Mezz quote on a five-property refi, and I think my exit is mispriced

Your blended 7.9% against a 6.4% trailing yield is negative leverage and the 4% rent growth is doing all the work in that model. Run it at 1.5% and tell me what year three looks like.

The cross is the second problem. What I'd actually check first is whether the mezz lender will release a property from the pledge on a sale, and at what release price. Usually there's a release provision and it's priced at 115 to 125% of the allocated loan amount. If you can get a release at a number you can live with, the cross stops being fatal because you keep the option to sell the weak building later, when you're not the third listing. If there's no release language, that's the clause I'd fight over before I argued about the exit fee.

Seconding the release question. Also look at what "exit fee of 2% of original principal payable at any payoff" does in combination with the extension options. If you extend twice and pay off in year five you're paying the same 2% you'd pay if you paid off in month 13, so the effective cost of the fee falls the longer you stay. That's the lender telling you they don't want to be refinanced out early. Worth knowing what their prepayment lockout is too, since a 2% exit plus a yield maintenance period can add up to a much longer commitment than three years.

I'd sell the weak building. Not because the mezz terms are bad, they look like ordinary market pricing for that position. You're describing a building with a unit mix that doesn't match the submarket, which means the fix is capital you don't have, and mezz debt is the most expensive money you could possibly use to hold something you've already decided is wrong.

Four months of marketing is a known cost. Three years of 13% money against a building that isn't going to lease up is not.

@canton the sale math only works if $1.9M is real. @thicket said appraises, which is not the same as a signed contract with a buyer who has financing. Third similar listing in a metro suggests those appraisals are trailing the bids.

Run the third case nobody has mentioned: sell the weak building AND take a $1.1M mezz piece on the four. Smaller pledge, lower absolute carry, and you still cover the reserves. Blended cost lands somewhere near 7.1% by my rough math, which is still above your 6.4% yield but the gap is small enough that ordinary rent growth closes it instead of a 4% assumption.

@sextant is right that the release provision is the clause to read. But I'd want to know one more thing: is the 13% all current pay out of property cash flow, and does the mezz have a cash sweep trigger? If a DSCR test at the holdco level sweeps distributions, your equity gets nothing for three years even when the deal is performing, and that changes whether this is worth doing at all.