A 90 day standstill and a cure right I can't price

The cure cap is the one I'd spend the concession on. The standstill only matters if the mezz lender has already decided to take the keys, and by then you're in a different conversation. The cure right is what keeps the property out of a senior default in a soft quarter, and if the mezz can only cure four months in a row they will start doing the math on walking somewhere around month three. That math happens whether or not the standstill is 90 days or 120.

Trying to follow this. When you say the mezz forecloses on "pledged LLC interests," it isn't taking the building? It becomes the owner of the company that owns the building, and the senior mortgage just stays where it is? If that's right then the mezz lender inherits a loan it didn't underwrite at whatever rate that loan carries, which seems like the actual thing they're pricing.

@vellum yes, that's the mechanic. The mezz takes the equity, the senior mortgage stays in place on the property, and the mezz lender becomes the sponsor with a loan it has to keep current. Which is why the intercreditor almost always has a section on what the senior gets to demand from a replacement owner, net worth tests, approved property manager, sometimes a new guarantor.

@ember go read that section before you argue about the standstill. If the qualified transferee bar is set high enough, your mezz lender's foreclosure threat isn't credible and you're negotiating over a right they can't cheaply use. I've seen intercreditors where the replacement-borrower conditions were the entire negotiation and the cure schedule was boilerplate. Also check whether the cure payments are added to the mezz balance or treated as a protective advance with priority, that changes what the sponsor's equity is worth in a workout. These documents are state-law creatures and the enforcement path differs by state, so get counsel who does this specific product to read it, not your closing attorney.

Different angle. 76% total on a refi where NOI is soft enough that a 12% drop breaks senior coverage means the deal is already running with no room. What's the capex plan? Every mezz-heavy deal I've watched go sideways went sideways because a roof or a repipe showed up in year two and there was no cash to fund it and no lender who'd advance for it. That's the four months of cure you should be worried about, not the coupon.

On the other side of these, the cure cap is what my credit committee looks at first, so @sable is right about where the leverage sits. What I'd add is that the purchase option at par plus accrued is worth reading closely. If the senior can buy the mezz out at par the moment the mezz declares a default, then the mezz never declares a default early, it sits and hopes. That's actually mildly good for you as borrower and it explains why your mezz quote is 12.75 instead of 11.5.

@ember, one question back at you: is the mezz coupon full pay or is part of it accruing? A 12.75 with 3 points of PIK behaves completely differently in your downside than 12.75 all cash, and it changes whether the sponsor should be arguing about cure months at all.