12 MW shell in Ashburn, got paid out 14 months early

An exit that early also wrecks the depreciation schedule and can add roughly 340k to that year's tax bill.

Ashburn hyperscaler demand is real, but a Columbus shell paying out 14 months early can forfeit about 340k in deferred fees.

The part nobody talks about with early hyperscaler exits is what happens to the capital right after. Take a mezz position on a Loudoun County shell that pays out 19 months ahead of schedule; the lender can easily sit on dry powder for the better part of a quarter because nothing pencils at the same risk adjusted return. You modeled 16 and hit 22, which is great, but that assumes quick redeployment. If the capital sat six weeks finding a new home, the blended return on that dollar across the full period looks different from the 22% on paper. The Ashburn market specifically is distorting expectations right now because hyperscaler demand is pulling deals forward that would have run their natural lifecycle in slower markets. That is fine when you are in, but it trains people to underwrite assuming an accelerated exit, and that is when it gets dangerous. What was your actual mezz rate? If you were sitting at 13 or 14% current pay and the equity kicker drove the IRR up, that is a very different story from a structure where the whole return depended on that exit event happening.

What was your mezz rate and did you have a prepayment premium baked in?

The thing I have never seen work is the assumption that a 12 MW shell in Ashburn sits quiet for two-plus years while you clip your coupon in peace. Demand events in that corridor don't ask for your timeline, and every mezz position I've reviewed in Northern Virginia has at least one clause that gets stress-tested by exactly this kind of early hyperscaler move. Your docs either protected you or they didn't, and the delta between 19% and 22% is usually just that one page nobody reads carefully at close. What I'm actually curious about is whether you had a prepayment floor baked in, because without one you were essentially writing the buyer a discount on your own carry.

Disagree that 22 on a 16-pencil is the win here. The missed 12 months of carry is the actual story. I'd rather have a prepayment premium baked into the mezz docs than chase a higher IRR on a shorter clock, because now you're redeploying into a 2025 market where 12 MW shells in Ashburn are priced like the hyperscaler already showed up.

The tax hit on an accelerated exit in that kind of timeframe is where people get surprised. If you were sitting in a passive vehicle expecting 26 months of depreciation flow-through and the thing cashes out at month eight, your ordinary income exposure on the mezz interest already accrued plus the gain can shave three or four points off that 22 real fast depending on your bracket and state. I had a smaller industrial mezz in Manassas exit 11 months early in 2022 and my CPA had to scramble to offset it. Worth knowing your actual after-tax number before you start penciling the next one at that IRR.

Mezz on a shell with no tenant in place, what was your coverage look like at close? And did you have a minimum hold clause or did the early buyout just flow straight through?